Aug 2, 2021 · 1h 6m · capital-allocators
Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Private Equity Masters, host Ted Seides interviews Orlando Bravo, founder and managing partner of Thoma Bravo, exploring the firm's operational playbook, the strategic evolution of software investing, and Bravo's personal leadership journey.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 20.3% of the talking time here. How this is scored →
Ted as informed peer 4.1 Guest teaching 3.3 Guest disagreement 0.4 Ted pushing back 0.7
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:02:31 Orlando calls out irrational market narratives
Orlando strongly criticizes industry clichés and market participants making excuses about primary market timing, calling the narratives nonsense.
Hardest push from Ted ▶ 48:42 Host pushes on LP skepticism toward SPACsTed directly challenges Orlando on investor friction and complaints regarding GPs splitting attention with separate SPAC capital pools.
Biggest teaching moment ▶ 23:35 Orlando corrects perception of software value buyoutsOrlando educates the host that traditional low-multiple software buyouts ended fifteen years ago, explaining how SaaS dynamics transformed them into growth investors.
Ted holds their own ▶ 23:16 Ted probes tension between recurring cash flows and innovationTed demonstrates keen industry familiarity by probing how Thoma Bravo fosters product innovation in businesses historically prized for sticky, static cash flows.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| ILPA and Voices of Private Equity Promotion | 0 | 0 | 0 | 0 | Introductory sponsor messages and host monologue introducing the series and guest background. No interactive dialogue takes place. | |
| Orlando Bravo's Tennis Roots and Formative Discipline | 3 | 1 | 0 | 0 | Ted prompts Orlando to recount his youth in Puerto Rico, competitive tennis background, and transition into investment banking. The exchange is warm, biographical, and collaborative. | |
| Early Private Equity Stumbles and Software Pivot | 4 | 3 | 0 | 0 | Orlando openly shares his initial failures in tech investing and explains how mentoring by Carl Thoma reshaped his investment criteria toward recurring revenue software. | |
| Prophet 21 Buyout and Operational Turnaround | 3 | 4 | 0 | 0 | Orlando recounts the buyout of Prophet 21, illustrating how operational mentor Marcel Bernard introduced quantitative discipline to sales and operations. | |
| Philosophy of Empowering Incumbent Management | 4 | 3 | 0 | 0 | Orlando explains why Thoma Bravo chooses to back incumbent management rather than replacing them, highlighting trust, institutional memory, and operational pacing. | |
| Firm Culture and Measurable Innovation | 3 | 2 | 0 | 0 | Orlando describes Thoma Bravo's culture of measurable execution and accountability, contrasting it with vague industry narratives. | |
| Strategic Evolution from Value Buyouts to SaaS Growth | 6 | 6 | 2 | 4 | Ted presses on whether mature recurring revenue businesses are the antithesis of innovation. Orlando politely reframes the premise, explaining that the old value buyout model ended in 2005 and SaaS required transitioning into growth investing. | |
| Evaluating Software Targets and Revenue Quality Metrics | 5 | 5 | 0 | 1 | Orlando breaks down granular metrics like gross and net retention, explaining how Thoma Bravo verifies quantitative data against operational reality. | |
| Pack of Wolves Deal Execution and Team Structure | 4 | 3 | 0 | 0 | Orlando shares an anecdote about a competitor calling Thoma Bravo a pack of wolves, explaining how small deal teams operate collaboratively across subsectors. | |
| Post-Acquisition Playbook and Operating Governance | 4 | 4 | 0 | 0 | Orlando details the post-acquisition governance cadence, including monthly 8 a.m. to noon operating reviews focused on prioritizing the top three high-impact initiatives. | |
| Exit Dynamics, Holding Periods, and Operating Ecosystem | 5 | 4 | 0 | 0 | Ted asks about exit timing and holding periods. Orlando explains their 3.3-year average hold, the rationale for selling when strategics approach, and the firm's history of repurchasing assets like Flexera. | |
| Succession, Talent Development, and Software Boundary Expansion | 5 | 3 | 0 | 0 | Ted asks whether Thoma Bravo would expand horizontally into other sectors. Orlando clarifies that software is expanding into every business model, eliminating the need to look elsewhere. | |
| SPAC Innovations and the RADAR Investment Principles | 6 | 4 | 2 | 5 | Ted presses Orlando on LP pushback regarding SPAC vehicles diverting GP attention. Orlando defends the vehicle using his RADAR framework and argues that SPACs enhance their core PE franchise. | |
| Navigating High Multiples and Expanding Margins | 5 | 5 | 2 | 1 | Ted inquires about navigating high software multiples. Orlando argues high multiples act as a competitive moat against generalist PE firms, noting Thoma Bravo expands EBITDA margins to 50-60%. | |
| Private Equity Generational Shifts and LP Diligence Insights | 5 | 4 | 0 | 0 | Orlando discusses next-generation firm governance and advises LPs on performing qualitative due diligence by walking office floors to hear real deal and operational conversations. | |
| Future Scaling and Product Innovation at Thoma Bravo | 3 | 2 | 1 | 0 | Orlando outlines future scaling plans to double AUM and shares the emotional journey of founding the Bravo Family Foundation following Hurricane Maria in Puerto Rico. |
Statements from this episode (30)
Bravo's First Three Private Equity Tech Deals Failed Back-to-Back
“And I did three deals and the three of them failed. They didn't do well. All three. It was like back to back to back.”
Post-Dot-Com Software Revenue Was Cheaper Than Any Other Sector Evaluated
“You can buy recurring revenues in software less expensively than in any other category that Toma Cressy or Toma has looked at. Transaction processing, media, radio in the days, outdoor advertising.”
Orlando Bravo Argues Software Sales Organizations Are Run by Gut Feel
“Sales is an area that is run a lot by gut feel. I like this quote unquote guy, or I have a gut feel that momentum is going up, or this, or that, but it's not run mathematically, and he put together a mathematical approach to running sales.”
Thoma Bravo's Core Philosophy Is Retaining Existing Portfolio Management Teams
“Our philosophy is to really stay with the existing management.”
PE Sponsors Should Retain Management Teams Making Positive Progress
“We say that as long as people are making positive progress, you stay the course. Even if that progress may not be fast enough for your investment case, because people move at different speeds.”
Missing Targets Opens the Door for PE Sponsors to Guide Management
“So sometimes it's good that they miss numbers because it gives us an opening to have them listen to us and become more open-minded.”
Thoma Bravo Defines Innovation Through Profitability and Hitting Financial Targets
“I think for our organization, Atoma Bravo, What holds us together is our passion for doing innovation right, meaning profitably, by measurement, by hitting numbers, by when an LP comes to visit us, what companies are unplanned and not unplanned. We're really f…”
Thoma Bravo Now Operates as a Growth Investor in SaaS
“We are really growth investors in companies where you can add significant value to your product ongoing because you have to. If not, you'll be displaced by another SaaS solution.”
SaaS Is Less Sticky Because Customers Avoid Upfront Capital Expenditures
“It's not as sticky as maintenance was because the customer hasn't made the capital expenditure.”
Thoma Bravo Targets Market-Leading Software Companies With $500M to $1B ARR
“The typical deal will look like five hundred million to a billion of recurring revenue. Number one or number two player in an application space, cybersecurity space, or infrastructure software space.”
Public Market Software Retention Metrics Are Often Murky Due to Missing Data
“These headline numbers that public investors talk about could be a bit murky, because they also don't have the information, the raw data week by week or month by month.”
Small Project Teams Give Deal Participants Broader Roles and Foster Creativity
“Our philosophy is to work in very small project teams, because when you do that, you give the associate on the deal, the VP on the deal, all the participants a very broad job, and when you have broader jobs, you become a lot more creative.”
Thoma Bravo's Three-Month Onboarding Tracks Hundreds of Functional Metrics
“We onboard the company into our reporting package. That has our hundreds of metrics by division, functional area, and potentially business unit if the company has multiple business units. That takes about three months of work.”
Thoma Bravo Replaces Strategic Board Meetings With Monthly Four-Hour Operating Reviews
“We do monthly operating reviews from eight a.m. To noon every month instead of these strategic board meetings, and in those ops reviews, we have all the direct reports of the CEO present together collaborating, and we go through each of those areas.”
Thoma Bravo Employs 25 Operating Partners Across Its Software Portfolio
“Now, we do have 25 operating partners that work across all of these companies, so a lot of the sharing happens.”
Centralizing Operational Execution Burdens Leadership Instead of Delegating Down
“The more centralized you become, the You're putting the monkey on your back, and you don't want that. You want to delegate it all down.”
Average Holding Periods Remain 3.3 Years Despite Larger Deal Sizes
“Our average holding period has remained at 3.3 years. Even as deals have gotten a lot larger and valuations have gone up, it just hasn't changed.”
Thoma Bravo Would Be Larger Than SAP If It Never Sold Companies
“Now, in hindsight, based on where software has gone, we should have held all the companies. And if we would have done that, we would have been much larger than SAP.”
Sell When Strategic Buyers Approach Because They Will Not Ask Twice
“When a strategic approaches you, look to sell, because they won't approach you again. They'll either build the product internally or buy somebody else.”
Private Equity Deal Teams Should Not Exceed Five or Six People
“You don't need more than five or six people in the deal team. You don't need 20. What would they do? They even have a hard time catching up with one another.”
Thoma Bravo Will Invest in Software-Driven Financial Service Business Models
“Software itself is extending into becoming the business. I was having a lunch yesterday where this venture capitalist was asking if we would invest in business models where the business model may be you're selling a financial service, but you're a software com…”
Sponsoring SPACs Creates Future Exit Pathways for Thoma Bravo Portfolio Companies
“By being in this market, we're not adding any work because we're already in these verticals. We're already talking to these companies. We're already interfacing with them. This is what we do. This adds value to our core business, and it makes us more informed …”
High Software Valuations Act as a Barrier to Entry for Generalist Buyouts
“The fact that valuations have been high, some claim too high, Actually, it's a barrier to entry. It keeps big players that could be new players or new entrants out of this market. There should be 20 or 30 private equity firms doing large buyouts and software. …”
Thoma Bravo Expanded Software Buyout EBITDA Margins From 25% to 50-60%
“Our best in class metrics before were 25% EBITDA margins. Now we're getting up to 50. LMA got up to 60%.”
Thoma Bravo Intentionally Operates Without a Corporate Organizational Chart
“We don't have an org chart, because everybody knows what their job is. We look to transfer ownership Over time.”
LPs Should Diligence Private Equity Firms by Overhearing Office Calls
“Hearing what people are talking about on phone calls and in the office is key. If you walk around Toma Bravo, most of our colleagues will be talking to companies about Sales plans and quotas, and they may be on a board call. It's a lot of operational talk. If …”
Thoma Bravo's 2008 Fund Raised $822.5 Million and Returned 4x Net
“We tried to raise a billion, we ended up raising eight, 22.5. That tells you we're looking for every penny, like every 500,000 we would take. The few that did, that fund returned for net, And then it gave about a one X multiple in co-invest that was great econ…”
Orlando Bravo Predicts Thoma Bravo Will Double $80B AUM in Five Years
“In five years, we're going to be double the size. We have eighty billion dollars under management, and we can tell how the portfolio is going to do.”
Leading Enterprise Software Targets Compound at 20% Annual Growth Rates
“And we actually need the capital because the industry needs it for us to buy these number one, number two players. They're growing at 20% compounded.”
Excuses That IPO Windows Close for Summer Holidays Make No Sense
“The big one is how so many market participants explain the market as if it's true. So for example, when they say, well, the reason this time is not good for IPOs is although the market is up, that's the secondary market, but the primary market is struggling ri…”