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Orlando Bravo

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80
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2021-08-02
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2021-08-02
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  1. “Align well for why there's a net expansion in the customer base is it because thereby more seats is it because the cross sell with other products are working? Is it because they're growing through other operations that the company has? It has to fit what the numbers are telling you. The same thing is in customer support. If you have very high gross renewal rates and then you also are able to see in the operational data that most calls the first call resolution time has remained really good and stable. It comes together. It also comes together with the quality of a product if our engineering team is telling us no this product is really good because it's architected in a certain way. It runs very efficiently. There's very little downtime, there's very low bugs. Most of the customers are in the latest release or in the case of SaaS that are on their latest release. Okay.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “On that top line, you have to be able to explain why things are staying the same or why things are changing. And then you take that quantitative analysis and make sure that the qualitative is giving you the same answer. So, for example, if the customer references”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Give us good gross retention rates and the industry is pretty familiar with that. Give us very high net retention rates. And there's so much analytical work that goes into this because these companies have many products, legacy and new, many regions, many go-to-market strategies, channel, direct, many types of customers, enterprise, mid-market, small and medium-sized business, many verticals potentially. So doing that work is really scientific and some people do a great job at it. Some people do a poor job at it. And you can make big mistakes. It's not as easy. 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. You also look at duration of bookings. These are total contract value and or contract value and how that distorts.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “Three things Give us very high quality of revenue, and we can walk through what that means. Secondly, give us a management team that we can work with. And all we need from working with is people that are open, people that care about numbers, and people that want to win. Work with anybody. And then third, give us enough what we call our margin. Give us enough room to be able to improve operations so that we can earn an excess return because prices are so high now that without that it's very difficult. The typical deal will look like 500 million to a billion of recurring revenue, number one or number two player in an application space cybersecurity space or infrastructure software space. Where we can then invest a lot behind sales and behind product and behind product management while running the business more efficiently.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Theoretically, because it's an operating expense. You don't have 10% of their CapEx budget and you're competing for capital expenditures with other areas. If you have products and solutions that improve that customer's revenues or bottom line, they're going to buy it. They have budget room for it because it just improves their budget that year. So we then said, well, now that we have expertise in running software companies, this recurring revenues are even better. Let's invest in growth. And that's something that people quite don't understand yet about us because of our history. 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. It's not as sticky as maintenance was because a customer hasn't made the capital expenditure. But at the same time, if you add a lot of value to your product, you can price that in and grow a lot faster.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “That's over. That has been over since 2005. And then you had the financial crisis. So maybe you could sneak in and do a couple deals like that. But that's been over for 15 years. What happened was instead of complaining about that being over and saying valuations are too high, we're going to exit the space, see that's where you can evolve if you have an open-minded culture and a risk-taking culture. Well, we said, well, look at this. The good news now is you have SaaS software. So therefore, since you can rent the product and deliver it through the cloud, and everybody can be on the latest release, software will become ultimately the entire business of a company. So you had these starting in 2011, 2012. SAS beginning to take over software, which meant that now your customers, you have 100% of their budget.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “What a great question because software is Has changed dramatically since the first example I gave you and why we got into the space in the first place And our tactics for software have changed dramatically as well with that change. Our culture has evolved from a tactical standpoint, but our philosophy is the same. And let me explain that. So yeah, we started because it was good value. You could buy these recurring existing customer bases where you're giving them good service. You're integral to their operations. And you could buy that for two times revenue And you could make money by increasing pricing along with inflation, not shocking your customer, and running a more efficient operation. And if you did add-on acquisitions and became the number one in the space, that was even better.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Feel almost embarrassed for defending companies that are not on plan and why that is. The way we talk to people is very similar, very open. We say it how it is, and that serves us well.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “What I mean by that is. What is the shared mission and sense of purpose? Create a community in a company. What is it that holds these individuals together Why do they do things a certain way? Culture, I know people are talking a lot about culture. It's really everything because technologies will change, ways of doing deals will change, the tactics of private equity, the tactics of operations that'll change. But if you have a strong identifiable culture that then gives you a core competency that is very difficult to copy because it comes from culture, you have it all Think for our organization Otama Bravo. What holds us together is our passion. for doing innovation right. meaning profitably by measurement by hitting numbers when an LP comes to visit us what companies are on plan and not on planned.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “We need their buying also. Sometimes it takes them to miss numbers, to realign their business with reality. 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.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “If we can marry that with our analytical approach to decision making and our cultural approach of inspiring them to do something differently, that's the best. Now we say, and you asked me about the art of the business here, 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. There are some management teams that struggle for six months to join in the partnership and then you get a step function in terms of how they're doing things. Others slowly ramp up over two years and then they do it. Sometimes you need an event that's a catalyst. For example, sometimes you need an add-on acquisition that really worked, where it was integrated properly and where they appreciated what we brought to the table as well.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Our philosophy He's to really stay with the existing management. Because We highly value the knowledge of the business that they have that we don't have. Event if we do great diligence, we will never come up to speed fully on where they're at. Secondly, they do have the following of their employees. So whatever leadership, actions they take, they have that trust. And third, they have the history and knowledge of their customers.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “But it's not run mathematically. And he put together a mathematical approach to running sales over assignment of quotas, territory management how many people do you really need to hit your numbers two years from now because it takes time to ramp and we call that the quota allocation model. And with those tools and that visibility by management, they could see where they were going and it worked.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “I define it as or summarize it into an analytical approach to decision making. He was able to take the company and help split it into its component parts. Assign direct revenue direct cost with no allocation to each call it mini business unit or functional area. And he helped Chuck, the CEO, delegate Authority and responsibility to each of his managers. Then collaborated together, but so that they could improve each area of their business with Doug in sales, with Sales is an area that is run a lot by gut feel. I like this guy or I have a good feel that momentum is going up or this or that.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “There was a silence in the room. It was like the most depressing thing. And we went outside, and my partner Carl Toma, who was with me at the meeting, said, that's not fatal. It's this deal still alive. We met Marcel Bernard because now we needed to help run the company. and Marcel worked so closely with the same team, as had never made numbers before from a top line standpoint, and they made it not only to a really profitable company, did six Adam acquisitions, but consistent bookings performance. And when we sold the deal and realized the great rate of return, it was how appreciative Chuck, Doug, and management were that we gave him a chance and we put him in a position to succeed. And Marcel Bernard always taught me, remember, everybody always needs somebody else to learn from.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “Had 2,000 customers at the time. And I remember in our last diligence meeting, we were looking for some co-investors in the deal and we were there with one of our co-investors. We asked the head of sales. You missed numbers this year. How did you do last year? Kind of looked around and said, no, we've missed those bookings as well. I was like, well, how did you do the year before that? We missed those numbers as well. And finally, I ask him, his name is Doug Levin. Doug, have you ever made your numbers? And there was this awkward pause in the meeting. He looked around like he was counting the years, and he said no, never, I've never made him”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “First software deal, and I remember that it was yesterday because It wasn't the financial success of it that It's how hard we worked on how meaningful from a personal standpoint it was. We were able to take a company private in Yarley, Pennsylvania profit 21 was the name. It's a software company that ran the business of distributors. So they did all the customer entry, warehousing, logistics, pricing of a small mid-market distributor, using their technology. We took it private and we backed the existing management team of the company. Chuck Boyle was the CEO. And this team had never really made much margin in their business, so they had never been profitable. But they had good values. They were never big money losers eith”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “And one of the reasons I wanted to be in tech is not necessarily the passion for technology or the engineering because I'm not an engineer, is I thought the space was not taken. I thought there was a lot of opportunity in the space, lots of opportunity for young people, lots of creativity. It just felt good from that standpoint. And it gave me a white space to be able to work in. Where we were lucky was when the dot-com bubble burst, our theory was, well, and we went to the partnership. You can buy recurring revenues in software. Expensively than in any other category that Tomacresi or Thoma has looked at. Transaction processing media radio in the days, outdoor advertising. And they said, yeah, that seems right. So that part of it, I had a lot of backing for.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “With a lot of help and mentorship I went to do the opposite of what I was doing investing wise. Instead of investing in how many employees can you add and how quickly because that's where these businesses were valued, some of them. Before the bubble burst. Went Value investing In established companies rather than new companies with existing management instead of taking new management and putting them in a venture situation. It was literally the opposite. Investing philosophy from what I just described. Where we were fortunate is I did want to stay in tech.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Great business ethics. And then at the same time, I had probably the best operational mentor anybody could have, Marcel Bernard, who did the first software deal with me as the chairman of the company and then became the chairman of our operating committee. What I credit myself with doing right is that I really listened to them. I took it all in like they would tell me something and it's not like, well, I'm going to kind of do it my way and that may be what happened in the 70s or 60s and that's not the world anymore. No, I really, really listened. And the more I would listen, the more time they would spend with me. That's the thing about managing up as well. The more mentorship I would get because they're there to help people.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “On the one hand I feel that I haven't done anything by myself. And I'm very clear on that. I had two key mentors Carl Toma, who really started then working with me teaching me the values of what's a good business, what's good management, what's a good partnership, how do you talk to people? How do you do a deal? How open are you?”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “Know if you're making bets, that's pretty unlucky. Anybody else could do better than that. And I thought that that was going to be the end of it. I wasn't any good at it. I wasn't taking the right risks. Maybe I wasn't understanding something. And Carl Toma gave me another chance. He said, you can make lots of mistakes. Just don't make the same ones again. And what we were doing, what I was doing, that was wrong is I was trying to chase the venture community into doing really venture type investing, which it's not in my makeup and certainly was not the type of risk that the firm, a buyout firm, would take. So we changed that. And I got another chance and then we got into software.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “Look, my early experiences in private equity were not good. I joined my partner now and my mentor Carl Toma when he formed his own firm Coltoma Cresse at the time, and I was based in the San Francisco office. We had three people in the office, and he gave me very early. Lots of responsibility. Lots of authority And I wanted to do It was before the dot-com bubble burst in two thousand. And we started doing these technology services deals. 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. And it's almost like.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “Well, I would say that the tennis work is much harder. It really prepares you for that. You feel like you can take anything on the workfront What investment banking that those all-nighters and getting assignments really late. Kind of a bit mean. Tennis is harder, but investment banker was meaner as an analyst.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “A second hand store, some wingtip shoes, wore a tie, and I got a job. And I was thinking about it. It's like, well, I get to work on Wall Street and make money and live in New York City. Let's do it. And then when I was there joining that community, I got to come in close touch with some private equity firms on a deal that I was the junior person on. And I was really early on fascinated by the fact that Or three people in an office could buy a multinational corporation that didn't even have a company, didn't have anything. And they seemed smarter, better negotiators, and incredibly entrepreneurial. And I said, wow, I'm going to look into this.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  26. “So funny. Tennis gave me the chance to then go to college and to go to Brown. And then get into what I call this community of people that do investing and are in private equity. But at Brown, I didn't know what investment banking was. And certainly I had no idea what private equity was. And my senior year, actually, towards the end of the year, I was going to go to law school. That's what you kind of do, I guess, if you're not sure of a job opportunity. And I had this really worldly friend that told me the investment banks are here. They're recruiting. And I put your name down on a list, right? There's no internet, no phone. So you had to sign up. You remember that Ted from Yale, you literally put it on the door. And your time slot is 2 p.m. And I go, well, what is this? What do I need to do? You explain what investment banking was. And he told me, just buy some wingtip shoes. So he and I went and bought it.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  27. “But you know, it taught me adventure, travel, learning how to lose, and cope with it, and correlating really hard work with having a chance at success. And it was a great part of my life.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  28. “Vita sterilitis was playing in it. I'm sure you remember him. And my mom and I thought this is so, what a beautiful sport. And next weekend I started taking lessons that were two chords in my hometown. And I started taking lessons, started playing, and went over to play my first tournament in San Juan. And one of the most influential people in my life, my tennis coach, Antonio Ortiz, a phenomenal player he played at Georgia, got to the finals of the Orange Bowl when he was young. He took me under his wing and started teaching me on the weekends, and that's when I started traveling, went to Venezuela. That was the first place I went to outside of Puerto Rico and played this incredible tournament there. Met Jim Currier through playing a tennis tournament in Miami where he killed me in the finals.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  29. “Man, that part of my life was Really hard. So grateful for it because to me, it was what gave me every opportunity that I have now. I started playing tennis young. Reason I started playing is I grew up in a small town in Puerto Rico, Mayagues. And when I was about eight years old on a mini vacation, my mom took me to watch this exhibition match in San Juan.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source

  30. “My guest on the seventh episode of Private Equity Masters is Orlando Bravo, a founder and managing partner of Toma Bravo, a private equity firm focused on software and technology companies with over seventy eight billion dollars in assets under management. Among his many accolades, Forbes named Orlando Wall Street's best dealmaker in 2019. Our conversation covers Orlando's background, early investment lessons, and approach around management, analytics, and collaborative culture. We then turn to Toma Bravo's investment philosophy, team structure, work with portfolio companies, exit strategy, and future. And we close with Orlando's thoughts on SPACs, valuations, and philanthropy.”

    2021-08-02 · Capital Allocators · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · IDENTIFIED FROM THE TRANSCRIPT · source