Orlando Bravo is the co-founder and Managing Partner of Thoma Bravo. We cover Orlando’s first software deal, why high growth and high margins are not mutually exclusive, and what he’s learned about selling well.
Principles & Lessons:
1) Valuing existing management can shorten the path to strong operations. Orlando explains, “We quickly developed this as our mission” after seeing how partnering with Prophet 21’s existing team “made us very passionate about the possibility of working with existing management.” His experience taught him that a seller’s deep knowledge and commitment often matter more than hiring new executives. This shortens the learning curve and accelerates improvements right after the deal closes.
2) High growth and high margins are compatible, not contradictory. Orlando points out that “people believe that investing in growth goes hand in hand with losing money... those two concepts... many times have nothing to do with one another.” He emphasizes that profitable software businesses can still invest heavily in sales, R&D, and product – they simply do so more intelligently, guided by a “creative and inspiring approach” to operating discipline.
3) The “market leader” title hinges on having the best product in a clearly defined arena. Thoma Bravo’s strategy focuses on “the best product in that software...vertical or horizontal market,” rather than just the biggest revenue. Orlando says, “Making that product call... is very important,” because software cycles move fast and top-tier solutions attract and retain the majority of customers.
4) Swift sales can emerge naturally from a strong cultural philosophy. Reflecting on shorter holding periods, Orlando notes, “We have not been afraid to sell.” He says a strategic buyer’s interest signals it’s often prudent to sell, because “if they’re here today, they won’t be here tomorrow,” due to shifting agendas. By aligning early with existing management’s vision, Thoma Bravo can implement changes “quite quickly,” making even short holds profitable.
5) Private equity need not revolve around heavy leverage. While many associate private equity with high debt, Orlando states “leverage has always been very little for us” in software. These deals hinge more on “being correct on growth” and operational improvements than on financial engineering. He cites the early 2000s, when “there was very little leverage in the industry” and Thoma Bravo achieved returns through bottom-line and top-line enhancements.
6) Delegating authority fosters more creative decision-making and speed. Orlando believes that strong leaders “delegate quite a bit,” only stepping in when essential. He warns that if decisions “all flow to the top,” it slows progress and overlooks local expertise. By pushing autonomy downward, software businesses – which “move very quickly” – can adapt and innovate in real time.
7) Pricing power matters greatly for software resilience in inflationary times. Orlando argues that because “the marginal cost of your product is nearly zero,” a top-tier software solution can raise prices “above labor inflation,” preserving or expanding margins. He calls this “the big difference” from other sectors – you can pass through cost hikes and still drive strong profit growth if the product is indispensable.
8) Personal trust and open-mindedness guide both dealmaking and talent-building. Orlando says the best deals rely on consistent transparency. “You have to earn it each time,” as management teams value sincerity over track records alone. He extends this principle to recruiting diverse young talent, explaining that Thoma Bravo seeks “culture add, not culture fit” so that new hires bring fresh perspectives instead of matching a rigid mold.
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