Orlando Bravo, Founder and Managing Partner of Thoma Bravo: Take the Risks Meant for You

[Music]

Orlando, welcome back to GSV.

>> Let's go.

>> Let's go,

man.

Look at all you guys out there. This

This is great. It reminds me of many,

many years ago when I was having so much

fun here. Made my best friends. Just

incredible to see all of you really. It

feels just like coming back home. and

we're so lucky to have you here who's

been in our shoes to come and join us

here for the first view from the top of

a year.

>> We wanted to start by bringing some of

the memories back from the time you were

a student here back in 97.

>> JJ, what did you do?

>> Charlotte,

>> who knew this guy would go and build one

of the most successful private equity

firms in the world?

Yeah, you know, it's it's this is funny.

That guy right there, Mason, um my best

friend from business school, one time we

were in Vegas, and I do believe that my

class started that Vegas tradition that

has become now super fancy. We when we

go in a small group, he was brushing his

teeth in the morning and goes, "Do you

think any of us would ever like start a

company or do something?" And he told me

the other day that we were one of them.

So, that's good.

>> Yeah.

>> I I'll take it.

>> I'll take it. Well, I think a lot of

students here today are going to relate

to your story, maybe even in ways they

don't expect. Here's something I relate

to. At 15, I moved to the US as an

international student. At 15, you moved

to Florida from a small coastal town in

Puerto Rico. What was that like for you?

>> Well, you're from Lithuania. You we

relate to that.

>> Yeah.

>> Um it was it was scary. Uh it it's not

only it's I'm I'm not only from Puerto

Rico, but I'm from a small town on the

west coast of Puerto Rico. So if you

want to do play tennis, uh look for a

better life, you have to drive four

hours just across the island to get to

San Juan. And then that's a that's a

city and you get that opportunity. But

but it was scary. My family, we were all

very very close. But it also was really

special. I thought I was being handed

like an opportunity of a lifetime. I was

just 15 playing tennis, but it was very

meaningful for me.

>> And in Florida, you went to Nick

Bullet's tennis academy. It's known to

be one of the most prestigious

tennismies in the world. What did tennis

teach you about life?

>> Humility. You talk about that tennis

academy and I found out pretty quickly

that I wasn't that good.

But I did private equity, so that's

okay. Uh, I'll take it. Uh, you know,

it's um that's really important an

important part of who I am.

>> Um, how I think about business, how how

I lead. Uh, for example, right in in

tennis, when you get on the court with

somebody,

it doesn't matter what your ranking is.

You could be ranked higher, you could be

ranked lower, the other player may have

more coaching, this or that, but you

have to try to figure out how to win

that match. And I had some of the most

amazing experiences when I was a little

kid being paid to go to Venezuela to

play in an international tournament in

Latin America. And you you notice that

you're as equally nervous as your

opponent. Uh you notice that you may

have the same style that you kind of

play in the same way. And that equalizer

is so so important. Like today we're

pretty big in tech, but we still need to

win that deal. even if we're much

bigger, even if we've had good returns

in the past, even if we have a great

team and that other competitor is equal

to us and that's great. And and also I

mentioned it's really humbling because

um there's always somebody better than

you and and it's okay not to always be

the best at everything and the best. You

just try your your hardest and you do

your own thing and and that really has

those two things have really stuck with

me.

You left the tennis court and joined

investment banking in the early 90s.

What surprised you the most about your

first few years on Wall Street?

>> The opportunity.

I was uh blown away and I think many of

you have done investment banking. You're

going into entrepreneurship or private

equity. But

I was going to go to Stanford Law

School. I was lucky to have gotten in

and because I really didn't know what I

wanted to do after undergrad and Morgan

Stanley gave me a job and Stanford was

the only school that deferred me which

was just incredible. I remember calling

Harvard because at the time that was my

first choice to go to law school and

they said ah you got to apply next year

you have to compare to the next class

and all this serious stuff and Stanford

when I called just admissions thank you

they said you're welcome to come here

anytime you want I was like wow west

coast that's that's so true right so

chill

and and I was like that's that's where I

want to go So, but but I wanted this

opportunity. I get to work in Wall

Street. This unbelievable. Really early

on, I noticed um and it was 1992, so it

was really early for private equity that

they put me on a deal. And um there was

this group trying to buy this company

that didn't own a company that didn't

have a big company in the space. They

didn't have anything. They just had

money. And I was incredibly impressed

about the American opportunity that

without anything, people will trust you,

give you money, and with that, you can

buy a multinational corporation. I

thought that was just the most

ridiculous opportunity there was. And

they seem to have a lot of money, too.

So, I said, "Ah, maybe I'll try that."

Um yeah.

>> You come to Stanford after two years at

Morgan Stanley, but not only to do JD,

also MBA.

Can you share more about what were your

biggest takeaways from the time you

spent on this campus?

>> Well, I was the luckiest. I I met

Gabrielle and she and I had Charlotte

who is here. Sorry to embarrass you. Uh

um my oldest. Charlotte's 23. She's a

senior at Stanford. So proud of you,

Charlotte. And without me being at

Stanford, I wouldn't have met Gabrielle.

So we had Charlotte and Xander and now

have other wonderful kids. uh met her,

met my best friends, had time to really

explore what I enjoyed and what I was

really like, was inspired by my

classmates, uh was really loved by my

classmates. You know, you saw the

pictures. Those are my best friends.

Still today, we've kind of traveled life

together, kids, challenges, work, um you

name it, right? That's kind of my my

support group. Um I don't know. It's

just it it was really what gave me the

true opportunity to to do what I do and

explore the world in the way I do it

now.

>> And your journey in private equity also

started here. You landed a summer

internship at a private equity firm

nearby here in Menlo Park. And for many

of us here, when we go on our summer

internships after the first year, we

hope that two things will happen. First,

we'll love their job and second, we'll

get the return offer to come back after

graduation.

What was that experience like for you?

>> Wow.

Nobody has asked me about that summer

job and not getting the return offer.

I thought you were going to jump to the

goat of private equity, Carl Toma, but

we'll we'll talk about that in a second.

Um, but that was a GSB alum. um Alex

Siver actually a very very good tennis

player an incredible investor he was

affiliated with TPG at the time right he

had he lived here in PaloAlto now he

lives in Connecticut kept in touch with

him and uh I didn't get a return offer I

don't know what I did

>> when you realize that

>> but you know what the truth is

>> is that then when Carl Toma gave me an

offer he gave me an offer

>> ah

>> and I didn't take it

>> but that time when you realized that the

offer wasn't coming.

What got you to the mindset to keep

going, to not give up on private equity?

>> I know.

>> And what would you say to someone in

this room who might be facing that kind

of rejection right now?

>> You got to do your thing. Um,

>> I sent out 500 random resumes and at the

time not a lot of people use the

internet, so you had to mail some of

them because they weren't, you know, up

to speed on this stuff. But I would send

them to random firms. I would cold call.

I would And you know, I think the the

lesson is

you don't need many offers. You just

need one and it has to be the right one.

And it wasn't until the end, I think I

had two weeks left in graduation that

Carl Toma decided to open up an office

in San Francisco. He was splitting from

GTCR, the firm he founded, and he

interviewed a few people and I and I got

that job. I just would say keep going.

Absolutely stay the course. It will

come. It may not come at this time. It

come a little later, but it will

absolutely be there.

>> So, let's go to that persistence and you

going to Chicago, meeting Carl and the

team, and the job is almost there. But

then comes San Francisco dinner that

almost cost you that job offer.

>> What happened?

This this is a joke. No wonder you're

GSB. All the studios. Nobody has asked

me that.

So Carl,

[Music]

does anybody here know Carl Toma?

Right. Of course, my my colleague, my

partner, Toma Bravo. You know Carl, he

kind of did the same thing to me that he

did to you when he was interviewing you.

Uh but Carl is GSB,

one of the greatest investors of all

time. Uh

has the highest ethical principles.

These old school values of who you

partner with, who you work with in

management. The the best thing that

happened to me is I was lucky that I had

him as a mentor and I never created

anything new. I just listened. Well, I

give my credit for listening. That

that's the key. So Carl comes to San

Francisco to close my offer. Uh we have

we're having this dinner and I said,

"You know what? I'm gonna I'm gonna ask

him for a carry. You know, this offer

just includes salary and bonus. I need

some carried interest. Isn't that what

private equity is about? Isn't there any

carry here?" So I I asked him, "Hey, you

know, how about a point of carry, half a

point of carry?" And he kind of

listened. He didn't say much. And he

called his colleague and said, "Withdraw

that offer." I don't want to I I don't

think I don't think um this is a good

fit. You know, you got to earn your way

through it. And I said, "No, no, I'll

take it." And I had like three sleepless

nights and and he did not withdraw the

offer. So that's what happened.

>> Luckily, you started in their San

Francisco office right after graduation,

but in the middle of a dot boom. Can you

share more about how did that go?

>> Not well. Um, and there may be parallels

now. You never know, maybe 50/50

um, at best. But Carl gave me a lot of

responsibility and authority early.

That's the way he leads and that's the

way he taught me how to lead. We do that

with our colleagues now. I love an

associate to call meet a company and try

to see if she or he can buy it. um and

learned the business by by or mentor by

doing the business and learning the

business and I started investing in IT

service companies that were providing

services to a lot of dotcom firms. That

was the hot thing at the time and I was

in San Francisco. I did three deals and

when the dotcom bubble burst, two out of

the three went to zero. We couldn't

recover any money and one we got like

50% of the money back. So it was an

absolute disaster and I thought you know

I had to work so hard. You you started

when I was 15 in tennis even before

right little by little trying to do

everything perfect and the school and

the thing just like all of you have

done. And I'm like now that I made it

into private equity I'm going to get

fired. And he in his 70th birthday Carl

said you know because I was there it was

a great event some years ago and and he

said remember I was about to fire you.

And I go I know I I can I could sense

it. I I knew that something like that

was coming and um what allowed me to

relax a little bit is I I had just had

Charlotte.

>> I spoke about that at commencement

>> and I was like, you know, in the grand

scheme of things, no nothing else

matters. So relax. Let's see what

happens. And Carl gave me another

chance.

>> He sat me down and said, I'm going to

give you one more chance. Just don't

take those types of risks. Those are not

the type of risks that our firm as a

private equity firm, as a buyout firm

takes. and you can make mistakes, but

don't make similar mistakes. And he gave

me a lot of rope to try again. And I

knew that was going to be my last chance

with him, but but at least it was one.

>> Well, most people who survive that

afterwards and that feedback would have

kept it safe, would not go and purchase

something new. Instead, you go back to

Carl and present him a new idea at that

time. Software buyouts. You were 30

years old. How did you have guts to do

that?

>> I had nothing else to do.

>> No, I mean nothing had worked. I had I

had to try something. It was a super

entrepreneurial firm. Um, and I always

for some reason wanted to always do

something a little different.

>> You know, one of the things about New

York, it's my favorite city in the

world. I love New York City, but one of

the things about that job is leaving the

job, I felt like I was walking with a

100,000 other people that were doing the

same thing dayto day. Still now I walk

into a lot of those offices because we

do business with many other groups and I

see these huge places with everybody

dressed the same way and doing the same

thing. So, I wanted I always wanted to

do something a little different. I

wasn't uh creative enough to be like 180

degree different. Uh but I thought look

software at the time our our viewpoint

was to Carl you can buy it super cheap.

He liked that

value investor. You could buy recurring

revenue and software less expensively

than every other category GTCR had done

and was successful at

>> outdoor advertising radio media a number

of them. The challenge was that no

company at the time really was making

money in software. Similar to now,

there's been no improvement in the

operating capability of those

businesses. I'm here with all the GSB

with the best of the best in leadership

and management. And in almost 30 years

in the software space, now a $ 1.3

trillion economy in revenue, the average

publicly traded software company loses

money just like it did when we started

in software. So, we kind of we were very

open with Carl that we have no expertise

in running one of these companies. We've

never done even done a deal, but he

allowed us to take the risk to do the

first one and try to see if we could

restructure the business to make it a

profitable buyout business. And he said,

"Go do it." And it was only a $50

million deal, so you got to start really

small. It's not like we were trying to

take the whole risk right there. And

then I met my second mentor

operationally, Marcel Bernard, who's the

best operator I'll ever meet in my whole

life. He ran Motorola, different

divisions of Motorola in the 70s when

that was an incredible school of

management.

>> And then he kind of taught us what to do

and and we followed him him him at it.

If that first deal wouldn't have worked,

right? That would have been over.

>> So a first deal allowed us to do a

second and a third and a fourth and and

so on.

You mentioned those two mentors, Carl

and Marcel, having a big influence on

how every the story played out.

For

the people in the room who also want to

attract that kind of mentorship, getting

people invest the time and energy in

them and their success or to make people

want to bet on their ideas.

What do you think they should be doing?

Mentors are all around you. And people

that have had success, it's because

somebody else taught him something.

Marcel Bernard had this great quote,

"Everybody needs somebody else to learn

from." That's why our model in private

equity was to work with existing

management. Restructure the company,

change the way it's being operated, but

actually do it with the existing people

um of of the business. So, anybody

that's self-aware

knows that the reason they've had luck

is because somebody brought them there.

Somebody took them to a place they

didn't know they could find or they they

could see. Now, you have to get that at

the job dayto day. Like I sometimes get

calls from talented young adults and

say, "Oh, can you mentor me on

something?" Of course I will. But it's

ad hoc. Ah, once a month I get a call. I

don't have enough context of what that

individual really wants to do and the

challenges day-to-day.

You have them all at at work at your

workplaces unless you're starting a

company from scratch. Maybe a board

member can be extremely helpful.

Engaging um day-to-day, but that those

people are all over. The key is also

finding somebody that shares your

values. I always thought that among

everybody in private equity, no, I want

to listen to that guy. I looked up to

Carl so much that it allowed me to

absorb more what he was saying.

>> And in 2005 at the age of 35, you became

a name partner. That's not just the

title. It's Carl saying, "I trust you

enough to share my name." What did that

mean to you?

>> Oh, it was incredible. In a five-year

turnaround from getting fired to

getting uh Okay, now they cannot fire

me.

That was that that was the key. Um that

was that was really you know incredible.

I don't think too much about the name of

our firm you know it was just the legacy

of how it was you know GTCR they named

it like that they named Tom Cresie like

that they they added me etc. But I

really we as partners I have many equal

partners in the firm and we run the

business as a partnership and as a

private partnership. And I don't think

anybody's too worried about that now but

for me it was great when it happened.

>> And a few years later the firm's name

changed again and became what it is

today Bravo. At that time you had around

1 billion in assets under management

and today it's closer to 200 billion.

That's 200x.

Through that period of such

extraordinary growth through those 17

years what changed the most for you

personally?

>> Not much.

Uh we we do you know that that example

that I gave you one deal at a time. Our

first deal was 50. Our second we bought

Vector SGI that was 75 million. Our

third deal we bought data for 250

million. A bit of a jump. That was a

great deal. Then we bought Sonic for 550

million. Our first cyber security buy

and a company here in Silicon Valley

which we hadn't done before. So we were

really afraid of turnover when we made

these changes and running. That was a

wonderful experience. Then we moved to

buying companies for a billion. We

bought three in a row, two of them here

in Silicon Valley. Uh, and those worked.

Then we bought Compware for 2.2. So it

was this trajectory.

We haven't changed that much. We still

have to get the money, win the deal, and

improve the deal. Just the numbers have

gotten bigger. And since we've done

okay, we have a bigger following of

people that now allows us to buy the

jewel.

See, now we're in a place we've never

been before. We can buy the number one

software company in so many different

areas. And the opportunity for that for

the next generation of Toma Bravo is

ridiculous because before we had to buy

a nichy player and try to make work of

it. Now we can maybe drive these

companies where close to it to 50%

margin and 20% growth and maybe create

the next 5075 billion market caps. It's

just amazing. But the the tactics and

the philosophy around it have remained

the same and we have remained with our

feet on the ground not levitating. I am

extremely hands-on like I was before. Um

you talk about mentorship. I love to get

a call from an associate to talk about

something or a deal and I reach out to

them. They're probably going, "What's

this guy calling me all the time? Does I

does he not have confidence?" you know,

all the people doing models at work, I

kind of creep behind them like a super.

You can see and I'm legitimately

interested in what they're looking at

and how they're thinking about the

business.

>> Well, without a doubt, you reached the

peak business-wise quite early in your

career, but personally, everything

changed for you in September 2017

when you got a call from Puerto Rico.

What happened? So, so I was traveling

with Jennifer James. Remember JJ? She's

our chief operating officer. We were

coming back from Tokyo.

Um, and Hurricane Maria had hit Puerto

Rico when we were leaving Tokyo. Uh,

when we land, I tried to call family and

friends and I could reach no one. And

it's like, this must be pretty bad. and

my brother who's very close to different

communities in the island uh a reporter

called him and said, "Hey, there's a

shelter next to my hometown with 35

people that have two day supply of food

and water."

>> This is unbelievable.

Sorry hos

>> I I get super emotional because he said

if

>> we don't do anything about it. That was

the feeling. Nobody's going to do

anything about it.

>> So we said, "Hey, we'll go there and and

we'll work it out. We'll see you in a

day." I told them, "We will leave and

we'll see you in a day. We'll land at

this airport really close to the place

and we will help you out." And we landed

and the people were there. They had

brought all these trucks. They got the

food, the water, whatever they needed to

hold them over for four or five more

days until we figured things out. And

that worked out. And then other

communities would come and we would do

the same. And then we started developing

all these distribution systems in Fort

Lauderdale, Florida because it was it

was manageable to do it from there. It

was much closer than coming from San

Francisco with a bunch of supplies. And

we started this huge relief operation

all over the island. Um, and FEMA didn't

get there till like two months till

after we were there. It was incredible.

And I always like thank the GSB for

>> that risk takingaking and and get out

there and do something different. I

didn't know anything about disaster

relief or hurricane relief or anything

like that. We just did it and and it

works. The nice thing is I did have a

background in entrepreneurship. You can

be entrepreneurial. Let's solve the

problem. Let's get it done. And I I

think in the process we were able to

hold together some communities that

otherwise would have been in trouble.

>> But you didn't stop just at really flat.

Uh release really

>> and Charlotte went with me on that first

trip. You remember that?

>> That was crazy. Okay.

>> You didn't stop just at the relief and

help. You kept going.

What was the intention behind the Brow

Family Foundation and to create the

opportunity in the island for the long

run? I was going to the island every

weekend, every four or five days,

whatever, working there with with

communities, and I met so many good

people. Like, it reminded me of the side

of Puerto Rico that is incredible. Uh

people that were educated, talented

salespeople, a lot of sales people that

couldn't work for months because they

didn't have any electricity, right? You

can't call customers and they're all

commission based 100%. So, they didn't

have any other any other income. And I

said, "That's that's isolating. That's

totally unfair." So, we started six

years ago the permanent programs that we

have in Puerto Rico. And the the center

of it is entrepreneurship is our rising

entrepreneurs program. We've now have

launched over 100 companies in Puerto

Rico. We have a bunch of people from

Tommo Bravo involved in those companies

and one-on-one mentorship. CEOs from our

companies go there. We give them free

capital, free education. We've taken all

the playbook from our firm and applied

it to how you build a business because

there they can't raise any outside

money. So, you got to get profitable

very quickly and do the kind of things

that we try to do with with bigger

companies. Leadership and that program,

I really really believe it's setting up

an ecosystem in Puerto Rico that will

entirely change the outcome for so many

young adults. We have paired up with a

high school program that we have where

we have now twothirds of the

municipalities in Puerto Rico, those

kids from public schools participate in

those programs. And the kind of hope

that I see and the kind of way that we

take those kids off the street, off of

just playing video games, now true

opportunity, they think about solving

problems of today, problems of their

communities. It's incredibly uplifting.

And you know, coming back, it's so tied

to what we do at Toma Bravo. We try to

help a really big company that's super

innovative and not making any money

become also a great business by doing it

with the existing people. When you see

when you try to help these entrepreneurs

that have very little resources,

>> you know, if you can do that, you can

certainly do it at a billion-dollar

company in Silicon Valley. This stuff is

easy. So, it gives you also a lot of

hope for your business. Well, it's

undeniable the impact you had on people

in Puerto Rico

multiplied because of that long-term

mindset. And I want to talk more about

that, but in the context of private

equity. I hear a lot of my classmates

here at GSB say that today proud equity

is too crowded, that the golden era is

over, and that is almost impossible to

build the next Tomama Bravo or become

the next Orlando Bravo. Where do you

think the critics are right? What's

generally harder today?

>> This is much easier today.

Well, I I I completely

I I believe some of you in this room

that will choose that industry as a

career, you stay with it. You will build

a firm much bigger than Toma Bravo and

better. The next generation is always

better. And you're some generations

below me, but it's always better than

the prior. It's it's not even close. The

industry is tiny. We feel ourselves that

we're just getting started.

I feel that I've been training with my

team of partners for 30 years to now get

the opportunity that I just spoke about.

This is new. This is tiny versus the

public market and other forms of

ownership. When I was interviewing for a

job, one of those many 500 jobs that I

did not get, I met the head of a private

equity firm, very large at the time, and

that person in that interview told me,

"Private equity is taken." And I've

mentioned that before in some other

conversations. Private equity is taken.

Uh there's not much for young people to

do in the business. That was 1997.

Come on.

>> Now our firm is much bigger than that

firm. I kind of look at that. It makes

me feel pretty good when I'm down and we

have a lot of portfolio problems. But

it's going to be the same thing. There

is no substitute for somebody being able

to buy a corporation, having full

control of it, partnering with great

leaders, solving problems. As Marcel

Bernard would say, every business

problem can be solved. Health is another

matter. And creating an entity that

people thought was impossible to create.

That opportunity for creativity, value

creation only exists when you can buy

the whole company. not a piece of paper,

not pieces of that company, not credit

in that company, not public stocks,

absolutely nothing else. So, I'm I'm a

firm believer it just requires people to

stay humble, keep their feet on the

ground, be practical, and focus on the

business, not on anything else. We would

not have gotten into software if we were

listening to the word at the time. uh

venture capitalists would say these

companies that you're addressing are too

old and new VC companies will put them

out of business for sure. That was a

scary comment from people that had done

really well in VC really good VCs that I

highly respect. The big buyout firms at

the time were saying you're crazy to get

into tech and software because that is

too risky. Both of those were extremely

general comments when we would go to

into a company and look at all their

files one by one. customer one, customer

two, customer three. When we would sit

there in their support center listening

to all the calls that were going, all

their salespeople that were working on

the system, we would say, "This is an

incredible business. What are what am I

missing? What are they talking about?"

Now, when you look at today with AI,

some people are doubting software. Of

course, you can read an article that

says, "Well, maybe the stack will do

this and that." Theoretically, that

makes sense. But when you go to a

corporate environment and know how

people work,

clearly it is a huge tailwind. But you

just have to do the work. You can't be

scared of it. You can't fall with

whatever else everybody's saying.

You have it's a place where you could do

your own thing. That's the key.

>> That's the key. Looking ahead, when you

think about the next generation of

investors, entrepreneurs, builders who

are with us here today in this room,

what's the one lesson you hope they take

away from your journey?

>> Can I give you two?

>> Go ahead.

>> Uh, do do your thing. Do do your own

thing. There's there's a lot of pressure

and we even face it now. We have all

this capital. Why don't we just go off

and build all these AI data centers

people are making money on that stuff or

do this do that? There's a lot of

pressure to do things where others that

you highly respect say, "Yeah, you're

doing the right thing." Or the the great

job to get or the type of company to

form now. Do the work. Focus on your

business. Focus on you and and do your

thing. That will pay huge huge

dividends. We'll make everything very

very clear. And the second piece is and

you spoke about it with challenges of

today. Look, it won't be linear. We just

walked through my good luck and how it

wasn't linear. It was terrible in in

some places. It won't be linear, but you

have to stay positive because all of you

if you apply to it and if you want to do

it, you will build things that were much

bigger and better than what anybody else

had done before. Just don't be

intimidated by it. If you look at the

end result, then you might not want to

focus on it. Just focus on step by step

and stay super positive in your in your

journey.

Orlando, we have a few students who

submitted a couple of questions. Let's

turn to them.

>> Hi Orlando. Uh thank you for being with

us here today. My name is Abdal Mutlik

and I'm an MBA too. You were actually

one of the reasons why I chose to come

to the GSB. Uh and you even made an

appearance in my why Stanford essay uh

based on a meeting we had in 21. My

question is about fundraising. Despite a

pretty challenging LB fundraising

environment, Toma Bravo has consistently

exceeded its fundraiser

performance and marktomarket figures are

difficult to trust. I'm curious if there

are any lessons or qualities to take

away from your time at the GSB that you

bring to your LP conversations that help

differentiate Toma Bravo further. So, so

Carl Carl Toma when we were starting um

Toma Bravo 1 which we called Toma Bravo

9 because we try to promote as much as

we could that we have been around for a

while. I was I

I was I was doing all these

presentations one PowerPoint after the

other. We're going to position ourselves

as this and this and that and that. And

he said Orlando stopped. He said in

private equity the only thing that

matters is returns.

investors have incredible choices of

where to put their money. I'm go,

"Okay." And we were getting turned down

a lot by LPs at the time and they were

giving us all kinds of different

excuses. One, I was walking down the

street in New York and I called him and

said, "Hey, when are you coming into the

fund?" He said, "We're not going to be

doing the fund." I said, "How come?" He

goes, "Because your numbers are not good

enough."

Wow. What a Okay. Note to self, my

numbers have to be good to get some

money. And and I promise you that that's

why we're step by step and deal by deal

right now. So we have had, you know,

good enough numbers to have our base of

customers

stay with us and and stay the course. So

you have to have a certain level um of

performance. And there are other great

performers out there. But then the

second thing and this is what Jennifer

James does so well is we really attend

to the customer

we know in our partner what they like

what they don't like how their family is

who makes the decision. How does that

organization make the decision? You got

to try to sell something. These one

person that decides two people. Is this

a group decision? Who who do we need to

talk to here? And we know which customer

do they buy from the top? Does private

equity buy here? And I see my peers

making a bunch of mistakes. Some people

go straight to the top because they have

that access. And then the person asked

the head of private equity, what do you

think of these guys? And they go, nah, I

have somebody else and that's us. Or we

try to do is at like that there is

getting the money that one-third I

saying private equity, get the money,

improve the deal, and sell the deal. But

getting the money is a really really

important skill of attention. Right.

Right after this, I'm headed out to Hong

Kong. See seeing some of our customers

there being very very close because

there are other ways that you can add

value to them. Co-invest when they have

an issue with AI. How quickly do you

have their back in front of their

boards? So many things. It's a kind of a

day-to-day thing. And finally, um Bird,

I have to give you a lot of credit and

please take this class if you haven't

done it. You know, communication. At

first, as we were getting a little

bigger, um, I I was imitating the goats

of private equity from the 70s and 80s.

Oh, this is the way you talk and that's

that's the way I have to seem and this

is what I have to pretend to be. And

Bert said, you you're funny. You're

Puerto Rican. You don't take yourself

seriously. Be yourself. And and I think

that allows me to connect pretty

decently and Jennifer James with other

people. one of the best hits of sales

that we've had at one of our companies

at Dinatrace. He said, "Remember, people

don't want to buy your product. People

want to buy from you." And that was very

consistent with what Bird was trying to

trying to have me understand.

Thank you.

>> Hi, my name is Owen, uh, class of 20 27.

Um, thank you for coming here. My

question is you guys have built Tomo

Bravo on the thesis that enterprise

software has durable modes but my

question is as generative AI decreases

the cost of software creation and some

say commoditizes it how is that

impacting your investment thesis moving

forward?

>> Yeah. Um

the software having a great that's a

phenomenal question that we're deep in

now and we've always been the fact that

software has a moat in general is not

really true

never been true especially in dynamic

spaces like cyber that's a third of our

investment infrastructure software

that's almost another third and all

these horizontals you face constant

changes competition and if you're not

growing bookings Even if you had a mode

around your customer base, if you're not

growing new bookings, nobody's going to

buy your company and you cannot take it

public. It might seem like a decent

financial investment if you got lucky on

the price or something else prior. So,

it's always been a fast evolving space.

Now, when we were doing our early deals

in software, we were buying what seemed

to be some old software companies with

legacy code, legacy architecture. That's

where venture capitalists would say new

companies are going to put you out of

business. a great engineer at Stanford

could have built a much better product,

faster, better code with newer

architecture than many of the companies

that we have bought in the past. No

offense to those development teams, but

those companies are about understanding

the customer's process and about

servicing that customer. The developing

of code is a very very small subset of

what that company does to deliver value

to that customer to give them that five

to one ROI over a year or that payback

period of nine months. You have to

really understand the function or the

vertical or the process or all of it and

be able to provide a custom solution.

not custom code, but you take this code

that you have and how do you figure out

the problem that the customer has, let

them know that they have a big problem,

allow them to re-engineer their

organization to absorb this way, this

better way of doing things. You you take

um Salesforce now 41 billion in revenues

and there's thought that oh they can get

commoditized.

Not at all. There's no way because if

you're a salesperson, you are you work

the way you get trained and the way you

work is in stage one, there's an

account. Stage two, they have money.

Stage three, they have a champion. Stage

four, I met with them. And that is the

process of getting somebody to close.

Now, if we get to a world where there's

no longer process, where there's no

longer uh organizational structures in a

company, oh maybe, you know, maybe maybe

way back in the in the future if

somebody invents a new way that we all

organize ourselves in a totally

different way, that could be a risk, but

not if we remain organized the way we

are. And I don't see that in the next 10

years. I really don't. I don't even know

how you train a new salesperson to do

their job. Oh, right. Um, AI can give

you more context on what accounts to go

sell than Salesforce can. Yeah. Because

it gets all this unstructured data. It

reads all the emails. It looks at the

customer buying activity. It looks at

their speed. It looks at much more rich

information and can give you a better

sense of of where to go. And and

Salesforce then just becomes one of

those pieces of information in the

system. But how do you train that person

of where to go and what to do and how to

move that account along? I don't I don't

think I don't think so. I think it's I

think it's still going to be okay. Same

thing happened with SAS um 10 years ago.

Of course, every change is different.

This could be more transformative, but I

think we'll be we'll be okay. At least I

hope so.

>> Uh thank you. Uh I am Dais

and I'm originally from the Japan

private equity. My question is about

global expansion and challenge. I think

uh you've built a strong franchise in

terms of the US software investment uh

with a repeatable playbook but as you

see in the global expansion next beyond

to the Europe

where do you think is most like a uh

good place uh to apply your playbook and

why and also I would like to ask what

kind of readership capability is

essential or required to achieve those

success in that challenge.

>> Thank you. Where could our playbook be

applied globally? What are the best

places for that? Everywhere.

>> Thank you. Look, it's it's um it's it's

more than a playbook, right? Of course,

we have by sales, support, uh customer

success, professional services, product.

We have an entire

playbook that we've built over buying

600 companies. So, we add to it from

people that we learn and Marcel Bernard

and and everything else, right? We can

tell you the number of reps per manager

and why and how many underperforming

reps can you have and quota and

territory. We we have all that all those

metrics um on some of the best ways.

Now, how do you apply so much to a

company? They cannot absorb all that.

You don't have time to do all that. As

Marcel would say, if you try to do it

all, you'll get to none. Come up with

the three biggest areas that will

completely change that business that are

also the easiest to do and give you the

most money. That kind of combination of

all that's tough to do. Then align

yourselves with management so that they

lead them so that they truly believe

that this can be done and so the CEO of

that company can can manage and lead her

or his direct reports to go into that.

That is about 80% of it and that

leadership place is the most difficult.

Now there are country differences,

regional differences, and whatever

differences around, but people are

people. And if you have leaders that

want to make money, that care about

numbers, and that are open-minded

enough,

this works. This is business 101 by far.

Now, we diligence that because we

usually start the deal by cost

reduction. Before people didn't like

that in Silicon Valley, now Elon Musk

has made that super popular. So now we

hear a bunch of people going, "Yeah, I

cut cost and everything else." But we we

start the deal um because they're

usually not very profitable companies by

cutting 15%.

Maybe 20%. Marcel would say if you try

to cut more than 20, you're going to

have to change the way that company

works. That's too risky. No matter how

unprofitable it is, but no matter how

profitable you are, you can always cut

10%.

And now the time to do that is when you

close the deal because people are

expecting that change. Don't go bother

all these great workers and employees

and colleagues and executives two years

into the mission because a board member

decided that you could be more

profitable. Do it now and then the CEO

as a leader can stand up and say this

this won't happen again but we needed to

do it once. From here we're going to

grow and do acquisitions. All that stuff

and all that model of turning a great

innovator into a great business applies

everywhere. You just have to adjust

yourselves to the local culture and the

local laws. In Europe, you can't do that

immediately, right? You have to go

through labor council on a long process.

And I'm I'm glad that you're from

private equity from Japan. I'm headed

there after Hong Kong. And Japan is an

unbelievable market. Just an

unbelievable private equity market right

now. Uh it's a that's another thing of

opportunity, right? What's what that's

an obvious one in software though it's a

bit small for us. So that may be a place

we get to in three years.

>> Thank you.

>> Thank you to the students and Orlando.

Before we wrap it up, we have to do our

view from the top tradition. A few rapid

fire questions.

>> Just what is this?

>> Just don't think too much. Say the first

thing that comes to your mind.

>> Okay. Really?

>> Okay. Now

>> cut it. Are you ready?

>> Yes.

>> Okay, let's go. San Francisco or Miami?

>> Miami?

>> I have to have the backs of my team.

Half of them moved there. I'm not going

to tell them I'm moving back.

>> Don't worry. I'm moving to Miami after

GSV as well.

>> Okay. Lithuania to Miami. We like that.

>> V-neck or crew neck?

>> What?

>> V-neck.

>> Oh, V.

>> Yeah, V. Oh, not too deep, but

It's like a Saturday life skit. I should

come back like that. Yeah.

>> Most overused word in private equity.

>> Escape velocity.

Gosh, I really don't like that word. Oh.

Yeah. Anyway,

>> Wimbledon or US Open?

>> Wimbledon.

>> And finally, the best business advice

you've ever received.

>> That's not a rapid fire question.

>> That's why it's the final one. That that

that's a really really deep question. I

I I was in a meeting once with Carl Toma

in Denver and um there was this um this

partner that was arguing with him about

a deal and he said, "Well, if you want

to make money, you have to take risk."

And Carl said, "Yes, but not that kind."

And it's what fits you. Like we take big

risk in turning around these companies

and what we buy. Sometimes we put these

equity checks that represent almost 20%

of the fund. We have to syndicate J.

Those those are huge risks that others

would perceive as enormous for us is

something that we we can do. So find the

ones that are meant for you to take but

not others.

>> And Orlando,

thank you very much.

>> Thank you.

[Applause]

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