How Orlando Bravo Built One of the Most Successful Firms in Private Equity

Orlando Bravo, the first Puerto Rico-born billionaire, built Thoma Bravo into a dominant software private equity firm by focusing on operational excellence, strategic cost-cutting, and disciplined growth through specialized software acquisitions.

• Orlando Bravo built Thoma Bravo from humble beginnings in Puerto Rico, driven by a strong parental influence and early mentorship.

• Thoma Bravo thrives by keeping its team small, focusing on operational excellence, and specializing in software acquisitions.

• Modern private equity, exemplified by Thoma Bravo, acts as a growth-oriented change agent, especially in technology, by turning innovators into profitable businesses and driving value through strategic improvements.

Orlando Bravo, founder of Thoma Bravo, discusses his firm's success in private equity, managing nearly $200 billion in assets primarily focused on software. The firm differentiates itself by transforming 'good innovators into good businesses' through operational improvements and strategic cost management, rather than solely relying on leverage. Bravo emphasizes a small, focused team, deep mentorship, and a disciplined approach to identifying and acquiring market-leading software companies to drive consistent returns for investors.

Orlando Bravo's Journey

• 00:02:51 Orlando Bravo's upbringing in a small town in Puerto Rico and his mother's influence were crucial in shaping his drive for success. His mother, a Cuban immigrant, consistently encouraged him to seek broader opportunities, initially through tennis and later into business, always providing a roadmap for advancement. This foundational guidance, coupled with listening and discipline, laid the groundwork for his career, even when opportunities seemed scarce after graduating from Stanford.

Thoma Bravo's Investment Philosophy

• 00:07:07 Thoma Bravo maintains a lean team of around 230 people to foster an outward-facing culture and enable senior partners to provide intensive mentorship to the next generation. The firm's growth has been incremental, starting with smaller deals and gradually scaling up, gaining investor trust through consistent returns. Thoma Bravo's core strategy revolves around buying the best software companies and operating them with excellence, focusing on a concentrated portfolio of 10-12 companies per fund to maximize influence and value creation.

The Role of Private Equity

• 00:09:05 Private equity acts as a significant 'change agent' in the economy, particularly for software companies, facilitating transitions when management becomes 'tired' and introducing new perspectives for growth. While historical perceptions of private equity often involve cutthroat tactics and layoffs, modern private equity, especially in the technology sector, prioritizes growth and building businesses rather than merely asset stripping. Thoma Bravo's model, which involves high equity contributions and growth focus, is distinct from the highly leveraged deals of the past, aiming for terminal value appreciation over cash flow yield.

Operational Playbook and Challenges

• 00:19:59 Thoma Bravo's operational playbook involves transforming innovative but often unprofitable companies into profitable businesses by implementing strategic cost reductions, typically around 15% at closing, to establish fundamental earnings. This initial shock allows for future profitable growth by focusing on bookings and add-on acquisitions. The firm faces significant challenges from AI disruption in the software sector and the necessity of selling increasingly large acquisitions for substantial multiples to generate returns, requiring IPOs at a discount even after paying a premium to acquire the company.