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

Key Concepts

• Private Equity: A type of investment fund that pools capital from investors to acquire and manage companies.
• Investment Banking: Financial services that help individuals, corporations, and governments raise capital.
• Carried Interest: A share of the profits in a private equity fund that is paid to the fund managers.
• Dot-com Bubble: A period of rapid growth in internet-based companies in the late 1990s, followed by a sharp decline.
• Software Buyouts: The acquisition of software companies by private equity firms.
• Recurring Revenue: Revenue that a company can expect to receive on a regular basis.
• Value Investor: An investor who seeks to buy securities that appear to be trading for less than their intrinsic or book value.
• Mentorship: Guidance and advice provided by an experienced person to a less experienced person.
• Assets Under Management (AUM): The total market value of the assets that a financial institution manages on behalf of its clients.
• Hurricane Maria: A devastating Category 5 Atlantic hurricane that struck Puerto Rico in September 2017.
• Entrepreneurship: The activity of setting up a business or businesses, taking on financial risks in the hope of profit.
• Generative AI: A type of artificial intelligence that can create new content, such as text, images, and music.
• Commoditization: The process by which goods or services become indistinguishable from those of competitors.
• Enterprise Software: Software designed for the needs of organizations rather than individual consumers.
• Durable Moat: A sustainable competitive advantage that protects a company's market share and profitability.
• Limited Partners (LPs): Investors who provide capital to private equity funds.
• General Partners (GPs): The managers of private equity funds.
• Escape Velocity: A term used in private equity to describe a company's ability to achieve rapid growth and overcome market challenges.

Orlando Bravo's Journey: From Puerto Rico to Private Equity Leadership

This summary details the career and life journey of Orlando Bravo, founder of Thoma Bravo, as shared in a "View from the Top" session. His narrative highlights resilience, strategic thinking, mentorship, and a commitment to giving back.

Early Life and Education

• International Student Experience: Bravo moved to Florida from a small coastal town in Puerto Rico at age 15 to pursue tennis. This experience was initially scary due to his close family ties but also felt like a once-in-a-lifetime opportunity.
• Tennis as a Life Lesson: Attending Nick Bollettieri's prestigious tennis academy taught him humility and the importance of figuring out how to win, regardless of ranking or external factors. He notes that "there's always somebody better than you and it's okay not to always be the best at everything." This equalizer principle is applied to business, where even a large firm must strive to win deals.

Transition to Finance and Private Equity

• Investment Banking at Morgan Stanley: In the early 1990s, Bravo joined Morgan Stanley. He was surprised by the "American opportunity" where individuals with capital could acquire multinational corporations, even without owning a company or having a large presence in the space.
• Stanford MBA/JD: He pursued a joint JD/MBA at Stanford, where he met his wife, Gabrielle, and formed lifelong friendships. This period was crucial for exploring his interests and being inspired by classmates.
• Early Private Equity Internship and Rejection: His summer internship at a private equity firm did not result in a return offer. This rejection, however, did not deter him. He emphasizes the lesson: "You don't need many offers. You just need one and it has to be the right one."
• Joining Thoma Bravo: After sending out 500 resumes and cold-calling, he secured a job with Carl Icahn's firm, Thoma Bravo, just two weeks before graduation.
• The "San Francisco Dinner" Incident: Early in his tenure, Bravo nearly lost his job offer by asking for carried interest during a dinner with Carl Icahn. Icahn initially withdrew the offer, but Bravo's persistence led to him accepting the original terms. This highlights the importance of earning one's way.

Navigating the Dot-Com Bust and Early Career Challenges

• Dot-Com Boom and Bust: Bravo's initial investments in IT service companies catering to dot-com firms proved disastrous after the bubble burst, with two out of three deals going to zero. He recounts that Carl Icahn later revealed he was on the verge of firing him.
• Second Chance and Risk Management: Carl Icahn gave him another chance, advising him to avoid similar high-risk ventures and to focus on the types of risks appropriate for a private equity buyout firm.
• Pioneering Software Buyouts: Despite the setbacks, Bravo proposed a new strategy: software buyouts. He recognized the potential for buying software companies cheaply with recurring revenue, even though many were not profitable at the time. This was a contrarian view, as both venture capitalists and large buyout firms considered tech and software too risky.
• Mentorship from Carl Icahn and Marcel Bernard: He credits Carl Icahn as a mentor with high ethical principles and Marcel Bernard, an exceptional operator, for teaching him how to run businesses. Bernard's philosophy was to "do it with the existing people" and focus on the biggest impact areas.

Growth of Thoma Bravo and Personal Transformation

• Becoming a Name Partner: At 35, Bravo became a name partner at Thoma Bravo, signifying Carl Icahn's trust. This was a significant turnaround from nearly being fired.
• Extraordinary Growth: Over 17 years, Thoma Bravo grew from $1 billion to nearly $200 billion in assets under management (AUM), a 200x increase. Despite this growth, Bravo states that "not much" has changed personally. The core philosophy of acquiring, improving, and selling companies remains the same, with the numbers simply getting bigger.
• Focus on "Jewel" Companies: With increased capital, Thoma Bravo can now acquire leading companies in various sectors, aiming to create significant market caps.
• Hands-On Approach: Bravo remains extremely hands-on, actively engaging with associates and learning from their work.

Impact of Hurricane Maria and Philanthropy

• Puerto Rico Relief Efforts: In September 2017, Hurricane Maria devastated Puerto Rico. Bravo, upon learning of a shelter with limited supplies, immediately organized relief efforts, deploying trucks and supplies before FEMA arrived.
• The Brow Family Foundation: He established the Brow Family Foundation to create long-term opportunities in Puerto Rico. The "Rising Entrepreneurs" program has launched over 100 companies, providing free capital, education, and mentorship from Thoma Bravo executives.
• Ecosystem Development: The foundation also partners with high school programs across Puerto Rico, aiming to instill hope and provide real opportunities for young adults, shifting their focus from passive activities to problem-solving and entrepreneurship. Bravo believes this work is "easy" compared to turning around billion-dollar companies, reinforcing the transferable nature of his business acumen.

Perspectives on the Private Equity Industry

• Industry Growth and Opportunity: Bravo dismisses the notion that private equity is "crowded" or that the "golden era is over." He believes the industry is still "tiny" compared to public markets and that the next generation of investors will build firms even larger and better than Thoma Bravo.
• The Importance of Control: He argues that true value creation and creativity in private equity only exist when one can buy and control an entire company, not just pieces of it.
• Navigating Market Doubts: He shares his experience of ignoring the prevailing skepticism from venture capitalists and large buyout firms when entering the software space. He emphasizes the importance of doing the work and not being swayed by general opinions.
• Generative AI and Software Moats: Regarding generative AI, Bravo acknowledges that software has never truly had a "durable moat" and that the industry is constantly evolving. However, he believes that enterprise software's value lies in understanding customer processes and providing custom solutions, not just code development. He uses Salesforce as an example, arguing that AI can enhance, but not replace, the human element of sales processes and organizational structures.
• Global Expansion: Bravo believes his playbook can be applied globally, emphasizing that "people are people" and that leaders who want to make money and are open-minded can succeed. He notes that cost reduction is often the initial step in deals, and while local cultures and laws require adjustments, the core principles of turning innovators into great businesses remain universal. He sees significant opportunity in Japan's private equity market.

Key Lessons and Advice

• "Do Your Thing": Bravo's primary advice is to focus on one's own path and not be pressured by external trends or what others are doing, even if they are highly respected.
• Do the Work and Stay Positive: He stresses the importance of diligent work and maintaining a positive outlook, acknowledging that the journey will not be linear but that persistence leads to building something significant.
• Fundraising and LP Relationships: For fundraising, Bravo highlights that "returns are the only thing that matters." However, he also emphasizes the critical skill of attending to the "customer" (LPs), understanding their needs, decision-making processes, and building strong relationships.
• Authenticity in Communication: He advises being oneself, as authenticity allows for better connection with others. He learned this from his mentor, Bert, who encouraged him to embrace his personality rather than imitating others.
• Risk Assessment: The best business advice he received was from Carl Icahn: "Yes, but not that kind" of risk. This means identifying and taking risks that are appropriate for one's strategy and capabilities, not blindly pursuing every opportunity.

Rapid Fire Questions

• San Francisco or Miami: Miami (to support his team who moved there).
• V-neck or Crew neck: V-neck.
• Most Overused Word in Private Equity: "Escape velocity."
• Wimbledon or US Open: Wimbledon.