Thoma Bravo founder: This opportunity is 'unbelievable'

Key Concepts

• Thoma Bravo: A leading private equity firm specializing in software and technology investments.
• Google Gemini: Google’s multimodal AI model and platform.
• Domain Leadership: The strategy of acquiring the #1 market leader in specific software niches (e.g., payroll, procurement, cybersecurity).
• AI-Driven Market Expansion: The belief that AI represents a "10x opportunity" for software companies to expand their total addressable markets.
• Private Credit: Debt financing provided by non-bank lenders, which Thoma Bravo utilizes for its portfolio companies.
• AI Disruption: The rapid acceleration of product obsolescence caused by advanced AI models (e.g., Claude/Anthropic).

1. The Thoma Bravo-Google Cloud Partnership

Thoma Bravo has entered a five-year, multi-billion dollar partnership with Google Cloud. The core objective is to integrate Google’s Gemini AI platform and enterprise tools across Thoma Bravo’s portfolio of software companies.

• Operational Integration: Google engineers will be embedded directly into Thoma Bravo’s portfolio firms to assist in building AI agents and leveraging Google’s infrastructure.
• Strategic Rationale: Orlando Bravo emphasizes that the pace of technological change is extreme. By partnering with a "broad infrastructure provider," Thoma Bravo aims to accelerate the implementation of AI solutions for their customers.
• Mutual Benefit: Google gains significant revenue from service fees, while Thoma Bravo gains access to cutting-edge AI capabilities. Crucially, Thoma Bravo provides Google with access to "domain experts"—the software companies that already manage critical business functions like payroll and procurement—which are the essential conduits for effective AI implementation.

2. AI Implementation Strategy: "Don't Deliver Garbage"

Orlando Bravo addressed concerns that the firm was "falling behind" in AI. He argued that the firm’s measured approach is a deliberate strategy to maintain customer trust.

• Customer-Centric Timing: Thoma Bravo serves Fortune 1000 companies that require a clear Return on Investment (ROI). Delivering experimental or "garbage" AI too early risks losing client trust.
• Realistic Adoption: The firm focuses on what customers can realistically absorb, ensuring that AI tools provide tangible value rather than just hype.
• Performance Metrics: Despite the cautious approach, AI is already driving results; in the last 20 investments made by the firm, AI-related bookings account for approximately 35% of all new business.

3. Private Credit and Portfolio Resilience

The discussion touched on the current volatility in the private credit market and the performance of Thoma Bravo’s portfolio.

• Portfolio Health: Out of 77 companies, Orlando Bravo acknowledged one underperforming asset, attributing it to overestimating growth rates and overpaying, rather than AI-related disruption.
• Discipline in Acquisition: The firm’s strategy remains anchored in three pillars:
  1. Buying the #1 domain leader in a specific area.
  2. Backing existing management teams who possess deep domain expertise.
  3. Selecting companies that understand the platform transition presented by AI.
• Market Outlook: Bravo noted that the firm historically performs better in "down markets" when financing is difficult to obtain, as the firm’s rigorous due diligence process provides a competitive advantage.

4. AI Disruption and Cybersecurity

The conversation addressed the "shock" caused by AI models like Anthropic’s Claude, which can perform tasks that previously required specialized software.

• The "Wrecking Ball" Effect: AI is accelerating the disruption of legacy software. Companies that are vulnerable to AI disruption would have been disrupted eventually, but AI is making that process happen "super fast."
• Cybersecurity Impact: When asked about the threat to cybersecurity firms (e.g., the impact of AI scanning for vulnerabilities), Bravo noted that while AI models can now perform tasks that once required dedicated software, this shift is part of the natural evolution of the industry.

5. Notable Quotes

• "It is about a 10x opportunity than current market." — Orlando Bravo, on the potential for software companies to expand their markets through AI.
• "You have to move with your customer, you cannot be way away ahead of your customer... you don't deliver garbage AI to your customer." — Orlando Bravo, on the firm's cautious AI deployment strategy.
• "We always do better in down markets than in up markets." — Orlando Bravo, on the firm's resilience during periods of financial tightening.

Synthesis and Conclusion

The partnership between Thoma Bravo and Google Cloud represents a strategic pivot toward AI-integrated software delivery. Orlando Bravo’s perspective is one of "disciplined acceleration"—using AI to expand market opportunities while avoiding the pitfalls of premature, low-quality implementation. Despite broader market jitters regarding private credit and the disruptive potential of AI, Thoma Bravo maintains that its focus on domain-leading companies and experienced management teams positions it to thrive in the current economic environment. The firm views the current climate as an opportunity to double down on its core investment principles, emphasizing that the most successful companies will be those that effectively harness AI to solve real-world business problems.