Thoma Bravo co-founder Orlando Bravo believes the software sector is currently undervalued, citing a lack of profitability as a primary concern. “A lot of these publicly traded software companies aren’t generating sufficient profits,” Bravo stated in a recent interview. “Their valuation is based on revenue multiples, which can be a precarious position.”
Thoma Bravo, a prominent investment firm specializing in software, manages over $181 billion in assets as of September. The firm’s perspective on the software market is particularly noteworthy given its deep involvement and extensive capital deployed within the sector.
Bravo highlighted the evolving landscape, suggesting that the rise of artificial intelligence, while a technological advancement, also elevates the importance of deep domain expertise within software companies. “There are truly valuable companies in the public markets today,” he observed. “These are businesses that have cultivated three decades of specialized knowledge embedded in their products. Consequently, they are trading at significantly attractive valuations right now, and we are actively evaluating many of them.”
While declining to name specific targets, Bravo indicated that portfolio companies with established domain expertise have demonstrated the most significant advantages and highest returns on investment from AI integration. Recent acquisitions by Thoma Bravo include the talent platform Dayforce for $12.3 billion and aviation software Jeppesen ForeFlight for $10.55 billion, both examples of strategic investments in specialized software solutions.
Bravo acknowledged the rapid progress of AI-generated code but emphasized that it cannot entirely supplant the critical functions of human research and development teams. “A substantial portion of what R&D professionals do extends far beyond simply writing code,” he explained. “We’d ideally like to reduce R&D expenditure from 15% to 2%, but that’s not currently feasible. Delivering robust enterprise solutions involves a complex interplay of factors that AI, in its current form, cannot fully replicate.”
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