Robert F. Smith, Founder, Chairman and CEO of Vista Equity Partners - One of the World’s Most Successful Private Equity Firms [REPLAY]
Jul 7, 2022
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Robert F. Smith, Founder, Chairman and CEO of Vista Equity Partners, discusses his upbringing, work experience at Bell Labs, and founding Vista Equity Partners. He explains the importance of software and describes today's epoch as the '4th Industrial Revolution'. He explores investment opportunities in the private market and technology sectors, and the role of enterprise software in various industries. He also compares private equity and public equity, and highlights the importance of communication and challenges faced by African-Americans.
Enterprise software and technology are highly productive tools that improve the human experience in terms of job creation, healthcare, and education.
Philanthropy should go hand in hand with responsible and accountable business practices to strike a balance between supporting capitalism and addressing social and environmental challenges.
The fourth Industrial Revolution is driven by the accessibility of computing power, connectivity, and the Internet of Things, empowering businesses to become more efficient and reach new markets.
Deep dives
Importance of Enterprise Software and Technology
Enterprise software and technology, particularly in the field of software companies, are highly productive tools that have a significant impact on improving the human experience. They contribute to job creation, higher quality healthcare and education, and have the potential to create value in various industries. The accessibility of computing power, connectivity, and the Internet of Things are the three major forces driving the fourth Industrial Revolution. The distribution of computing power has become more affordable and allows for the development of more efficient processes. The connectivity to computing power enables real-time communication and data exchange, leading to increased efficiency. The Internet of Things connects various devices, expanding the network of computing power and enabling new applications. This fourth Industrial Revolution is creating opportunities for businesses to become more efficient and reach new customers and markets. It also presents opportunities for philanthropy, as enterprise software can have a positive impact during times of crisis, such as providing efficient solutions for small businesses or managing temporary hospital workforce. Private equity in the software industry provides opportunities for long-term value creation, while public equity markets often focus on short-term results. The private markets offer more alignment with stakeholders, including employees and customers, and allow for engineering solutions and long-term growth. The future will likely involve a hybrid work environment, with a seamless integration of in-person and remote work, leveraging advanced analytical capacities for increased productivity and a more sustainable and inclusive approach to business.
Supporting Capitalism and Philanthropy
Supporting capitalism is crucial as it has had a significant positive impact on improving the human condition. Capitalism provides job creation, higher quality healthcare, education, and has the potential for innovation and growth. However, capitalists also have a responsibility to their communities and should embrace philanthropy as a way to contribute positively. Philanthropy can be more than just capital donations; it can involve organizing resources and providing intellectual property to improve communities and address social issues. Philanthropy should go hand in hand with responsible and accountable business practices. There is a need to strike a balance between supporting capitalism and ensuring its sustainability while also addressing social and environmental challenges.
The Power of Enterprise Software and Intellectual Property
Enterprise software is a powerful tool that improves efficiency and creates value in various industries. It offers significant returns on investment, with ROI of over 600% in many cases. Software solutions become mission-critical and business-critical, leading to high retention rates and significant impact on businesses and industries. The software industry provides opportunities for investors and has the potential for high returns compared to other investment segments. However, software companies require more than just capital; they need intellectual property and organizational capacity to succeed. The ability to organize resources and develop best practices is crucial in delivering consistent value and achieving optimal potential.
The Fourth Industrial Revolution and the Role of Technology
The fourth Industrial Revolution is characterized by the accessibility of computing power, connectivity, and the Internet of Things. These forces are driving significant changes in various industries, empowering businesses to become more efficient and reach new customers and markets. The distribution of computing power has become more affordable and widespread, enabling the development of innovative applications. Connectivity provides real-time communication and data exchange, leading to increased efficiency. The Internet of Things connects devices and expands the capabilities of technology. This revolution has been further accelerated by the COVID-19 pandemic, highlighting the importance of technology in managing businesses and providing solutions. The future will involve a hybrid work environment with seamless integration and increased analytical capacity to drive efficiency and sustainability.
Balancing Private Equity and Public Equity
Private equity offers opportunities for long-term value creation and alignment with stakeholders. It allows for an engineered approach to value creation and provides the flexibility to focus on long-term goals. Public equity markets often prioritize short-term results, which can hinder long-term growth and impact. However, private equity also needs to adapt and consider longer holding periods to fully capture the value of software companies. Permanent capital funds, such as perennial funds, provide an alternative to selling businesses and allow for long-term value creation. The software industry's potential for high returns and efficiency makes it an attractive investment segment.
With more than 96 billion dollars in assets under management (as of March 31st 2022), Vista Equity Partners is one of the world’s largest and leading software private equity firms. As Founder, Chairman and CEO, this success has helped Robert F. Smith become one of the most respected investors of his generation, being named by Forbes as one of the ‘100 Greatest Living Business Minds’ as well as one of the most generous philanthropists of his time.
Robert describes his upbringing in Denver, how he secured his first work experience at Bell Labs whilst still at school and his education at Cornell University and Columbia Business School, taking him from engineering to finance. Robert describes working in technology at Goldman Sachs Investment Banking, which included advising a then-troubled Apple as it pivoted to become a platform technology company.
He then explains his decision to leave and found Vista Equity Partners in 2000. He talks about the signs that software’s importance would mushroom and how today, Vista’s 80+ portfolio companies have circa 90,000 employees globally, together comprising one of the world’s largest enterprise software companies when combined by revenue, serving over 300 million users.
Robert goes on to examine why software has been the most productive economic tool in the last 50 years and explains why he describes today’s epoch as the ‘4th Industrial Revolution’. After covering the underlying meaning behind ‘digitization’, he provides examples of how his companies have prospered, why their growth trajectory is still so exciting and why software companies are helping to re-shape supply chains and industries across the world.
He discusses the merits of private equity versus public listings, the huge gains investors have made in their funds, and why he believes the investment opportunities are still so significant.
Robert then talks about his philanthropic work, his view on reaching those communities who have been underserved and what needs to be done and committed to in order to create lasting change for good.
Originally recorded in June 2021, we re-releasing this episode as part of our ongoing Private Equity Miniseries.