147: Vista Equity Partners: The $100 Billion Private Equity Software Group - With Rachel Arnold, Co-Head of Vista Equity Partners’ Endeavor Fund
Jul 18, 2024
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Rachel Arnold, Co-Head of Vista Equity Partners' Endeavor Fund, discusses the growth and importance of software companies, AI adoption, operational transformation, and software's economic resilience. The podcast dives into the thriving software industry, investment strategies, and the significance of software investments in business operations.
Software's economic resilience and AI's application show immense potential for investment in private software companies.
Vista Equity Partners’ Endeavour Fund focuses on strategic support for software companies in growth phases.
Deep dives
Global Adoption of Enterprise Software
Enterprise software adoption is still in its early stages globally, with businesses of all sizes integrating software into their operations. Despite the misconception that the opportunity to invest in enterprise software has passed, businesses across various sectors continue to leverage software for marketing, revenue growth, cost savings, and efficiency improvements. This trend presents a significant investment opportunity to support companies disrupting larger competitors and driving digital transformation worldwide. For instance, companies like Inevaptive are addressing the automation needs of industries like heavy manufacturing, indicating the ongoing potential for software integration.
Strategic Support for Software Companies
Software companies in their growth phases, typically with established product-market fit and annual recurring revenues between $10 to $40 million, are entering a crucial stage requiring strategic support. The Endeavor Fund focuses on providing these companies with essential resources and expertise to navigate challenges related to team expansion, automated processes, and operational efficiency. By offering best practices, value-adding services, and a dedicated team of experts, the fund aims to empower CEOs and founders to create long-term value and sustainable business growth. The partnership model emphasizes building durable businesses rather than focusing solely on exit potential, reflecting a shift towards long-term value creation over immediate exits.
Opportunities and Risks in Generative AI for Software Companies
Generative artificial intelligence (AI) presents a significant inflection point for enterprise software, driving innovation and efficiency improvements. Utilizing AI technologies like generative AI enables software companies to enhance marketing strategies, streamline code generation processes, and automate internal operations for increased productivity. Software companies integrating AI-based products are positioning themselves for improved ROI and market competitiveness. However, as the AI landscape evolves, companies must carefully assess risks and opportunities, ensuring readiness in terms of technology integration, data management, and team capabilities to leverage the full potential of generative AI.
In this shorter interview, recorded at Berlin SuperReturn, Rachel Arnold, Co-Head of Vista’s Endeavour strategy, a fund focused on small-cap private software companies, offers insights that echo Bill Gates comment that “software is the magic thing whose importance only goes up over time”
Amazingly, over 90% of software companies are private, and as a former tech operator and CEO, Rachel brings hard-earned expertise to explain their investing approach.
She discusses portfolio make up, the drivers behind software’s growth and how they assist their portfolio companies on operational transformation.
She discusses the urgency and applications resulting from AI’s adoption, the likely trajectory of this investing space, software’s economic resilience and the runway ahead.