Defying the Down Market w/ Vista’s Robert F. Smith
Nov 14, 2023
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Robert F. Smith, CEO of Vista, discusses defying the down market with 18 successful monetization events, strategies for running software companies profitably, challenges in finding exit opportunities in private equity, impressive performance and financing challenges, and the advantages of private credit in the current market.
Enterprise software remains a fast-growing sector with high ROI, especially in challenging market conditions.
Building infrastructure and establishing efficient processes are crucial for sustainable growth and profitability in software companies.
Deep dives
Tech sector growth and the value of enterprise software
Despite recent concerns about the tech sector, enterprise software remains a fast-growing sector, with mid teens growth rates and high levels of consumption. Enterprise software enables various industries and provides a significant return on investment (ROI) for customers. Companies like Vista Equity Partners measure the ROI of their software products, which averages around 640%. With the increasing accessibility of computing capacity and the development of more efficient code development tools, the demand for enterprise software is expected to accelerate further.
Building profitable software companies and managing margins
To ensure profitability and sustainable growth, it is crucial to build infrastructure and establish efficient processes in software companies. Vista Equity Partners focuses on accelerating corporate maturity by enhancing product development, go-to-market strategies, contract administration, and human resources management. By creating sustainable infrastructure, companies can pivot from high-growth models to profitability models without breaking the business. Proper infrastructure also allows software companies to scale and capture more value from their customer base. Maintaining strict price discipline is essential to ensure investments are made at the right level and value is captured.
Successful exits and the importance of customer economics
Vista Equity Partners has achieved successful exits in the current market downturn, generating significant value for their investments. By demonstrating solid customer economics and a track record of delivering value to customers, Vista's companies have become attractive to buyers. The focus on expanding sales of existing products to the customer base and showcasing additional value opportunities plays a vital role in attracting buyers. Vista also utilizes the private credit market to provide reliable capital to enterprise software companies, leveraging their expertise and unique perspective to underwrite credit opportunities.