Investing with software specialists Vista Equity Partners

Transcript

Hi. My name is Michael Fosnaugh. I'm a senior managing director at Vista Equity Partners, and I co-head the flagship fund. Vista Equity Partners was founded in April of 2000 to fo cus on investing in enterprise software companies that service the business-to-business software landscape.

Vista Equity Partners invests in mature enterprise software companies that are mission-critical market leaders in their industries. We've had a consistent approach for 22 years now; find great world-class enterprise software companies focused on business-to-business enterprise software. So think of it as software that's being used by one business to help provide whatever product or service that they're providing to the global economy and bring our proprietary value creation ecosystem to bear with our best practices and our operational apparatus. And that, we believe, whether it's good times in the overall economy or bad times in the overall economy, will produce predictable, consistent, risk-adjusted results. 

We've been able to help over 550 companies across a range of different sizes in the flagship fund that we focus on, the largest of those primarily control buyout transactions between, you know, the two different buckets are more mature, slower-growing traditional buyouts. And then an emerging space for us over the last couple of funds has been higher growth, we call it growth at scale, but again, it's controlled buyouts of much higher growth companies. The investment thesis, I'd say, first and foremost, is it a mission-critical sticky product? Meaning people aren't looking to turn it on or off? You know, once it gets in, it's not going anywhere. And then, ultimately, do we feel like the financial profile sets up where we can come in with our software best practices that we've developed over 22 years of doing this and help make that business better in some way, shape, or form? Typically that means can we do it bigger, better, and faster than they're doing it on their own? The end goal is to help create the best possible business you know that we can through that partnership. And ultimately, we believe if you do that, you're going to ultimately create a business that people want to pay a lot of money for on the other end. 

Vista sources investments primarily through our network of 83 companies. And, you know, the founder network that comes from with inside that. We're able to really work those network connections to go build relationships with the up-and-coming companies that either they're using their software or they're friends of those businesses. And ultimately, what we're able to pitch to them, these founders have built these great businesses. They get the size and scale that we're interested in, but ultimately they get to a point in their life where what they've done before is just not going to keep working the same as it has before because it's very different running a $50 million business than a $250 million business. And what you did to be successful at 50 million is not going to work at 250. That's where we can come in and say we've been doing this for 22 years with over 550 companies; we can help you avoid the mistakes that you're going to make on your own and help you hopefully, you know, capitalize on the opportunity set in front of you to help grow and scale that business. That's a message that really resonates with founders, who all they want to do, is make their business the best it can possibly be.

As far as the size of the enterprise software market, it's pretty hard to quantify just how big it is. For people looking for exposure to that market, they really do have to find partners that have access to that channel. Where we're playing right now in terms of focusing on growth at scale and growth buyouts, there really aren't that many other private equity firms that are focused on that.