Thoma Bravo Bets Big on AI with Google Cloud Partnership

Thoma Bravo Bets Big on AI with Google Cloud Partnership

Software investment firm Thoma Bravo has inked a significant five-year deal with Google Cloud. This partnership, valued at over $2 billion, aims to give Thoma Bravo’s software companies access to Google’s advanced AI platform, Gemini, and enterprise tools. The agreement will also embed Google engineers within Thoma Bravo’s portfolio companies.

Orlando Bravo, founder of Thoma Bravo, described the opportunity as “unbelievable” and highlighted the rapid pace of change in the software sector. “Things are moving so fast.

We need to be moving very fast,” Bravo stated in a Fox Business exclusive. He believes the chance for software companies to grow their markets through AI is a “10X opportunity” compared to current market potential.

AI Offers a Massive Growth Opportunity

Thoma Bravo manages a large number of leading enterprise software companies across various sectors. These include payroll, planning, procurement, and cybersecurity.

The firm sees AI as a key driver for these companies to expand their reach and offerings. By partnering with Google Cloud, Thoma Bravo aims to leverage Google’s broad infrastructure and AI models.

Google’s involvement means providing the underlying technology and expertise. “First they get money. Because we have to buy the great services from them,” Bravo explained.

Google also gains access to Thoma Bravo’s deep domain expertise. The software companies within Thoma Bravo’s portfolio understand their customers’ business needs at a detailed level, which is crucial for successful AI implementation.

Customer-Centric AI Adoption

Bravo addressed concerns that the deal signifies Thoma Bravo falling behind in AI adoption. He emphasized a customer-first approach.

“You have to move with your customer, you cannot be way away ahead of your customer,” he said. Delivering unproven AI technologies too early could risk losing customer trust, especially since many of Thoma Bravo’s clients are within the Fortune 1000.

The focus is on providing realistic AI solutions that offer a clear return on investment. “You don’t deliver garbage AI to your customer,” Bravo stated. The partnership with Google is seen as a way to accelerate this process responsibly, by working with a leader in AI development like Google, which is far ahead with Gemini.

Navigating Private Credit Challenges

The discussion also touched upon Thoma Bravo Credit, which focuses on software companies with predictable recurring revenues and strong cash flows. Despite the overall strength of their portfolio, Bravo admitted to one mistake out of 77 companies.

“We have a company that is not doing great right now,” he noted. This was attributed to overestimating growth rates and overpaying, rather than issues related to AI or market shifts.

Looking at their most recent 20 investments, Bravo reported that these companies are performing exceptionally well. AI is already contributing significantly, making up about 35% of all new business for these recent acquisitions. This shows a strong current performance driven by AI integration.

Discipline in Acquisitions Amidst Market Jitters

The private credit market has experienced significant turbulence, with large redemption requests impacting many firms. However, Bravo stated this volatility has reinforced Thoma Bravo’s long-standing strategy. “Made us double down on our strategy, has made us more disciplined about what we’ve been doing for 25 years,” he explained.

Their strategy centers on three key principles: acquiring the deepest domain leaders, backing existing management teams who are domain experts, and investing in companies that understand the AI transition. Bravo acknowledged that the software sector faces challenges, as AI will disrupt many companies, but believes those most affected would have faced disruption eventually, with AI simply accelerating the process.

Cybersecurity and Future Outlook

The conversation also addressed recent shocks in the cybersecurity sector, such as the concerns raised by AI models like Anthropic’s Claude and the impact of companies like Mythos. Thoma Bravo, which has experience with cybersecurity investments, views these developments as part of the natural evolution of technology. Bravo recalled owning a company years ago that scanned code for vulnerabilities, a process now significantly advanced by current AI models.

Bravo expressed immense confidence in Thoma Bravo’s current position, comparing it to the firm’s situation in 2000. He believes the firm performs even better during difficult market conditions. “Better what times are difficult, we always do better in down marketings than in up markets,” he concluded, highlighting the firm’s resilience and strategic advantage when financing is harder to obtain.

Source: Thoma Bravo founder: This opportunity is 'unbelievable' (YouTube)