What is Toma Bravo's strategy for managing a large portfolio with a small team?

Toma Bravo maintains a lean team of about 230 people to stay externally focused on deals and companies, rather than becoming internally focused. They prioritize mentorship and select a limited number of high-quality companies (10-12 per fund) to operate.

What is the role of private equity in the US economy?

Private equity acts as a significant change agent, driving innovation by acquiring companies and injecting new ideas or perspectives. The alignment with capital sources through returns ensures PE firms remain focused on performance.

How has the private equity industry changed, and what is Toma Bravo's focus now?

Historically, PE was more focused on traditional industries, but now a significant portion, around 50%, is in technology. Toma Bravo exclusively focuses on software, particularly SaaS companies, since 2010, adapting to market shifts and higher valuations.

What is the playbook for acquiring and transforming technology companies?

The playbook involves turning 'good innovators into good businesses.' This includes meeting with management, creating a plan to cut costs (e.g., 15%), investing in growth, and improving profitability from a revenue multiple to an EBITDA multiple.

How does Toma Bravo evaluate talent in acquired companies?

Toma Bravo assesses talent by looking at the leader first, believing a good leader makes everything good. They evaluate leaders based on company performance (bookings, customer service, retention), open-mindedness, and their ability to rally employees and customers.

What due diligence methods does Toma Bravo use before acquiring a company?

They employ multiple methods, including talking to customers, backdoor references, interviewing former employees, and analyzing raw data provided by the company. They also leverage long-term relationships with competitors or partners.

Why doesn't Toma Bravo plan to go public like other large PE firms?

Toma Bravo believes going public would not help their core goals of getting money, securing deals, and improving deals. They prioritize focusing on returns for their investors and mentoring the next generation, feeling this path will lead to greater long-term wealth.

Key Moments

Inside Orlando Bravo’s Private Equity Playbook: How to Build a Top Firm

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Entertainment4 min read29 min video

Oct 15, 2025|72,846 views|1,061|41

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Key Moments

TL;DR

Orlando Bravo's playbook: Focus on software, disciplined operations, and mentorship to build Thoma Bravo into a PE giant.

Key Insights

Thoma Bravo's success stems from a laser focus on software, a small, outward-facing team, and deep mentorship.

The firm's operating playbook involves acquiring good innovators and transforming them into strong businesses through cost optimization and strategic investment.

Private equity plays a crucial role as a change agent in the economy, particularly in the dynamic technology sector.

Underwriting AI risks and potential disruptions is a critical, ongoing challenge for the firm.

Thoma Bravo prioritizes disciplined deal-making, focusing on high-conviction opportunities rather than competitive bidding.

The firm has no current plans to go public, prioritizing investor returns and nurturing the next generation of leaders.

HUMBLE ORIGINS AND EARLY INSPIRATION

Orlando Bravo's journey began in a small town in Puerto Rico, a stark contrast to his current success. His mother, a Cuban immigrant, instilled a drive for advancement, pushing him towards opportunities like tennis tournaments abroad that exposed him to wealth. While not becoming a professional athlete, this early exposure and his ability to listen and absorb lessons from mentors like Carl Thoma were instrumental in shaping his disciplined approach, laying the groundwork for his entry into the business world.

THE FORMATION AND GROWTH OF THOMA BRAVO

Bravo joined Carl Thoma in 1997, a time when private equity was nascent and opportunities were scarce. Despite initial rejections, his persistence and desire to focus on US tech buyouts led him to Thoma Bravo. The firm's growth has been deliberate, starting with small deals (e.g., $50 million) and gradually scaling up to significant acquisitions. This step-by-step approach, coupled with a strategic pivot to software and later SaaS after the 2008 crisis, allowed Thoma Bravo to capitalize on market shifts and build significant investor trust.

OPERATING PHILOSOPHY: SMALL TEAM, OUTWARD FOCUS

Thoma Bravo operates with a deliberately small team of around 230 people to maintain an outward-facing perspective, recognizing that deals, companies, and buyers are external. This structure fosters a culture of intense mentorship, allowing senior partners to dedicate time to developing junior talent, a model that mirrors the guidance Bravo himself received. The firm's fundraising success, including raising over $34 billion, is attributed to this consistent performance and deep investor relationships built over years of delivering returns.

THE ROLE OF PRIVATE EQUITY AS A CHANGE AGENT

Bravo views private equity as a critical change agent in the American economy, particularly in technology. Unlike long-term corporate ownership, PE firms bring fresh perspectives and entrepreneurial drive to companies. This is especially true in software, where Thoma Bravo focuses. The firm's strategy involves acquiring companies, often at revenue multiples, and transforming them into profitable businesses by improving operations and margins. This contrasts with older PE models that relied more heavily on debt and cash flow generation.

NAVIGATING THE AI REVOLUTION AND DEAL PRICING

The advent of AI presents both disruption and opportunity. Bravo acknowledges the significant risk AI poses to various software verticals, forcing the firm to constantly learn and adapt. Underwriting AI risks is complex, especially for enterprise software where ROI and implementation plans are crucial. Furthermore, Thoma Bravo's deal pricing philosophy emphasizes conviction. Armed with a deep understanding of target assets, they are willing to decisively transact at a fair price, as demonstrated in the acquisition of Boeing's avionics business, making them formidable competitors.

THE POST-ACQUISITION PLAYBOOK AND TALENT ASSESSMENT

Upon acquiring a company, Thoma Bravo's playbook begins with cost optimization, often a 15% reduction at closing, to establish a baseline for profitability. The focus then shifts to profitable growth, identifying the best innovators and helping them become great businesses. Key to this is talent assessment: identifying strong leaders who are open-minded, data-driven, and have employee and customer trust. This involves deep diligence, including talking to customers and former employees, to understand a company's true operational health and potential.

A STRATEGY OF FOCUS AND LONG-TERM VISION

Thoma Bravo's discipline in staying true to its core competency—software buyouts—is central to its strategy. They limit their portfolio size to ensure they can effectively manage and improve each company. The firm has no ambition to go public, believing that maintaining focus on investor returns and nurturing the next generation of leadership is more valuable. This contrarian approach, prioritizing purity of strategy over market trends, has been key to their sustained success and strong reputation in the industry.

PERSPECTIVES ON PUERTO RICO'S FUTURE

Bravo, as the first Puerto Rican billionaire, expressed a strong belief in the potential benefits of statehood for Puerto Rico. He noted the island's historical political engagement and the growing support for statehood, partly due to shifts in economic incentives. While acknowledging the complexities and divisions, his public support for Puerto Rico becoming a state signifies a broader hope for a more stable and prosperous future for his homeland, driven by a desire for deeper integration with the United States.

Mentioned in This Episode

●Products

●Companies

●Concepts

●People Referenced

Orlando Bravo's Private Equity Playbook

Practical takeaways from this episode

Do This

Maintain a small, outward-facing team (around 230 people for $200B AUM).

Prioritize mentorship and passing knowledge to the next generation of leadership.

Take a step-by-step approach to deal-making, starting with smaller investments.

Focus on buying the best companies and operating them effectively within a 3-4 year timeframe.

Be decisive and willing to transact at a fair price when conviction is high, avoiding nickel-and-diming.

Identify and empower strong leaders within acquired companies; if the leader is good, the company thrives.

Use rigorous due diligence, including customer calls, backdoor references, and employee interviews.

Look for opportunities to make add-on acquisitions to drive profitable growth.

Be open-minded, number-driven, and ensure a following of employees and customers when evaluating talent.

Focus on turning good innovators into good businesses by improving margins and driving growth.

Be prepared to cut costs early (around 15%) to achieve fundamental earnings and affordability for the deal.

Leverage the opportunity for immediate change when a new owner takes over.

Believe in evolutionary, not revolutionary, technology adoption for enterprise clients focused on ROI.

Stay pure to investor base and colleagues by focusing on returns.

Avoid This

Avoid having too large a team, which leads to internal focus.

Do not try to influence management if the portfolio is too large (e.g., 30 companies).

Do not solely rely on old-school private equity tactics focused on cash flow; adapt to growth investing.

Avoid confusing or overly disruptive areas of technology if they don't align with core strategy.

Do not underestimate the transformative potential of AI in disrupting various business verticals.

Be wary of underwriting deals where you start significantly in the hole (e.g., 50% due to IPO discount vs. acquisition premium).

Resist the urge to grow beyond the core technology focus simply for the sake of going public.

Do not solely focus on cost reduction without planning for profitable growth.

Do not assume that technology adoption is always revolutionary; customers prioritize ROI.

Do not overemphasize margin revisits once profitable growth is achieved.

Private Equity Deal Evolution & Financing

Data extracted from this episode

Time Period	Deal Size (Example)	Financing Structure (Example)	Return Driver (Example)
1980s-2000s (Old School)	N/A (Focus on cash flow)	Significant debt	2/3rds from cash flow (yield), 1/3rd from terminal value
2000s (Software focus)	$550M (Sonic Wall, 2010)	7-8x revenue multiple, ~30% debt, ~70% equity	Growth and terminal value appreciation
Post-2010 (SaaS deals, larger scale)	$10B deals	Implied leverage: ~2 turns of revenue	Terminal value appreciation is critical; need to sell for 25x+ E V I T D A against 30% premium paid initially

Cost Cutting Estimates

Data extracted from this episode

Profitability Context	Estimated Cut Percentage
Highly profitable companies	Up to 10%
Unprofitable companies	Difficult to cut more than 20%

Common Questions

Orlando Bravo's journey involved supportive parents who encouraged him to travel and seek opportunities. He benefited from being in the right place at the right time, particularly with the rise of software during his early career.

Topics

Toma Bravo Orlando Bravo Software Industry Puerto Rico Technology Sector

Mentioned in this video

Products

Jeppesen

Boeing's avionics system, crucial for accurate flight information, acquired by Toma Bravo.

Companies

Toma Bravo

Private equity firm founded by Orlando Bravo, managing under $200 billion in assets.

Motorola

Company where Marcel Bernard worked for 35 years, providing him with an exceptional school of management.

People

Orlando Bravo

Founder of Toma Bravo, the first Puerto Rican-born billionaire.

Marcel Bernard

Orlando Bravo's mentor and an exceptional operator from Motorola, known for his deep understanding of management and cost-cutting.

Concepts

US buyout tech

Orlando Bravo's initial career interest in US technology buyouts.

Hurricane Maria

A major hurricane that impacted Puerto Rico, prompting Orlando Bravo to provide aid.

Twitter acquisition

The acquisition of Twitter by Elon Musk, used as an example of integrating technology companies and evaluating talent.

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