The narrative around private equity is shifting, and not in the way most fund managers like. Critics keep pointing at rising interest rates, stalled exit environments, and the "liquidity crunch" as proof that the industry is a ticking time bomb. But if you ask Orlando Bravo, the co-founder of Thoma Bravo, he’ll tell you those critics are looking at the wrong map.
Private equity isn't a monolith. While some corners of the market are sweating, the heavy hitters in software and tech-enabled services aren't just surviving. They're comfortable. Bravo recently pushed back against the growing skepticism, arguing that the resilience of high-margin software businesses makes the current macro-economic noise irrelevant for long-term investors. He’s betting that the underlying cash flows of these companies are so sticky that the "risk" everyone is talking about is mostly phantom.
The Disconnect Between Public Fear and Private Reality
There's a massive gap between how the public perceives private market risk and how the people actually running the funds see it. Most headlines focus on the lack of IPOs. They see a year where exits have slowed down and assume the whole system is broken.
It’s not broken. It’s just patient.
Bravo’s core argument is built on the nature of the assets. Thoma Bravo doesn't buy cyclical manufacturing plants or struggling retail chains. They buy enterprise software companies. These are businesses where the "churn" is incredibly low because once a corporation integrates a specific software into its daily operations, ripping it out is more expensive than paying the subscription fee.
When you have 95% recurring revenue, the "uncertainty" of the Federal Reserve's next move feels a lot less threatening. Bravo notes that "everybody’s extremely comfortable" because the debt loads on these companies are supported by real, predictable cash. It’s not the speculative growth-at-all-costs model that blew up in 2022. It’s disciplined, margin-focused operations.
Why Software Is Different This Time
In previous cycles, high interest rates were the "PE Killer." If you bought a company with a lot of debt and the cost of that debt doubled, you were in trouble. But the math has changed.
Today’s top-tier private equity firms are focusing on "efficiency" over "raw scale." This is a point Bravo hammers home. It’s not just about buying a company and waiting for the market to go up. It’s about taking a company with 10% margins and using specialized operational playbooks to move those margins to 30% or 40%.
When you increase the profitability of a company by that much, the interest rate on the debt becomes a secondary concern. The increased cash flow covers the extra interest and still leaves plenty of room for reinvestment. Critics often miss this operational "alpha." They treat private equity like a simple leveraged bet on the economy. In reality, for firms like Thoma Bravo, it’s an industrial process of software optimization.
The Liquidity Myth and the Secondary Market
One of the loudest complaints right now is that limited partners (LPs)—the pension funds and endowments that give PE firms money—are trapped. They aren't getting their checks back because there aren't enough sales or IPOs.
Bravo doesn't seem worried.
The rise of the secondary market has created a "pressure valve" for the industry. If an LP needs cash, they don't have to wait for an IPO anymore. There’s a sophisticated, multi-billion dollar market where they can sell their stakes to other investors.
- Secondaries are maturing. It’s no longer a "distressed" move to sell a stake.
- Continuation funds. PE firms are moving their best companies into new funds to hold them longer.
- Private credit. Instead of relying on big banks, PE firms are borrowing from each other and specialized lenders who understand the tech space.
This ecosystem provides a level of stability that didn't exist in 2008. The "liquidity crisis" is more of a "liquidity delay." The money is there; it's just staying in the compounding machine longer because the machine is working so well.
Stop Obsessing Over the IPO Window
Everyone wants to know when the IPO window will "open." It’s the wrong question.
For a company owned by a firm like Thoma Bravo, an IPO is just one option among many. Strategic acquisitions—where one big company buys another—are still happening. More importantly, these companies are often more valuable staying private.
In the public markets, you have to deal with quarterly earnings calls, fickle retail investors, and the constant pressure to show short-term growth. In the private market, Bravo can tell a CEO to ignore the next three months and focus on a three-year restructuring plan. That freedom is worth more than the "prestige" of being listed on the NYSE.
Bravo’s stance is clear: the public markets are currently more volatile and less rational than the private markets. Why would you rush to list a company in an environment that doesn't reward long-term value creation?
The Interest Rate Bogeyman
Let’s talk about the 5% elephant in the room. Rates aren't zero anymore. They probably won't be zero again for a long time.
A lot of people thought this would be the end of the private equity "golden age." But look at the data. Deal flow in software hasn't vanished. It has just become more selective.
The firms that are struggling are the ones that relied on "multiple expansion." That’s the fancy way of saying they bought a company for 10x earnings and hoped to sell it for 15x earnings without actually making the company better.
Bravo’s firm, and others like it, focus on "earnings growth." If you double the earnings of a company, you can sell it for the same multiple you bought it for and still make a killing. High interest rates haven't broken the model; they've just exposed the people who weren't actually good at running businesses.
What LPs Are Actually Thinking
While the media portrays LPs as panicked, the reality inside the room is different. Big institutional investors—think sovereign wealth funds and massive teacher pension plans—have decades-long horizons.
They aren't looking at the price of a software company today versus yesterday. They’re looking at where that company will be in 2030. Bravo points out that these investors are "comfortable" because they see the same data he does. They see the resilience of the software sector. They see that even in a "bad" year, these companies are still generating massive amounts of cash.
The criticism usually comes from the outside. From the inside, the conviction remains high.
How to View Private Markets Right Now
If you’re trying to make sense of the conflicting reports, you need to look at the quality of the underlying assets. Not all private equity is created equal.
- Look for "Mission Critical" Tech. If a company’s product is something a business literally cannot turn off, it’s a safe bet.
- Focus on EBITDA Growth. Ignore the hype about "revenue multiples." Real profit is back in style.
- Watch the Dry Powder. There is still over $2 trillion in "dry powder" (unspent cash) sitting in private equity funds. That money has to be spent eventually.
Orlando Bravo isn't just being a cheerleader. He’s pointing to a structural change in how the global economy works. Software is no longer a "sector"—it’s the infrastructure of everything. When you own the infrastructure, you don't worry about the weather as much as everyone else.
To navigate this, stop looking at the S&P 500 as the only barometer of health. Start looking at the internal rates of return (IRR) of software-focused funds over a 10-year span. The volatility is a distraction. The cash flow is the reality. If you want to invest like the pros, stop fearing the rates and start looking for the margins.
