The current market is an ideal time to acquire high-quality, market-leading enterprise software companies at discounted valuations, but a poor time to buy mediocre ones.
Software companies with deep, non-replicable domain expertise are best positioned to survive and thrive in the AI era, as they hold the keys to AI adoption within their specific verticals.
The proliferation of AI, particularly AI agents, creates massive new cybersecurity vulnerabilities, which is expected to trigger a significant boom in the cybersecurity industry.
Thoma Bravo's strategy is to invest in established leaders that are adapting to AI, viewing it as too early to invest in AI-native companies due to their unproven business models and monetization strategies.
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Concerns Raised
AI will accelerate the disruption of mediocre software companies that lack a strong moat.
The massive cybersecurity risks posed by AI agents could become a barrier to enterprise adoption if not addressed.
Incumbent leaders are at risk if competitors adopt AI development tools faster and out-innovate them.
AI-native companies currently lack proven business models, clear monetization strategies, and demonstrable ROI for customers.
Opportunities Identified
Acquiring market-leading software companies with deep domain expertise at depressed public market valuations.
Investing in the cybersecurity sector, which is poised for a major boom due to new AI-driven threats.
Leveraging AI coding tools to dramatically increase developer productivity and accelerate innovation.
Public software companies may be more willing to sell to private equity to escape public market pressures and focus on long-term AI strategy.