In a climate of growing skepticism toward private markets, Orlando Bravo, the founder of Thoma Bravo, is making a case for specialization. He argues that deep, operational knowledge within sectors like software is what now distinguishes successful firms as artificial intelligence reshapes the industry.

Bravo's comments arrive as investors question private-market valuations and liquidity. Concerns are mounting: Morgan Stanley forecasts direct-lending defaults could approach 8%, while Apollo's John Zito has contended that private equity firms are broadly mispricing their software assets.

Yet Bravo insists his firm's investors, including major pension and sovereign wealth funds, are unfazed. "They've seen our marks, they've seen our exits," he told CNBC. This confidence, he says, stems from a hands-on approach—analyzing customer contracts and company details rather than trading stocks.

He openly addressed a high-profile error: overpaying for Medallia in 2021. "We made a mistake. The equity has been impaired for a long time," Bravo stated, noting his investors have been aware for years. However, he pivoted to the broader portfolio, asserting that the vast majority of Thoma Bravo's 77 other companies "are absolutely crushing it," particularly in adapting to AI.

Bravo drew a clear line between private and public software companies. He suggested many public firms face inevitable, AI-accelerated disruption, making recent valuation drops "very warranted." In his view, private equity's intensive model provides a critical buffer in this rapid transformation.

Source: CNBC