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In today's newsletter, we're examining Thoma Bravo Discover Fund V, L.P.'s presentation to the Employees' Retirement System of Rhode Island (ERSRI). This pitch represents an excellent example of how a leading private equity firm positions its software-focused investment strategy to a sophisticated institutional investor. Thoma Bravo, with over $138 billion under management, has established itself as one of the most successful software investors in the private equity landscape.

What makes this pitch particularly interesting is how Thoma Bravo balances showcasing their impressive historical performance with clear explanations of their investment philosophy, organizational structure, and differentiated strategy in the software sector. The presentation offers valuable insights into how leading private equity firms communicate their value proposition to institutional investors in today's competitive fundraising environment.

Let's examine this presentation slide by slide to understand the key elements that make Thoma Bravo's pitch effective and the lessons we can learn from their approach.

Thoma Bravo Private Equity at a Glance

Thoma Bravo opens with a powerful overview slide that immediately establishes credibility through impressive performance metrics and organizational strengths. The 3.5x gross multiple of money (MoM) and 47% gross IRR on realized software investments sends a clear message: this firm knows how to generate exceptional returns in software investing.

What works particularly well here is the clear, structured presentation around five key pillars: Performance, Organization, Market, Strategy, and Process. Rather than overwhelming the investor with data, each section offers a few well-chosen bullet points that paint a comprehensive picture of Thoma Bravo's strengths.

The firm smartly emphasizes its software focus ("over two decades" of experience) and scale (445 software acquisitions representing approximately $200B of enterprise value), establishing both expertise and market leadership. The reference to the expanding software market ($9.4T public market capitalization, +840% since 2008) provides important context for why this sector represents a compelling opportunity.

This slide effectively combines backward-looking performance with forward-looking opportunity, giving investors confidence that Thoma Bravo has both the track record and the market opportunity to continue delivering strong returns.

Buyout Funds: Performance Summary

Building on their performance claims, Thoma Bravo presents a detailed track record table that provides concrete evidence of their investment success across multiple funds and vintages. This comprehensive performance summary is organized chronologically, showing the evolution and growth of their platform over time.

What's particularly effective is how this table reveals consistent performance across different market environments. The earlier funds (Fund VII through Fund XI) show impressive net multiples ranging from 2.1x to 3.8x, while even more recent funds show promising early results.

The Discover Fund series—directly relevant to the fund being pitched—demonstrates excellent performance, with Discover Fund I delivering a 3.2x net multiple and 35.9% net IRR. This creates confidence in the specific strategy being presented to ERSRI.

The presentation of both net multiples and IRRs provides investors with multiple ways to assess performance, while the clear organization by vintage year helps contextualize results based on market timing. This transparent approach to performance reporting builds credibility and trust with sophisticated institutional investors who understand the importance of consistent returns across market cycles.’

Investment Team Leadership and Firm Culture

On this slide, Thoma Bravo shifts from performance to people, showcasing the depth and breadth of their investment team while emphasizing their collaborative culture. The slide is effectively framed with their mission statement: "to deliver superior value to our investors and companies by forming collaborative partnerships."

What makes this slide particularly strong is how it personalizes the firm by featuring photos of the Managing Partners and Partners across different fund strategies. This approach helps investors connect names with faces and demonstrates the depth of the team beyond just the founding partners.

The organizational structure illustrated here effectively shows how talent is deployed across different fund strategies (Flagship, Discover, Europe, Explore, Growth, Credit), giving investors confidence in Thoma Bravo's ability to execute their multi-fund approach.

The "Culture of Collaboration and Results" section highlights important structural advantages: no third-party ownership (ensuring alignment with limited partners), investment team leadership directly responsible for investments, and promotion from within (12 of 20 Managing Partners and Partners joined at lower levels). These points effectively address governance and succession concerns that sophisticated investors often have about private equity firms.

Thoma Bravo Breadth of Software Investing Experience

This visually impactful slide uses company logos to demonstrate Thoma Bravo's extensive experience across different software subsectors. By organizing their investments into three categories—Application Software ($59.0B invested since 2003), Infrastructure Software ($12.1B since 2004), and Security Software ($29.5B since 2009)—they effectively showcase both their sector diversity and specialized expertise.

The impressive investment figures for each category demonstrate meaningful scale and commitment, while the multitude of logos creates immediate visual impact that communicates breadth of experience. This approach is more powerful than simply stating the number of investments they've made—it provides tangible evidence of their market penetration.

The bottom-line summary ("Responsible for around 445 acquisitions since 2003 representing around $200 billion of Enterprise Value") reinforces their position as a market leader in software private equity. For institutional investors considering a significant allocation, this scale and experience provides reassurance about Thoma Bravo's ability to access deals and deploy capital effectively.

Thoma Bravo Has Been Investing in Software Since the Start of the U.S. Software Market's Growth

This slide uses a powerful chart to place Thoma Bravo's investment history in the context of the broader software market's evolution. By showing U.S. software spending growth since 2000 alongside software spend as a percentage of GDP, they effectively illustrate that they've been investing in this sector since its early growth phase.

The visual marker of their "First software investment" in 2003 is strategically placed to show they weren't late to the party—they were investing in software when it represented a much smaller portion of the overall economy. This timing perspective adds important credibility to their claims of sector expertise.

The steady growth trajectory of the software market (both in absolute dollars and as a percentage of GDP) helps make the case for continued opportunity in this sector. The chart effectively shows that despite significant growth already, software spending continues to increase as a share of economic activity, suggesting ongoing investment potential.

For institutional investors concerned about market saturation or whether the software growth story is over, this historical perspective provides compelling evidence that structural growth trends remain intact.

Thoma Bravo Buyout Strategy

This slide clearly articulates Thoma Bravo's investment philosophy and value creation approach. The organization into target company characteristics and a three-step value creation process provides a coherent framework for understanding how they generate returns.

The target company characteristics section effectively communicates their focus on "market-leading, mission-critical software" with "high recurring revenue and revenue retention" and "strong existing management teams." This screening criteria helps investors understand their deal sourcing approach and risk management philosophy.

The three-step value creation strategy—Cost Reduction, Profitable Growth, and Add-on Acquisitions—is presented as a sequential process with clear actions at each stage. This systematic approach demonstrates a repeatable model rather than relying on financial engineering or market timing.

What's particularly effective is how they connect their value creation capabilities to specific resources: aligned company management, proprietary best practices and operating metrics, experienced operating partners, and expertise in consolidation strategy. This addresses the crucial "how" question that investors need answered.

The simple statement at the bottom—"Thoma Bravo has honed its strategy through a highly-tested investment process"—reinforces the maturity and refinement of their approach over numerous deals and market cycles.

Thoma Bravo Value Creation Advantage

This slide provides compelling empirical evidence for Thoma Bravo's value creation approach through a clear comparison of EBITDA margins across different types of software companies. The contrast between Public SaaS (-3%), Public Software (16%), and Thoma Bravo's Portfolio Average (38%) creates an immediate visual impact that quantifies their operational improvement capabilities.

The framing is particularly effective: "As the software market has expanded and new companies have been created and scaled, the average software company operating profile generally has not changed." This observation positions Thoma Bravo's operational expertise as addressing a persistent market inefficiency rather than a temporary opportunity.

The conclusion that "Margin improvement opportunity is between approximately 25-40%, a dynamic that persists in various market environments" provides a concrete, quantifiable basis for their value creation thesis. This specificity helps investors understand exactly how Thoma Bravo aims to generate returns regardless of market conditions.

For institutional investors concerned about whether private equity firms can continue to generate alpha in increasingly competitive markets, this slide presents a compelling case that operational improvement in software remains a durable source of returns.

Case Study: Magnet Forensics

This case study slide effectively brings Thoma Bravo's investment approach to life through a concrete example. The clear organization into company background information, investment thesis, and Thoma Bravo impact provides a comprehensive view of their investment process in action.

The investment thesis section effectively articulates the three key reasons for the investment: a scaled platform with end-to-end offerings, favorable outlook due to durable demand, and the opportunity created by combining two businesses (Grayshift and Magnet Forensics). This clear articulation of the investment rationale demonstrates thoughtful strategy rather than opportunistic dealmaking.

What's particularly effective is the "Thoma Bravo Impact" section, which provides specific examples of how they've added value: effectuating transformative M&A, cost optimization, rigorous tracking of bookings/renewals, pricing & packaging improvements, and tuck-in acquisitions. Each point includes concrete details (e.g., "executed its first price increase in company history") that demonstrate tangible operational improvements rather than vague claims.

This case study effectively bridges the gap between strategy and execution, showing institutional investors exactly how Thoma Bravo's approach translates into actual portfolio company improvements and value creation.

Summary Fund Terms – Fund XVI and Discover Fund V

This slide clearly presents the key terms for both Fund XVI (their flagship fund) and Discover Fund V (the specific fund being pitched to ERSRI). The side-by-side comparison allows investors to understand how the Discover strategy differs from the flagship in terms of size and fee structure.

The presentation is appropriately focused on the most critical terms that institutional investors care about: target fund size, GP commitment, management fee, carried interest, hurdle rate, and investment period/term. The table format makes these terms easy to compare and digest.

The Discover V fund's $7B target size (compared to Fund XVI's $20B) positions it as a focused strategy that can target different opportunities than the flagship fund. The higher management fee for Discover V (2.0% vs. 1.5% for Fund XVI) is transparently disclosed, allowing investors to make informed decisions about the value proposition.

The disclaimer at the bottom appropriately notes that this is a summary of terms that should not be relied upon for investment decisions, directing investors to the governing documents for complete information. This combines transparency with appropriate legal caution.

Summary

The final summary slide effectively distills Thoma Bravo's value proposition into its essential elements, organized around their five key pillars: Experienced Organization, Expanding Software Market, Differentiated Strategy, and Tested Process. This consistent framework, which was introduced at the beginning of the presentation, creates a cohesive narrative arc.

The slide reinforces the impressive performance metrics highlighted throughout the presentation: 47% Gross IRR, 3.5x Gross MoM, 35% Hypothetical Net IRR, and 2.8x Hypothetical Net MoM for realized software investments. These figures serve as the capstone for their investment thesis.

The clean design with the Thoma Bravo logo prominently featured reinforces brand identity, while the concise format leaves investors with a clear takeaway rather than overwhelming them with last-minute details.

The appropriate disclaimer about past performance not indicating future results demonstrates regulatory compliance while ensuring investors understand the hypothetical nature of certain calculations. This transparent approach to performance reporting enhances credibility with sophisticated institutional investors.

Conclusion

Thoma Bravo's presentation to ERSRI demonstrates several key elements that make it particularly effective for institutional fundraising:

First, they establish credibility through concrete performance metrics and a clear track record across multiple funds and market cycles. Rather than making vague claims, they provide specific figures that institutional investors can evaluate.

Second, they clearly articulate their investment focus and differentiation in the software sector. By demonstrating deep expertise in a specific market segment with strong growth characteristics, they position themselves as specialists rather than generalists.

Third, they provide a clear, systematic explanation of their value creation approach. The three-step process (Cost Reduction, Profitable Growth, Add-on Acquisitions) and supporting evidence of margin improvement demonstrate a repeatable methodology rather than relying on financial engineering or market timing.

Fourth, they balance backward-looking performance with forward-looking opportunity. While showcasing impressive historical returns, they also make a compelling case for why the software sector continues to offer attractive investment potential.

Finally, they address institutional investor priorities beyond returns, including team depth, succession planning, and diversity initiatives. This demonstrates awareness of the holistic considerations that sophisticated investors evaluate when selecting managers.

For investment managers raising institutional capital, Thoma Bravo's presentation offers valuable lessons in how to combine performance credentials, sector expertise, operational capabilities, and organizational strengths into a cohesive investment narrative that resonates with sophisticated institutional investors.

See you next week!

PitckDeckGuy

Real quick...

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