Tech private equity investor Orlando Bravo says the mantra of 'growth at all costs' is over

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Software has been one of the worst-performing sectors this year amid a rising rate environment and geopolitical tensions overseas. 

This comes as no shock to Orlando Bravo who helms tech-focused private equity firm Thoma Bravo. He says the mantra of 'growth at all costs' is over and that investors are slowly shifting their focus from momentum to fundamentals and profitability.  

Bravo sat down with the Delivering Alpha newsletter to discuss what he thinks are structural problems in the software industry, the revaluation in tech, and the growing cybersecurity risk emanating from Europe. 

 (The below has been edited for length and clarity. See above for full video.)

Leslie Picker: There has been a massive shift in 2022, there's just this macro change afoot. How does that impact what you do and what do you make of the recent revaluation in the [tech] sector?

Orlando Bravo: It was just a long time coming. I mean, we've been on a decade of tailwinds not only in the software industry, but in multiples. And what happened recently is that multiples of these growth stocks went from 20x to 10x. They got cut in half. Now why is that? Our theme and our thesis on it in talking to the big investors, sovereign wealth funds, big state pension plans, the original sources of capital, is that people are getting tired of being money-losing operations. They're finally digging into the business models, looking at when profitability is going to come and discounting assets that have high growth, but no near-term prospects for profitability. So that correction is here and it's happened and it's in effect today. Now how does that affect our business? That is phenomenal on the buy side