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Dynatrace first stood out as a leader in SaaS when the Thoma Bravo team realized the massive potential of cloud infrastructure, and successfully predicted an industry-wide disruptive shift in that direction. The acquisition became a fascinating case study, borrowing multiple strategies from the Thoma Bravo playbook - such as operational improvements on day one, backing existing management, and transforming the business to a SaaS-based model - and deploying them all on the same deal.


January 18, 2024





John Van Siclen:

Like, I was thrilled. I hope I tried to contain my excitement a little but because we were still had some details to work out but I couldn't have been more thrilled. And one of the things that I recall that helped get me excited was the depth of understanding that Thoma Bravo had, you in particular Chip, with the technology space we were in, and the competition, and the opportunity.

Chip Virnig:

That excitement that you showed Seth and I that morning was absolutely necessary because a lot of people thought we were crazy to want to embark on this mission.


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Orlando Bravo:

Welcome to Thoma Bravo's Behind the Deal. I'm Thoma Bravo founder and managing partner, Orlando Bravo. And that was John Van Siclen, the former CEO of Dynatrace speaking with Thoma Bravo partner, Chip Virnig. The Dynatrace deal was one of the most intricate deals we've ever pulled off at Thoma Bravo. It involved a complex carve out, intake private, a subsequent IPO, and a million square foot building that we needed to sell. But despite all the moving parts, Thoma Bravo partner and deal lead, Chip Virnig never gave up. He really understood how valuable Dynatrace could become. Ultimately he was right and our firm was rewarded with one of the best investments we have ever made.

Years before it was common knowledge in the business community, we at Thoma Bravo saw the massive disruption cloud infrastructure was gonna have on SAS and the tech sector as a whole. In searching for a partner that could help us take advantage of this coming change and that was aligned with our values, we found a company in Austria called Dynatrace. We were impressed by their culture, their products, and their founder and CTO, Bernd Greifeneder, but unfortunately before we could make a move, they were acquired by another company.

Later, through a complex carve out that leaned heavily on the unique skills of the Thoma Bravo team, we got our hands on Dynatrace and gained an opportunity to work with its general manager John Van Siclen. John has a career in enterprise software that dates back to the 70s. And as we said to him, we were betting on him and his leadership as a full partner in this deal. John rewarded our faith and then some. And in 2019, Dynatrace had one of the most successful IPOs we've ever had here at Thoma Bravo, one that ended with a team behind the deal ringing the opening bell at the New York Stock Exchange.

Today, Dynatrace has a market cap of over 16 billion. There are three key points that I take from the Dynatrace case study. First is the investment judgment required to buy a very special company. And that wasn't obvious. The company was buried within Compuware and went largely unnoticed. Second is how one could achieve high margines and high growth at the same time, that they go hand in hand. And third, investments for Thoma Bravo are not linear and Dynatrace was certainly not linear.

About a year after the investment, things were not great but our team stayed focused on how we operate and supported existing management. The Dynatrace deal employed a multitude of operating levers that we have to pull at Thoma Bravo, building value, carve outs, a merger with another portfolio company, operational improvements on day one, backing existing management, and transforming the business to a SAS based model.

As I said, it certainly wasn't easy, but it was exciting to see it all come together in a single deal. And it's a great example of what an IPO can look like. So, today, you'll hear everything that went on behind the deal of this investment from Chip Virnig, the deal lead and partner at Thoma Bravo, followed by his conversation with former Dynatrace CEO, John Van Siclen.

Chip Virnig:

Hi, I'm Chip Virnig, a partner at Thoma Bravo, and I've been with the firm for 15 years now, focusing on our infrastructure and cyber security investment efforts. Dynatrace is a leading provider of modern cloud infrastructure and application of durability solutions. And why is this important? Well, companies across every industry are increasingly reliant upon technology to accelerate the way they do business, the way they interact with our customers, their employees and their partners. And this movement is broadly referred to an industry as digital transformation.

I think it was Mark Andreessen, a very well known VC who first coined this term by famously saying in 2011, "software is eating the world." So, that is really where the thesis of Dynatrace originated from. It was really our efforts to capitalize on this thesis of digital transformations. And our view was, if this world is gonna be run on software and we are going into a digital world and a digital economy, who is gonna ensure that this world (laughs) functions and everything runs well? And that really was the thesis of Dynatrace. Dynatrace's mission statement is to make software run perfectly.

So, back in 2012 was when we were chasing this thesis down. And we quickly moved on to try to then figure out what investment could we make that would be the ultimate play on this thesis around enabling digital transformations and ensuring these digital transformations run perfectly. And we did extensive market work back in 2012 and that's when we landed on Dynatrace as being the ideal company for us to invest in on this strategy.

Unfortunately, Dynatrace had been acquired right around the same time that we were coming (laughs) into this thesis by a large publicly traded tech diversified holding company called Compuware. So, we quickly realized it was gonna be very hard to convince a large sophisticated public company to sell us something that they just acquired, despite how much we liked it.

Now, at the same time, we got lucky because Compuware, as a large public company, was struggling on its own. The Dynatrace business they acquired was just one small piece of a small piece of a big amalgamation of assets that they have acquired over decades and decades of being a public company. Specifically, an activist investor got involved in their stock around this same time period. And that is when we decided to hang around the hoop because typically when things like that happen, we thought the business could be sold outright, pieces of the business could be available, and we were really keen on trying to figure out how we could land on Dynatrace.

While we were waiting and getting smarter and trying to get an opportunity to look at Compuware, we continued to do our market work and actually ended up making an investment in a smaller player in this market known as Keynote Systems. And that was our first, kind of, effort and our first investment in this observability market. And having owned Keynote for a little while we quickly realized that it was a great market to be in, but keynote didn't have all the pieces and it made us want Dynatrace even more.

The activist effort at Compuware was continuing at this time, and they ended up selling four business units to various firms, which simplified the story from our view significantly. Compuware was a holding company that had six business unites, now it just had two. And the two remaining business units were a mainframe business that focused on development tools in the mainframe environment that had been around for a long time, a very mature business that was sadly, at the time, declining about 35% per year, and nobody wanted to touch it.

And then the other asset was their APM business unit, which referred to application performance monitoring. And within that APM business unit was Dynatrace, which was the crown jewel of this whole company, and what got us all started. So we quickly realized that having had four businesses spun off of Compuware, two remaining. If they sold the mainframe business to somebody and really simplified this, it would be very competitive to get our hands on Dynatrace. So we decided to bite the bullet and buy the entire company.

So, that's how the deal came together. We bought the company in 2014 for $2.4 billion. There was absolutely zero competition on that take private from our perspective because nobody wanted to deal with the overhang of the declining mainframe business. They didn't wanna deal with all of the other general administrative and shared services, expenses that we had to inherit that once supported six businesses in total, and as I mentioned, four were sold, as well as a one million square foot building that they wholly owned in Detroit. So, no one wanted to deal with it but us, but we were now the proud owners of Compuware. We had the $250 million revenue mainframe business that was falling off a cliff, a GNA org structure and shared services center of $200 million of annual expense that supported those six business units. And then a gigantic building that we didn't need. And we finally got our hands on Dynatrace.

Now, what we did next, I'm pretty confident that I could say that not many other people could pull off. And we first sold the building to a prominent investor in the area for over $100 million. We got rid of all of that shared service, general administrative $200 million annual expense base that once supported this larger conglomerate, got rid of all that expenses. We then carved (laughs) out the mainframe business and brought in a very seasoned operator by the name of Chris O'Malley to run that business as CEO. We stabilized that business and actually got it to grow 5% per year for our entire investment hold period, from a 35% annual decline the five years prior to our involvement. It actually led to a great exit, where we sold that business to BMC.

And then, we cared out that APM business unit. We promoted the general manager, John Van Siclen to be the CEO of that company. And we backed his existing team from the Dynatrace business to merge that entire business unit with our existing portfolio company Keynote. And we rebranded that entire combined company as Dynatrace.

People look at Dynatrace today and, and see this massive, highly profitable, very disruptive cloud modern vendor growing very fast. But it wasn't always that situation. It wasn't always that pretty. When we carved out the business, we had to create entirely new systems. We luckily had the core folks in the management team, John Van Siclen and Bernd Greifeneder and their team, but we had to build an entire new back office system, all new reporting systems, stand up a GNA structure, legal, build a new sales department. And all that took time, and we also had, at the same time, had to cut a lot of cost that was stranded that came with all these different assets.

The company, when we carved it out, was really 400 million of revenue, only about 200 million of that was recurring through maintenance contracts. Growing mid-single digits with some product lines growing really fast, mainly the core Dynatrace product, which was just one piece of the overall APM observability business. But it was making no money. It was literally break even. So we had 400 million of revenue, making no money, and that was a nonstarter for us. We had to prepare the business for profitable growth. And the first year, we spend, building all the back office systems, building out the rest of the management team, with a mandate to get the profitability up to $100 million of EBITDA in the first year, which took a lot of work because we also had to make sure we simultaneously were prioritizing our investments in our next generation cloud product, which we'll talk about shortly. And we accomplished 100 million of EBITDA.

From there, we really focused on a plan for profitable growth while also investing in the future. We knew that this market was taking off, but it was actually moving even faster than we thought to the cloud. So as these large enterprises were moving quicker to the cloud, they were increasingly writing and building applications in more modern environments that were more cloud friendly, and that made some of our classic observability solutions obsolete. Dynatrace was incredible at handling the most complicated environments with the most scalability, finding the root cause as to why an application or a piece of software wasn't running perfectly, but Dynatrace wasn't equipped to monitor and observe all of these workloads and modern cloud environments and modern programming languages. And we just couldn't anticipate the market moving as quickly as it did.

Now, luckily, we had a strategy, and we were shown this strategy during diligence with this next gen offering that they were building behind the scenes at Dynatrace. But it couldn't (laughs) come out fast enough. And we felt like it was behind. When we first launched it, the intent was to go after small, medium-sized businesses, which was not really core to Dynatrace's DNA. They were always known to go after larger enterprises. So instead of going after the small, medium-sized businesses and changing our market segmentation, we intentionally, as a board, told management to go back into the "Bat Cave" and not come out with this new product until it was, indeed, enterprise ready.

Again, we carved this thing out in 2014. Took about a year to create the standalone entity. 2015 got to 100 million of EBITDA, growing but not growing very quickly. And then told everyone we had to build this next gen offering and make it enterprise grade. And then 2016 happened. And I'll never forget, we were in the holiday season of 2016 and we landed our first customer, our first enterprise customer on the new platform, and they came in as an eight figure deal. And from that point on, it was just nuts. The velocity of new deals, the velocity of hiring new reps, the positive reviews from the analyst community, customers landing, using the product, then immediately coming back to us wanting more. It was just amazing. And it was amazing to see such a disruptive transition to a company. And it was entirely due to the management team, and to Bernd having invented this market in the first place, sold to Compuware, carved out to us, and then he and John Van Siclen disrupted themselves yet again by introducing a whole new platform to leapfrog the market.

And with the intent to transition all of our existing revenue and all of our existing customers to this new platform, which would take a lot of work. This is where our skillset really came in, and our board to really help them manage through the complexities of that transition. It's one thing to sell a new customer a new product, it's another thing to convert all of your $400 million of revenue to this new product over time and over a few years, we got that done, and eventually decided, based on the profitability of the company, the growth, having almost all of the revenue and customers on our new platform, that it was time to go public.

And in 2019, we went to New York, we rang the bell, and it was a moment I'll never forget. We ended up going public at around a four and a half billion dollar valuation and today, we fast forward a few years later, and I think the market cap today is around 15 billion. And I think the company is over $1.25 billion of cloud ARR, which is just amazing to think about because when we got involved it was just zero of cloud ARR. So it's just been an amazing story to be a part of. It's a case study that we never get tired of talking about. Not only was it one of our most successful investments at Thoma Bravo, but it really, as a case study, exemplifies every single thing we have done with the company, that we've done with investment, we just happened to do everything to the same company, and it was just a huge success for us, and it's been very inspiring and fun to be a part of.

And now we're gonna bring in former CEO of Dynatrace and close friend, John Van Siclen.

John Van Siclen:

How are you Chip?

Chip Virnig:

I'm doing all right. Retirement's looking pretty good on you.

John Van Siclen:

It's not bad. I enjoy it.

Chip Virnig:

(laughs) You deserve it.

John Van Siclen:

Glad you're holding down the fort and making sure the economy continues to move forward.

Chip Virnig:

One deal at a time. We've been talking about a case study and finally talking to the world about this story, so I am very excited to be doing this with you today.

John Van Siclen:

That's great. No, same from my perspective as well. The Thoma Bravo years were, they were special. To finally get unleashed from where we were, you know, hidden and sorta buried by the 40 year old holding company. I'd been in the industry for 43 years and it never ceased to amaze me how it would reinvent itself every five to 10 years. I remember the early stages of my career, being with companies that were extremely successful and all of a sudden hit a wall when there was a technology shift. And so I think prior to Dynatrace, the longest I had been with a company is probably six, maybe six and a half years.

But Dynatrace was different. And it was different because the technology continued to evolve and the technology team was able to reinvent itself over and over again, and catch the new waves of technology ever step of the way. It was really quite amazing, which was the reason I stayed with it for 13 and a half years. It was like multiple lives and multiple adventures into new and exploding markets. Some of streams were the same, the CTO and founder was the same, the market in general was the same, just an evolution of it. But just amazing how many pivots and shifts were required in order to continue to build a multi-billion dollar business in the category we were in.

Chip Virnig:

So, John, in 2008, you had already been successful CEO, what made you take the Dynatrace CEO job?

John Van Siclen:

(laughs) What made me take the Dynatrace CEO job was meeting and then interacting in a workshop with then-founder, CTO, and CEO Bernd Greifeneder. Now, Bernd started and founded the company in Linz, Austria. One of my first things over breakfast as I was talking to him was, gee, even if this doesn't work out, I'm gonna get a trip to Linz, Austria, so that'll be fun. But it was a really interesting sorta feeling out of each other a little bit. I'm not a founder type. I need to see a technology actually be acquired and used by customers before I can really figure out how valuable it is, how special it is, and whether we can, you know, take this from the first several dozen customers to thousands of customers.

Once I get the hang of it, I'm pretty darn good at it. And that's really been my serial entrepreneurial career is high-growth moments in companies. So I was trying to figure out whether the CTO was able to productize things well enough that we could really go from several dozen customers to thousands. Now, Bernd, on the other hand, had just been interviewing dozens of CEOs who we thought were just empty suits as, I think he told me over breakfast. And he wanted somebody of substance who didn't just talk a lot but actually could roll up their sleeves and really understand the business.

And one the things that is unique about Bernd is he's not just an unbelievable technology genius, he's actually quite an astute businessman as well.

So, anyway, we had a workshop, a two day workshop in Linz, Austria and we solved some problems that, that he had from a business standpoint. And he convinced me he wasn't a CTO-type that was gonna try to hang onto the CEO role, that he really wanted a partner in the journey, and we hit it off. And from there I knew this was gonna be something special. We're both still making sure that we both were staying on the same page and good partners throughout. But I gotta tell you, he was just a wonderful person to work with. And together, I think we brought the best out of each other.

Chip Virnig:

John, I know we had lots of stops and starts to the deal like any deal, but for me, when I think about when we really came to an agreement on what we're gonna build together, I think about the breakfast where me and my managing partner, Seth Boro flew out to Boston to meet with you and really align on the deal. And I think it was at that breakfast when we told you with complete transparency what we wanted to create. I think we walked you through our thesis. I'd love for you to tell me if that's what you recall as being the, the pivotal point in the move forward for you as well.

John Van Siclen:

I couldn't have been more excited because where I was as a general manager when a technology holding company that was quite distracted with a hostile takeover, I felt like we were trying to build a business in a competitive market space, no matter how good the tech was and how great the market was, but we had one arm tied behind our back, maybe both of them. And when Chip, you and Seth Boro explained what you wanted to do, which was truly and aggressively carve out the business and stand it up as a separate growth entity, I couldn't have been more excited. It's what I was trying to do inside of Compuware but without a lot of luck. And I knew at that moment that I would spend, instead of spending 80% of my time internally with politics and communication and all the rigamarole of being a division, one of several divisions in this holding company, that I'd be able to spend 80% of my time out building a great business.

I hope I tried to contain my excitement a little bit because we were still had some details to work out, but I couldn't have been more thrilled. And one of the things that I recall was, that helped get me excited, was the depth of understanding that Thoma Bravo had, you in particular, Chip, with the technology space we were in, and the competition, and the opportunity. I remember talking about apps eating the world as a core thesis of yours which was the same one we had. So that's a media of alignment.

And then, from a carve out standpoint, you guys really understood, probably more than I did, even about how much viscosity I was wading through and what could be done on the other side with a little bit of freedom. But that alignment and your entrepreneurialism throughout that process of being excited about it, this carve out and what it could be, was just phenomenal.

Chip Virnig:

That excitement that you showed Seth and I that morning was absolutely necessary because a lot of people thought we were crazy to want to embark on this mission and take Compuware private, carve out the APM business unit, merge it with our preexisting Keynote entity, rebrand the whole thing as Dynatrace. You, as the CEO, hire a team around you, standup to Compuware mainframe assets as a separate business, sell the building. This was unnecessarily complex and nobody really wanted to do it, but we needed that excitement from you because that's our business is working with passionate leaders, working with existing management, with you and Bernd as a combo. If you weren't excited and/or if Bernd opted out, I don't know if we'd be where we are today and if Dynatrace would exist because we needed to show our investment committee and ourselves, Seth and I, that we had that buy in, and that breakfast and that relationship and that transparency was so critical for us to get this thing started.

John Van Siclen:

I gotta believe there were plenty of hurdles. Uh, it clearly wasn't a straightforward deal or sort of line to success. The passion you guys had was clear to me. And I, I remember something else from that breakfast, Chip, which was your and Seth's directness about betting on the CEO in particular, and then the extended management team that the CEO would build together with Thoma Bravo. That was something that was special to Thoma Bravo and meant a lot to Thoma Bravo. And so I was partly flattered, but also it's been really important to hear because there's all these thoughts about private equity that run throughout the marketplace, as if it's going to just cut and burn everything. You're not gonna have any value left, and it's, you're gonna, you're gonna sell it because of profitability but not because of value and growth, which is required in a tech company.

Once we were aligned there and, you guys said, you bet on the CEO, I thought, here we go. Lets' do it.

Chip Virnig:

And that's a good transition point, John. So we got the deal signed right around that time. And then we weren't without some hurdles along the way. How do you look at the investment, uh, from your perspective, and the journey from there onward?

John Van Siclen:

(laughs) Gosh, I remember maybe two or three moments in that journey. The first one was just, oh, and by the way, we need you to cut 25% of your cost, it's on a proforma basis, don't worry, but 25% of your cost in the first 12 months. And I figured for freedom, that was a low price. We jumped in, we got to 20% in the first year. We ended up past 25 in the second year. But that was, that seemed daunting at the time. In hindsight, I realized that a lot of our ability to do it was, nothing hurt the company, it just made us stronger. It made us lean, but in being lean, you're healthier. You can move faster; you're more nimble; you're, you know where everything is. You, you, you can move. And my hat's off to the operating partners, Chip, that you guys brought on to join the board and team because they were invaluable in helping us carve out, reset, restructure, and regain momentum as a separate business.

I remember those fist couple years of being quite a challenge to stand up, but if we hadn't have done that, we never would've had the success and the next pivot which was needed.

Chip Virnig:

Yeah. Let's go there, the next pivot, 'cause you got your baseline. We had the carve out. We helped you build your org structure, get the profitability so you can sustain yourself as a standalone entity. And then the next big step to the journey, I believe, was the move to the cloud. And I'd love for you to walk us through that whole journey and transition.

John Van Siclen:

Yeah, that was a good test, wasn't it, between the management team and Thoma Bravo? So, we had actually started on this cloud journey prior to the acquisition. And so we had the skunk works that quickly gained momentum post the, uh, Thoma Bravo spin out, where I think we ended up, uh, having maybe a third of our engineering team on this reinvention around cloud. And I remember when the tech team came to me and said, "Okay, we've done our research, let's have a dinner and we'll tell you all about it." And they said, "You know what? We've decided, looking at everything that's going on, and the trajectory and that market, development, trends and the rest, the cloud platforms, that we're basically gonna have to reinvent everything, and here's why."

And they convinced me in a couple days. It didn't mean that we did it overnight. There was a lot of transition work. Took four years, maybe five, to actually do it all. But it was a year into the Thoma Bravo take private, once everything was profitable, things okay, we got our foundation, that let's review the product set, and let's review how you're allocating resources. And when the Thoma Bravo team found a third of the engineers on something that was driving zero revenue, I remember some of those conversations, and it did take us a little time to work through it. It took some due diligence with Bernd and his team. But to Thoma Bravo's credit, Chip to you and Seth, when the operating partners, they ended up, after a f- several weeks of due diligence saying, "Sounds great. Carry on."

And I remember such a relief of that, because internally that, we knew it was right. But it is a tough pill to swallow being part of a private equity carve out, to all of a sudden realize that, you know, this zero dollar thing, we were gonna bet on as the big thing over the next four or five years. How'd you think about it?

Chip Virnig:

Yeah. I remember all those conversations and all those discoveries. And Bernd and yourself included, you were comfortable disrupting yourself, disrupting your own company, in order to disrupt the market and jump in front of the competition. And I remember these difficult discussions and these pivotal moments and we wouldn't have felt comfortable if it wasn't for the consistent leadership and backing the existing team. And someone like Bernd who invented the market in the first place. And then somebody who he's worked closely with as you with great commercial expertise when we got to market to make it a success. So, once we realized that we had the business set up in a profitable manner, and we could fund this former skunk works project into our next gen enterprise cloud solution, we trusted you.

And then there were some proof points along the way. I, I'd like to hear from you, given you had inside scoop. I was seeing everything in afterthought. But what was it for you that gave you confidence and conviction that it was gonna work? Because for a while, we were a flatish business. We were profitable, we had this great new tech, but we didn't really have numbers to show for it. I know it was frustrating for, for all of us and we were a little bit worried.

John Van Siclen:

It's a good question, Chip. When we had set up the skunk works, the concept was not just to go after the enterprise market space, but also down market. And so that's a big space and I remember one of the operating partners talking about it like, you gotta think about it this way: Water through a very wide channel goes very slow, but the minute you start to confine it, it goes really fast. So it's not a bad thing to confine your market angle. So what's wrong with the global 10,000? It's what you're best at anyway. So, that was an early ah-ha. We took that onboard 110%. We shifted the engineering to build out the enterprise capabilities, accelerate them beyond some of the other things we had on the list, we just jettisoned low end automatic cloud setup and et cetera, et cetera. We had a services team. They could do all that.

And that really changed our ability, that ability to focus, accelerated a number of things. And I think it culminated in a really large deal at the end of that first year. A seven figure to eight figure deal, largest in the company's history, and it was all on the new platform.

Chip Virnig:

I remember that moment. And as number oriented individuals, Seth and I were mostly focused on that deal when that thing came in and it was eight figures. I'll never forget it and the holidays of 2016. Your CRO, Steve Pace was texting us that I think I landed a big one. And we were like, on what product? And then he told us the acronym at the time of our next gen product, and we had zero revenue to show for that product prior to this customer. And Seth and I are like, oh my God, they did it. And from there it was just like the confidence just went across the entire field organization and it was one deal after another. And then I guess that leads to the next big milestone, John, which is we got a lot of our revenue tied to this new product very quickly. It was a crazy flywheel for us in just a few years.

John Van Siclen:

It was. And there was another piece to the puzzle that was another defining moment, I think, and that was, it didn't go right along with it at the time. It was actually offset by, I don't know, six to 12 months, and that was a shift in the licensing model away from the classic perpetual licensing with maintenance to a modern predictable subscription. But those two moments were the ones that really unleashed the opportunity to not just have a highly profitable solid growth company that we might be able to sell to strategic, but actually a business that could be an IPO candidate. And not just an IPO candidate, but a leading high growth, super exciting public company at the time. And that's what we leaned into next, and together we were able to pull it off.

Chip Virnig:

Yeah. And that transition, just to give everybody some context, when we carved out Dynatrace, it was roughly 400 million of revenue. And you mentioned, you got the profitability up to 100 million of EBITDA, and then pretty close after close. But that 400 was roughly flat and it was almost entirely our, what we called our classic on-prem products, our old pricey model, zero cloud. And it was flattening out. And that 400 million at the time of our prospectus when we went public, that classics was almost down to zero. And the billion plus that became, as a public company of ARR, was entirely on that new cloud platform. But you basically took 400 to zero, while building the zero all the way up to a billion plus, which I don't think there's been a more successful SAS transition from a carve out (laughs) that I can see at scale. And it's certainly taught us a lot.

John Van Siclen:

No, I appreciate that 'cause I remember at the time feeling, why can't we grow a little bit faster, and then we, we just had too many declining revenue streams. We just had to wait long enough for that new platform to eclipse that 400 million mark. And the beauty of the new platform which allowed us to really pull this off was, it truly was a platform with monetizable modules. So what we did in product lines before that, these classic product lines, we reinvented them all as modules, you know, on this new cloud first, multi tenent platform. And really surprised the market. Our competition were still, couldn't believe that we had really done this. And, in fact, as probably one of my biggest challenges in those first few months prior to IPO, as well as the next year, was convincing the market that, no, this truly is a reinvention. And what's going on under the hood is truly a high growth, modern software business that is a multi-billion dollar winner.

Chip Virnig:

You not only disrupted yourself, you disrupted our model at Thoma Bravo in a positive way by enlightening us on how to successfully navigate these very complicated SAS and next gen transitions that, as you mentioned, this ever-evolving industry that is technology, you're constantly disrupting yourself to stay ahead of the competition. And we got the confidence on how to implement that and operate that effectively with our experience with you and your team, and that's led to so much of our success as a firm since that journey with Dynatrace. So, we're forever thankful for that experience, not just the amazing financial outcome that we generated together in Dynatrace, but the everlasting value it's had to our firm.

John Van Siclen:

Oh, that's great. I mean, it really is one of the truths about, you know, the technology business; if you don't disrupt yourself somebody else is gonna do it. And, like I said, the early years of my career, I was with a number of companies but they couldn't disrupt themselves. And those companies, if you see the multi-billion dollar businesses that are out there, and there's a number of them in tech, of course, but they are constantly reinventing themselves. Some try to acquire it in, but I think the most successful ones today, whether it's Service Now or Crowd Strike or Dynatrace, they're all innovation engines and they're doing it with, they might pick up a little piece or a little piece or a little piece, but they're wrapping it into their organic innovation engine itself, and expanding into new markets here and expanding this market there. And it's exciting to watch.

And I think it's a, maybe that's a new trend in software in some ways, is that organic innovation model, and how powerful it can be.

Chip Virnig:

So, John, I just wanna go over some history here and some timelines and milestones 'cause it's pretty incredible. When you joined Dynatrace in 2008 as a venture backed company, I think the value was around $50 million. Then, in 2011, a few years later, you sold to a large publicly traded strategic Compuware for $250 million. A few years later, in 2014, as part of our take private transaction, we just signed about $1.7 billion to that same company. And then in 2019, we went public for about four and a half billion. And then in 2021, when you retired, I think the market cap was 20 billion. So, how does that resonate with you, that you were the CEO of this company for a little over a decade, from 50 million when you joined value to retiring it at around 20 billion?

John Van Siclen:

(laughs) Well, I look back and go, wow, that actually happened. But, when you're in the trows of it, you don't really think about it. You keep your head down and just to get to that next milestone. And so from the venture standpoint, the milestone is, you know, I knew that, given I was on the East Coast, and the way the East Coast VCs think is probably gonna be a sale to a strategic. Very few East Coast companies actually get positioned for IPO exits, just a difference in the way the VC world thinks. But, so I knew that was the goal. I thought it would take a little longer, but came in a little early.

I will tell you, I wasn't super happy at the, at that point, 'cause I knew there was more value. The market was big, the competition was stale. It was an opportunity, which was why I stuck with it in the next chapter. And the next chapter was interesting. We became a multi-product line global business absorbing resources from that Compuware world. And then Thoma Bravo unleashing it and carving us out, that was chapter three. And then IPO and post-IPO chapter four.

Maybe I should think about it as four different lives instead of one, but was such a great continuum and such a great set of building blocks between technology market and Bernd. (laughs) I couldn't get away from it. I loved it. Absolutely loved the whole journey. And like I said, it's wake up at the end of it and go, wow, what a success.

Chip Virnig:

Your commitment was really amazing and it was a pleasure working with you every step of the way. And I can't thank you more for joining us in this podcast, John. It was really a pleasure to get together again. And I'm so happy we could share our story with a broader audience. It was truly a special transaction experience for us.

John Van Siclen:

Thank you, Chip. I gotta say, it was the same for me. Without Thoma Bravo it just never would've happened. And it'd, not just because you carved us out and, or saw the opportunity, it was all along the way. Many times, providing advice, asking key questions at important moments, believing in the team and me and some tough decision points that didn't seem obvious at the time. Great partnership and forever indebted. Thank you very much.

Chip Virnig:

Thanks to John Van Siclen for talking with us today. If you wanna learn more about Dynatrace, visit Dynatrace.com and for more stories "Behind the Deal," check out all of our episodes wherever you get your podcasts. Plus, don't forget to subscribe to "Behind the Deal" to hear new episodes as soon as they drop. If you liked this episode, check out our miniseries "Beyond the Deal" for bonus content from John Van Siclen and myself that we didn't have time to share with you today. Catch it in this feed next week or on YouTube. From all of us at Thoma Bravo, I'm Chip Virnig.

Orlando Bravo:

Thoma Bravo's "Behind the Deal" is produced by Thoma Bravo, in partnership with Pod People. Stay tuned for more stories behind the deal. I'm Orlando Bravo. Thanks for listening.


Certain statements about Thoma Bravo made by portfolio company executives are intended to illustrate Thoma Bravo's business relationship with such persons, rather than Thoma Bravo's capabilities or expertise with respect to investment advisory services.

Portfolio company executives were not compensated in connection with their podcast participation, although, they generally receive compensation and investment opportunities in connection with their portfolio company roles. And in certain cases, are also owners of portfolio company securities and/or investors in Thoma Bravo funds. Such compensation and investments subject podcast participants to potential conflicts of interest.

Certain statements about Thoma Bravo made by portfolio company executives are intended to illustrate Thoma Bravo's business relationship with such persons rather than Thoma Bravo's capabilities or expertise with respect to investment advisory services. Portfolio company executives were not compensated in connection with their podcast participation, although they generally receive compensation and investment opportunities in connection with their portfolio company roles, and in certain cases are also owners of portfolio company securities and/or investors in Thoma Bravo funds. Such compensation and investments subject podcast participants to potential conflicts of interest.