Flexera is a company that provides customers with the ability to map their IT spend to better optimize their IT estate. In this episode, Thoma Bravo Managing Partner Seth Boro sits down with Flexera CEO Jim Ryan to talk through the initial carveout, surviving the Great Recession of 2008, and where Flexera goes from here.
AIR DATE:
December 14, 2023
RUN TIME:
37:23
Transcript
JIM RYAN:
I tell my employees all the time is, "Don't worry about what we're worth. Let's worry about the problems we solve. You know, what we'll, what we're worth and the types of multiples we can get will take care of themselves."
SETH BORO:
Well, you've built an incredibly high quality business, rule of 60, gross retention. You mentioned GRR, gross retention of 96%, net retention, or NRR, of 109. There's not many companies in the world that look like this.
DISCLAIMER:
This podcast is for informational purposes only and does not constitute an advertisement. Views expressed are those of the individuals and not necessarily the views of Thoma Bravo or its affiliates. Thoma Bravo funds generally hold interest in the companies discussed. This podcast should not be construed as an offer to solicit the purchase of any interest in any Thoma Bravo fund.
ORLANDO BRAVO:
Welcome to Thoma Bravo's Behind the Deal. I'm Thoma Bravo Founder and Managing Partner Orlando Bravo, and that was Jim Ryan, President and CEO of Flexera speaking with Thoma Bravo Managing Partner Seth Boro.
Flexera's a company that provides customers with the ability to map their IT spend to better optimize a company's IT estate. Back in 2008, Thoma Bravo bought Flexera through a divisional spinoff of a company called Macrovision at the time. Over the years, Thoma Bravo set Flexera as a very successful standalone company that had a series of private equity owners over its history.
In this episode, you'll learn what drew Thoma Bravo back to Flexera in 2020. Thoma Bravo's deal with Flexera is a case study in starting with a product, carving out a business from its parent company, and building the company around it from the ground up. Back in 2008, Thoma Bravo was still really early in our software effort, and this was one of the first platform carve-out investments we did. It is truly a great example of company building, building all the functions from day one in a best-in-class way, and having a management team that really bought into what that meant straight from the beginning.
Even though the initial deal happened back in 2008, I remember it like it was yesterday. I remember all the details of every deal, of every investment we have ever done. And this one is certainly no exception. During our negotiations with a parent company, I got a call from Mark and Jim, where they told me that Thoma Bravo was going to lose the deal to another private equity firm. I immediately got in my car, drove down 101 (laughs) to go meet the company and the decision makers in person, as I knew that our firm really needed to win this deal.
So today, you'll hear everything that went on behind the deal of this investment from Seth Boro, our Deal Lead and Managing Partner at Thoma Bravo, followed by his conversation with Flexera President and CEO Jim Ryan.
SETH BORO:
My name is Seth Boro. I am a Managing Partner with Thoma Bravo, and I have worked with Thoma Bravo for a little over 18 years. This time, I'll be talking with Jim Ryan, President and CEO of Flexera. We'll discuss how Flexera has managed to build value straight through from inception til now and how Thoma Bravo played a role in its origin story.
The IT management solutions, uh, segment of the software industry has been one that we've been invested in actually across a couple of, of different companies. And IT spend is a huge piece of enterprise budgets. And this segment, and specifically what Flexera does, enables IT organizations within enterprises to really have clear visibility into where their IT assets are, how much people are spending on those, and how much they should be spending on those. As organizations have transitioned to Cloud, Cloud spend has also become incrementally important and a big piece of, of enterprise budgets. And managing that spend and optimizing which Clouds, public Cloud or private Cloud to operate on, uh, has become very critical as companies plan their IT spend generally, and, uh, especially in a, at tighter macro environment that we find ourselves in today.
Our first investment in the space was in 2008, the first time that we acquired Flexera in a carve-out transaction. And what was really interesting at the time as we entered the, the great financial crisis in 2009 is that the Flexera solution and the IT asset management space in general was one that really provided customers with very high ROI on buying their products and buying products in the space, because people were really looking at that point to clamp down on, on spend. And the ability for CIOs to really understand where all of that spend was taking place and it being able to address it, uh, was critical in companies being able to reduce spend, reduce assets, manage growth. At that high ROI, um, at the time, which we find ourselves in somewhat of a similar environment today, is much easier for people to approve as they're making budget decisions.
So it's, it's really back to this idea that, you know, needing to know where your assets are at all times, needing to understand where you're spending money, both hardware and software, and being able to do it globally with all the various license agreements you have against those assets to make sure that you're utilizing them in the most efficient way.
Back in, in 2008, the company was really operating as product segments within a larger business called Macrovision. And it was not core at the time to what that organization was doing. And it was the combination of really two very different companies sitting inside of, of that organization. At the time, it was the Flexera business, which is the IT asset management business, on one side. And on the other side, it was the license management business, which today we call Revenera, that sits inside Flexera and helps software companies manage their product with their customers.
So Flexera itself is two different businesses. It continues to be today. It's like any carve-out. You are essentially starting to build a company from scratch. It was not a business that was sitting, uh, inside the parent organization as a, as a standalone company. That's always trickier to do. Sometimes, when, in these carve-out transactions, what you find is that you're essentially carving out an organization that is almost fully functioning as a standalone organization.
In this case, we really did need to build, uh, a company around the products. So there's just a lot that goes into that, building G&A, putting the right systems in place, hiring a lot of people that would've been sitting at the parent organization before, facilities in some cases, right, setting up leases, everything you need really to build the business. So you're, you're almost starting a, a company from scratch, except, in this case, you have a revenue stream obviously and, and products and people that, uh, have been working on, on developing those and building those over time.
We had to get all the general and administrative functions built as we carved out the products back in 2008 to make sure that we had a, a company that was fully functioning on day one. So most of our efforts in this case were spent on the more organizational functions, G&A functions, go-to-market functions, making sure we had the right amount of people in place to build the company and carry it forward, and really e- establish all of the day-to-day, you know, routines and practices that you would find in, in any organization.
You know, these carve-outs really do feel like startups in many cases, except that you do have products and revenue sitting there on day one, which is what you're buying, but with a lot of work to build the business around them.
We really focused the business in its two main segments. And on one side, it was the license management piece. We made some acquisitions in and around that business to bolster what they were doing already, and we started focusing the business a little more on the embedded solutions market. So think about that as a hardware company or a module or a hardware appliance that essentially runs on software. And that piece of the business today, which is known as Revenera, is a market leader and, uh, and very mission-critical to its customers because it allows software companies and embedded software companies to really deliver products, licensed products to its customers and manage them, uh, with their customers to make sure that they know how the products are being used, to entitle people to use the products, almost like a back office system for software companies. So that was one piece of the business that we were focused on strategically.
And then on the other side, one of the big acquisitions that we made was a company called ManageSoft, and ManageSoft was, at time time, a, a business in Australia. We still have, you know, people on the ground there today with the company. But it was really, uh, the company's foray much more into the license optimization and management business for the enterprise. So the idea behind the company in totality was that it was providing solutions that managed software. On one hand, those solutions were being provided to software companies and embedded software companies. On the other hand, they were being provided to enterprise and, and IT organizations. ManageSoft allowed us to get much more into that market that ultimately became a big growth area for the business.
When we bought the company, the company was managing software for enterprises, but only software that had the Flexera licensing agent embedded in it. We ultimately made this acquisition of ManageSoft to build a much bigger presence in and around that space to grow that side of the business also. So as we moved the business forward strategically, we had two end market segments all tied together with the idea that we were managing software assets, on one hand, for software companies, on the other hand, for enterprises. And that was the strategic direction that really pushed the company forward. But that ManageSoft acquisition that we made was very critical to the company's future.
2008 was the original carve-out transaction of the business from, from Macrovision. 2011 was where we exited the business, although not fully. We did retain an interest in the company. And then 2020, we became re-interested in the business and bought a control stake in the company as we looked to really re-partner with the management team. Um, and at this time, Jim Ryan was, was managing the business, uh, as CEO.
And what interested us, again, in 2020 was the opportunity to partner with Flexera in a, a world that was increasingly going to Cloud, and most companies today are really struggling with that piece of their business. It's, it's expensive. There's multiple solutions today. There was less so at the time. You have hybrid IT that's driving the need to both manage on-premise and Cloud assets. And the idea that you can really manage your IT portfolio, both on-premise and Cloud, with Flexera solutions with an increasing need towards the hybrid enterprise, as well as a world that is Cloud-only for, for some companies, for us was exciting as a new entry point into Flexera, to partner with the team that we knew really well and a business that was very, very well-run.
So the company operates at very high cashflow margins. Part of that started on day one when we actually carved out the company initially. Those margins had increased over time. And you had a, a CEO partner in Jim Ryan, who had transitioned from Head of Sales when we were running the company, and he was someone that we knew we wanted to partner with to carry the investment forward and the company forward.
So all of that made the new investment and the majority ownership position in 2020 very exciting to us.
So the past three years have been great. The business has performed very well. What's happened in general over the last few years is that investors, strategic buyers are looking for companies that both grow and generate a lot of cashflow. Flexera is what we call a rule of 60 company. It's got recurring revenue growth in the double-digit range and margins at about 50%, which is incredible. So the business is very efficient. It's very well-run. It continues to grow. It's got great market leadership positions in both of its segments. And it's continued to deliver on this purpose of managing software assets both for software producers on one side, and that's the Revenera business, and also for enterprises on the other side of the business that we call Flexera that, you know, also is now increasingly important in a hybrid IT and Cloud-only world, uh, in some cases.
So strategically, it's really well-positioned. We think that today, as people look to optimize cost in their organizations, manage their IT assets, make sure that they're both using their prior investments properly and thinking about future investments properly, the solutions that has become increasingly strategic to their customer base, operationally this is a business that really from day one I think that we help quite a bit. That best-in-class operational performance has always underpinned the company's performance.
We acquired a controlling stake in the company for 2.85 billion, which was roughly a low teens EBITDA multiple on the business. That was another reason that we were attracted to the acquisition. It felt like a very responsible buy-in multiple on actual cashflow with, without a lot of work to kind of create that earning space, uh, which isn't always the case in, in a new investment.
Jim is a, a great example of what we look for in a partner. He originally was a, uh, a partner to us running sales when we initially made the carve-out back in, uh, the transaction in 2008. And Jim came out of a business called InstallShield, which is a really interesting company that was part of the assets that we carved out from Macrovision at the time, a business that was a, a leader in its market installing desktop software, but a pervasive software asset.
And so he was part of the original team on the ground in Chicago. He was a leader in Chicago. When we carved the business out, we made him the, uh, the Head of, of Sales for this combined company, standalone company. And from day one, he just proved to be a great partner, incredibly open-minded. We worked very closely, as I mentioned earlier, to build the operations of the company in a standalone way. Jim really was very much a student of what we had to offer around how do you build best-in-class go-to-market, and, um, he put up some great performance in that role. We had thought about him at the time as a successor to Mark Bishof, who was a, a great partner to us in the early days in those investments, and Mark actually works with us today as an operating partner, another testament to how we really like to stay close to our best operators and, and keep them in the Thoma Bravo family.
And Jim transitioned into the CEO role when, uh, when Mark decided to take a step back very seamlessly. He's been just a great leader of the business. He's a very high energy, high integrity individual, always available, hires great people around him, looks for areas where perhaps he doesn't have specific strengths, puts people in those positions that complement him very well. People love working for him. We love working with him. But he's been nothing but a great partner over the years.
And, um, you know, it's not always easy to make that transition from Head of Sales into CEO. Some people really struggle with that. But for him, it was seamless. Uh, and he knows the business so well. He's been with it for so long that he's always been such a great leader of the organization.
For us, we look for partners that are open-minded, willing to do things differently, good partners, you know, push back when it's appropriate to push back, keep an open mind when we bring new ideas to the table, have the company's best interest at heart. And Jim really checks all of those boxes.
And now, we'll bring on Jim Ryan, Flexera's President and CEO.
Thanks for, uh, joining us here for Behind the Deal.
JIM RYAN:
Thanks for having me. Last time I did this was virtual, so it's great to be doing a in-person podcast in our new media room. This is a sweet setup.
SETH BORO:
Well, look, we, we appreciate it. We're here today talking to Jim Ryan, President and CEO of Flexera, a long-time partner of Thoma Bravo, both as an investment, as a, and also as a executive working with us.
JIM RYAN:
That's right.
SETH BORO:
So thanks, uh, thanks again for taking the time.
JIM RYAN:
Time's flown by. Fifteen years? Fifteen? Yeah. Fifteen years.
SETH BORO:
Amazing. You don't look it.
JIM RYAN:
Same, same to you.
SETH BORO:
(laughs).
JIM RYAN:
(laughs).
SETH BORO:
You had to say that.
JIM RYAN:
(laughs).
SETH BORO:
Jim, two, 2008, you were, I believe, working in Europe at the time.
JIM RYAN:
I was. I was living in London, running our international operation.
SETH BORO:
For Macrovision, right?
JIM RYAN:
That's right.
SETH BORO:
You had started your career at InstallShield.
JIM RYAN:
That's right.
SETH BORO:
InstallShield was bought by Macrovision. That's how you ended up there?
JIM RYAN:
Yep.
SETH BORO:
So tell us about what that time was like and sort of your, maybe your initial impressions. And if I remember, it almost took two forms. At first, it was just a sale of InstallShield. Then, that didn't materialize, and then it became a sale of the whole software business unit.
JIM RYAN:
Yeah. I mean, the, there were a lot of machinations on how that thing ultimately went down. I mean, from, from my perspective and, and my, my predecessor and partner at the time Mark Bishof, it, it was a crazy, exhilarating, fun time. A little unnerving. I was, I was living in London, so I was going back every week, commuting because we were talking to all these different private equity firms. And, uh, I think we had about nine or 10 different private equity meetings that we had. And, uh, the joke back then is Mark and I didn't even know how to spell EBITDA. We, we really... I think we were great line executives at the time.
SETH BORO:
Do you now?
JIM RYAN:
I think so. Yeah (laughs). I actually have it tattooed somewhere on my body. I absolutely know how to, uh, spell it, and I, I know my way around it quite well.
SETH BORO:
(laughs).
JIM RYAN:
Uh, but, you know, back then, we, we were going back and forth and we just thought every private equity firm was created the same. That, that's patently false, by the way, for those of you that are listening.
SETH BORO:
(laughs).
JIM RYAN:
Uh, it does matter. And we, if you remember, uh, the, this, this firm will go unnamed, but there was another private equity firm-
SETH BORO:
Mm-hmm.
JIM RYAN:
... that had thought-
SETH BORO:
I do remember.
JIM RYAN:
... that had thought that they won the deal.
SETH BORO:
It was very stressful.
JIM RYAN:
It was very stressful. And, uh, they had told us that they had gotten the deal. And Mark and I really loved working with you and Orlando at the time, and we loved working with you guys and wanted to work with you guys so badly that we picked up the phone and said, "Hey, listen. You're going to lose this deal. It's going to another firm."
And Orlando never flinched. He got into his car, drove south down the 101, and met with, I think it was our CFO at the time and pipped the deal from this, this other private equity firm. And the r-, the rest was, was history after that. We, we signed up with, with you guys and, uh, began a wonderful partnership.
SETH BORO:
I remember that very well, and, uh, it was an exhilarating evening of deal-making.
JIM RYAN:
That's right.
SETH BORO:
And it was also the first step in our partnership.
JIM RYAN:
Yep.
SETH BORO:
Right? Like, that was a very... it was very important that, uh, we, you had that trust in us. We really wanted to own the business. And that's how those partnerships are, are forged.
JIM RYAN:
So what you have to understand, uh, you know, back then, if you remember, it was a carve-out. We, we didn't have a CFO. We didn't have a head of HR. We didn't have a, a company name. We didn't have a head of... Uh, we had a head of marketing. We, we didn't have the infrastructure that a standalone-
SETH BORO:
You didn't have physical space.
JIM RYAN:
We didn't have physical space.
SETH BORO:
You had some physical space.
JIM RYAN:
Yeah.
SETH BORO:
But not what you needed.
JIM RYAN:
Right. And we, you know, there was a lot that, that we didn't have. So we began the process of, of trying to create a standalone entity with an associated (laughs) brand that, that we could carry into the future, and we... I don't remember what we did. We spent some amount of money and time hiring some people to come in.
SETH BORO:
(laughs).
JIM RYAN:
And we came up with the, with the company name Acresso, A-C-R-E-S-S-O. The logo was black and red. And we were exceedingly proud of that. That was (laughs)... Eh, you know, it was, it was a small step, but we thought it was a, it was a monumental leap forward in, in forging our own identity. And approximately (laughs), I don't know, it must have been 30 to 45 days after we went public with the name Acresso, we got a cease and desist letter from a company headquartered in the Netherlands called Unit4 Agresso (laughs).
And, uh, our attorneys sat us down and they said, "Listen, you're, you're free and clear in North America, in Asia, in pretty much everywhere you want to do business with the exception of the UK and Netherlands," which, from an EMEA perspective, was a fairly large swath of our business. And we had only had 60 days-ish of brand equity at that point in time, so we, we killed it off and came up with Flexera.
SETH BORO:
It's now really called-
JIM RYAN:
Which is a better name, by the way.
SETH BORO:
I as-... Yeah, it... I... Well, it's a great name, and I assume it's also not a call you want to make to your board to let them know that, your new owner, that you actually messed up the naming-
JIM RYAN:
Yeah.
SETH BORO:
... of the company.
JIM RYAN:
It, it was a-
SETH BORO:
I do remember getting that call. I was in a rental car somewhere on the way to a meeting-
JIM RYAN:
(laughs) That's right.
SETH BORO:
... somewhere in the country. And, um, of all the stuff that I thought we had to worry about, that wasn't one of them.
JIM RYAN:
The, there was a couple T-shirts. Uh, I have business cards. I, I actually have an old business card. And every now and then, somebody pulls out... We did, we did produce one T-shirt or something like that.
SETH BORO:
(laughs).
JIM RYAN:
It's in the Flexera museum.
SETH BORO:
Jim, a, a lot, a lot happened between that carve-out in 2008 and 2011, including the greatest recession-
JIM RYAN:
That's right.
SETH BORO:
... of our, of our life (laughs)-
JIM RYAN:
That's right (laughs).
SETH BORO:
... of our lifetimes as we were trying to build this company around a product set. Tell us about that, that time period and what it was like.
JIM RYAN:
You, you had mentioned the InstallShield business, which is a super easy business to forecast. I couldn't forecast it. I had, I had been affiliated with that business for a decade and, uh, that was, that was really the first, you know, test as an, as an operator and a leader. And I think we had... And I think it was probably the first test as to what are these private equity guys from Thoma Bravo really like? You know, because everybody can whisper sweet nothings to you when they're trying to entice you to, to buy the business. But when the proverbial S hits the fan, I, I think that's the earmark of a great partner.
And long story short, nobody ever flinched. Marcel did what Marcel did, uh, so well and was just tell us that it's a lot easier to cut costs and to make decisions earlier in a fiscal year. So we, we took a bunch of actions, leveled with our employees, and we got through the recession. Uh, I don't want to say just fine, but we got through it. And, you know, what goes down ultimately comes up, and we came out a better, stronger company, ended up buying, um, buying a few businesses, building out our enterprise capabilities, and had a really great outcome in 2011 as a result of all that work.
SETH BORO:
I remember that very well. And I also remember Marcel, Marcel Bernard, really the founder of our, of our operating partner group and, you know, just an amazing human being and-
JIM RYAN:
Yeah.
SETH BORO:
... just an incredible mentor to all of us, um, immediately advised to change the cost structure in the business. That decision ended up being the best decision, because business dropped probably 30% that year.
JIM RYAN:
Mm-hmm.
SETH BORO:
New business.
JIM RYAN:
Yep.
SETH BORO:
But it set up the company to make a really strategic acquisition in ManageSoft that today is really the underpinning of the fastest growing segment of our business. And I think we made that acquisition in 2010.
JIM RYAN:
That's right.
SETH BORO:
And it was something that we'd been thinking about for a couple of years. We also had the company really set up to buy Intraware on what's now called the Revenera side of the business.
JIM RYAN:
Mm-hmm.
SETH BORO:
But all of that was possible because we acted quickly when, uh, you know, when the world was falling apart.
JIM RYAN:
Yeah. I, I think ManageSoft was the best, most important acquisition we've made in company history, all made possible because of the actions that we took when the great recession occurred, all made possible because of the great leadership and mentorship of Merc- Marcel.
SETH BORO:
Yeah.
JIM RYAN:
I mean, we c-... I... We, we could do a half hour segment just on Marcel-
SETH BORO:
Totally agree.
JIM RYAN:
... and everything that I learned and we learned as a management team from him. He was unwavering. And, and, you know, a lot of, a lot of people look at executives, and, you know, we've got big egos and our, our confidence is high. But, you know, in, in those times, everybody gets uncertain. And Marcel was just steady as she goes, always believing in us, always, you know, saying, "You guys can do it. You're doing a great job here." He was, he was a rock of stability back then, uh, r- really, really something that we didn't necessarily appreciate when we first tried to guide the business (laughs) over to you and Orlando back in the day.
SETH BORO:
Right. Yeah, and the, and the big obviously transition from when we were control investors in the company is that you were now CEO.
JIM RYAN:
That's true. Yeah.
SETH BORO:
Mark, uh, Mark Bishof, who was a, a, you know, a great partner of yours and, uh, and who still works with us today in a different capacity had left the business in a, in a really spot. You had transitioned from Head of Sales, which is not easy to do, not everyone can do it, and, um, you know, were carrying the business forward. And, you know, 2020 was obviously a really interesting time. I, we were sitting in the middle of the pandemic, early stages of the pandemic when we really got much more serious in our dialogue.
JIM RYAN:
I think it was done all virtual, wasn't it?
SETH BORO:
Yeah, the whole thing was done virtually.
JIM RYAN:
Yeah. And-
SETH BORO:
I mean, of course, we knew each other.
JIM RYAN:
Yeah.
SETH BORO:
I think the fact that we knew each other so well facilitated that at a time when everybody was virtual. The company was performing. It was similar to, you know, back in the recession. It was a solution that, as people were looking to bring costs down, was one that had very, very high ROI. That's always been such a great s- piece of the Flexera business, really on, on both sides, both the Revenera and the Flexera side. People can really justify it very quickly, the payback. And that's always been critical to us.
Marcel always said, "If you can sell something with less than 12-month payback, you're in a good space." And Flexera's always been in that space. And, um, you know, we knew we always wanted to get back involved in the business. The focus on Cloud, uh, and hybrid IT and Cloud optimization was early at the time. Multi-Cloud has become a much bigger opportunity, more spend, it's more complex, harder to make those decisions. So that was really the next phase of the company in many respects.
And you had made some nice moves to get into that market at the time. So it re-energized us around the asset, and we knew that there was more to do in the market from an acquisition perspective and also great to be partnered with people that we knew really well. And obviously, you know, we had kept in very close touch over the years and followed your success.
JIM RYAN:
And that's not something I take for granted as a CEO dealing with a lot of private equity professionals who are typically the smartest people in the room and lets you know it. I have choices now that I didn't have in 2008 (laughs), as we all do. And, um, I want to spend that with people that I like and that I trust and I've got a good relationship with.
So they're just great people here at the firm. I think for a, a group of people that has had so much success, it hasn't gone to their head. They treat people the same way they treated us back in 2008. That's important.
SETH BORO:
Jim, you know, we're three years in, second time around. World's changing. World changed again. I mean, there's, there's a lot of big opportunity out there. What are you expectations for the business? What do you think we're going to do together? What would you like to do together?
JIM RYAN:
In, in some ways, it's a rinse and repeat from 2008. It's just a lot larger. So the more things change, the more they stay the same. Uh, we were talking about the need for more pipeline back in 2008, and at tomorrow's board meeting, we'll be talking about the need for more pipeline (laughs) in 2023 here.
But I, I think from an outside in perspective, the world continues to get more complicated for enterprise software companies. Uh, Cloud is, is excellent, but it also poses challenge with the ephemeral nature of, of those assets being spun up and down that represents a significant amount of potential waste, which gives us an opportunity to go in with that 12-month or less ROI that Marcel used to talk about. So, so I think for us, it's just one continuum from an outside in of what can we do organically or inorganically to try and give capabilities to our customers to take a great look into what they're using and giving them views and insights that they can take action on to go and bump up their top line if they're a tech supplier and they're a customer of Revenera, or, uh, you know, better optimize and manage their spend if they're a large, complicated distributed enterprise here.
And all of the same key metrics are, are, remain the same. We need more bookings. We need to, we need to laser in on, on GRR and NRR. There's more focus on price increases with SaaS because it's, it's harder to defend that renewal, which means that we've got to sharpen our saw with customer success. While we're out of the perpetual to subscription transition, we've got a new phenomenon that we've got to manage, and that's our cost of goods sold with Cloud, and it's impacting our margins.
So it's... They're different issues, but they f-, they feel the same, and I think the dialogue's the same. It's candid, and it's direct, and it's professional, but it's, it's designed with one goal in mind, which is let's just build a kick-ass company here, solve big customer problems. And if we do that, you know, what I tell my employees all the time is, "Don't worry about what we're worth. Let's worry about the problems we solve. You know, what we'll, what we're worth and the types of multiples we can get will take care of themselves."
SETH BORO:
Well, you've built an incredibly high quality business, rule of 60, gross retention. You mentioned GRR, gross retention, of 96%, net retention, or NRR, of 109. There's not many companies in the world that look like this. And, um, you know, it's, it's been fun to watch that journey starting in 2008.
JIM RYAN:
Yeah.
SETH BORO:
It was amazing how long Flexera's been part of our portfolio, that we've had this relationship, the transition you've made, Chief Revenue Officer into, uh, CEO. It was so long ago that VPs of sales weren't even called CROs.
JIM RYAN:
Exactly.
SETH BORO:
You didn't have a-
JIM RYAN:
Yeah, yeah, yeah. Exactly.
SETH BORO:
You didn't have a cool title like that.
JIM RYAN:
You just that, Head of Sales.
SETH BORO:
Head of Sales.
JIM RYAN:
(laughs). Yeah.
SETH BORO:
You just sold stuff.
JIM RYAN:
Exactly.
SETH BORO:
But that, that's been... It's really nice to see that success and all the work that we've done together and to see you evolve into this position of CEO and a great one, running this company with incredible metrics. It's, um, it's really nice.
So that's been a... It's been a really... It's been really fun to watch that journey, and, uh, and there's a lot more to go do. And when you have an asset like this, like Flexera, that grows every year, that retains customers, that delivers value, it's easy to be patient and try to continue to find more opportunities, because we know the management team can deliver on those. And you've had an incredibly loyal employee base also over the years, which is something that, um, I remember on day one, if you remember, we moved the headquarters of the business to Chicago-
JIM RYAN:
I do remember it as-
SETH BORO:
To Schaumburg.
JIM RYAN:
From California to Illinois.
SETH BORO:
To Illinois, which was completely contrarian, but really was true to the Midwest culture of the business and, uh, was one of the early things that we did that I thought really helped establish the culture of the company and reenergize the employee base. And I think part of that has really, you know, really helped create that employee loyalty over the years, which is so critical to any successful business.
JIM RYAN:
Yeah. I, I, I, I think that's, um... Private equity gets a bad rap, and, and people that aren't aware of o- of private equity think that it's, it's mostly dark clouds and all about cost cutting and everything else. And, um, you know, we've, we've got a, hundreds and hundreds and hundreds of employee investors that would disagree with that. We've got a lot of people that have been around since 2008 and before that time. And, you know, we're proof positive you can run a company at a rule of 60 with all of those other great metrics and still be anointed a Great Place to Work in Illinois. We just got a Great Place to Work in India, in the UK. It, it's a great company with great career options and, and wealth creation opportunities if you want to invest in the company. So it's a, it's, it's been a winner for the employees as well.
SETH BORO:
You know, when we first got together, it was about just selling software (laughs). Uh-
JIM RYAN:
Yeah.
SETH BORO:
My, my worldview was-
JIM RYAN:
Making the quarter.
SETH BORO:
... far, far more limited. So...
JIM RYAN:
Yeah.
SETH BORO:
Thanks for the kind words.
JIM RYAN:
Yeah. You're welcome.
SETH BORO:
Jim, thanks so much for, for being here and taking the time. It's, uh, been an amazing 15-year journey with you. And, uh, we look forward to many, many more years.
JIM RYAN:
Mm-hmm.
SETH BORO:
And thanks for your leadership and friendship.
JIM RYAN:
Thank you. Back at you. Uh, thanks for having me. Thanks to everybody over at TB that, uh, has been with us for 15 years. It's not something we take for granted. And, um, same to you, I value our friendship very much.
SETH BORO:
Many thanks to Jim Ryan. You can learn more about Flexera by visiting Flexera.com. And for more stories behind the deal, check out all of our episodes from season one wherever you get your podcasts and be sure to subscribe to Behind the Deal for our new episodes from season two.
And if you liked this episode, check out our new miniseries Beyond the Deal with bonus content from me and Jim Ryan that we didn't have time to share with you today. It will be dropping on this feed soon with full video of the interview available on YouTube.
I'm Seth Boro. Thanks for listening.
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.
DISCLAIMER:
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.
