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At Thoma Bravo we’re exposed to all sectors of the software economy.

Q: In February, Thoma Bravo closed its tenth fund with $1.25 billion in commitments after being in the market just five months. Fundraising is tough right now. How did you close so quickly?
One of the things that contributed to our success is that we try to work closely with our advisory committee, which is made up of our larger limited partners. Before we start fundraising, we make sure these investors know what we’re doing. We share any management changes that might take place, we reassure them that there isn’t any strategy drift. We’re really making sure that this group of investors is really up to speed, so that even before we go to market, we’ve got 60 to 70 percent of the money raised. If those nine people are not going to sign up for our fund, we better not go to market. You have to take your core investors and be partners with them because it’s sufficiently hard to raise money right now. If they don’t support you, you just can’t raise money.

Q: Since Thoma Bravo has so many longstanding investors, do you feel the need to get new blood into your funds?
Yes, for several reasons. First of all, it’s sometimes harder for existing investors to give you more money than they did last time. And if you want the fund to be a bit bigger, you need new investors. Also, you occasionally run into situations where certain investors are over-allocated to private equity and they can’t make any new commitments when you are raising your fund. So you’ve always got to be adding new people for occasions like that. And you want to keep growing and building new relationships and getting new perspectives. You just don’t want to be thinking of yourself as a closed group.

Q: You don’t use placement agents. Why not?
I think the days of using placement agents are, well, I guess, no comment. I suppose they might be useful if you’re trying to raise a lot of money and you don’t have enough hours in the day and you need someone to help facilitate relationships. But I think LPs would just assume not have placement agents because it just adds another layer of worry after the various problems that have happened in the past.

Q: When you raise a new fund, how probing are investors as far as their due diligence?
The level of due diligence certainly hasn’t gone down. But GPs have gotten a lot better at it. GPs have to be prepared. Years ago, when we were raising our second or third fund, we almost waited until our LPs asked us for information, and then we would prepare it. Nowadays, before we mail out our first memorandum, our data room is populated with every conceivable question somebody could ask. If you do these things in advance, it can literally save you months of time. You have no idea the amount of information we have to provide people. Part of what LPs are doing is checking on the integrity of the GPs. There is also quite a bit of studying portfolio companies to see how we made our money.

Q: Besides returns, what do your investors want most?
LPs really don’t like surprises. When you present a new fund, you would like to say that nothing has changed: same partners, same strategy, same solid performance. They would rather have you make your money from 10 good investments rather than one great investment. What they want is as much predictability, stability and certainty as possible. They’ve got a lot of money to look over, and what they don’t like is problems. They’re not in the work-out business.