Rank the best tech funds in SF Bay Area

Have a good understanding of the NYC market, but planning to move to SF and need to get a quick understanding on who are considered the best players across tech buyout, GE, and VC (only care about VCs that recruiting out of banking). Any names come to mind?

 

No because it's wrong. Funds that can fundraise will always need new associates coming in every year. TB raised $32 billion - unless they are returning this capital back to LPs they need staff to deploy it.

Returns will almost certainly come down, but that has no immediate effect on the stream of management fees used to pay salary/cash bonuses.

 

Silver Lake and Thoma (as referenced above by the first poster) are the top names in the tech buyout space in SF. Would add Francisco Partners as well. They've gotten so massive over the last few years.

Other premier large cap buyout funds include H&F and Genstar. Both do more than just tech but have done some great deals in the space. GI Partners is good. WCAS is another great name but think their presence in the Bay Area is relatively limited as most of the investment team sits in NYC

Advent raised a tech-focused MM fund a few years ago out of an office in Palo Alto. Not sure how that specific fund is doing but Advent, as a whole, crushes it.

 

Genstar and H&F are very different. H&F is double Genstar fund size.. Genstar primarily focuses on MM 

missing some names like permira, Clearlake

 

They aren't that different but I never said they were the same...they both do a lot of investing in tech as well as healthcare and financial services. They also both pay up for high quality, growing businesses. Genstar is raising $13B. They're still huge. They do MM deals but also look at some massive deals. We looked at something they recently did and it traded for around $3B. Clearlake is in Santa Monica, outside of LA, not SF.

Edit: How are you going to give MS for this? Literally all of this is true. 

 

GI is a good mention. They were the pioneers in the private equity investments into data centers and other internet-related infrastructure. Several other funds have now copped a style from GI given the success of their investments.

 

Can anyone comment on Vista? Seems that they are considered a tech megafund along with SLP and TB (although their Bay Area office is just a satellite, much larger presence in Austin/Chicago)

 
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I'll give you a few perspectives on Silverlake, H&F, Thoma Bravo, Vista all in one go. I don't know Francisco Partners as well (mentioned in other comments) but in my mind they are very solid, growthier investors than the previous bunch. Worth prefacing all this with the caveat that I consider our fund to be a competitor of esp TB and Vista - so there is always the concern of bias, but I am trying to be fair to our colleagues in all this.

Silverlake marches to its own drum

They do very, very interesting deals that I don't see the others chasing: structured deals, PIPEs, asset backed, more B2C if they find the right asset. Historically they've done even stuff like chip fabs, although I haven't heard of them doing that recently (admittedly I am not 100% current). Their flagship deal is the P2P of Dell where they together with Michael Dell went head-to-head with Carl Icahn. They acquired that business back in 2013 for something like 4x EBITDA for a rock solid services and resale business, and Icahn had correctly fought them about it because it undervalued the business significantly. They made absolute bank on it. See for example some coverage: https://www.forbes.com/sites/forbesdigitalcovers/2021/10/07/michael-dell-book-excerpt-play-nice-but-win-how-to-win-a-game-of-chicken-with-carl-icahn/?sh=5f217f8f2c07

Similarly, they've done B2C deals (which most of the others on the list will not do), such as the investment in Twitter and the structured deal in Airbnb during COVID that netted them crazy return. See for example: https://www.businessinsider.com/airbnb-silver-lake-sixth-street-ipo-billion-dollar-loan-warrants-2020-12

Just overall, they have the courage to underwrite risks that many others would not feel comfortable with. If you are interested in B2C, they are the best shop of the list 

H&F has never lost money on a deal

It's their calling card and the first thing they tell LPs. They steer more towards "value buys" in tech, if there is such a thing - they won't do the 50x EBITDA deals, for example. They have a very lean team (as far as I know, they pay by far the most in London) and an insanely charismatic leader in Patrick Healy, who can convert any management team. I've heard he's also a bit of a trickster? Like showing up at a German company's board meeting in lederhosen - can't help but respect that! If you want to read more about him and his approach, see: https://www.ft.com/content/25a46f81-6ceb-433c-ade9-6c6543b123d5 They are seen as very active board members and quite in the weeds despite the lean team - they'll get to know 2 layers down from the C-suite of a business they acquire. 

I associate them most with the Kronos / UKG - fabulous company they've owned for many years. It does workforce management software for enterprises and has an insanely sticky product. They merged publicly traded Ultimate Software with Kronos to create the $20bn UKG. 

Thoma and Vista are cut from the same cloth

Both pursue LBOs of mostly B2B software businesses. Both have a "playbook" which is slightly different flavours of "buy a business and get it to 40%+ EBITDA margins stat." Robert Smith, the founder of Vista, is known to have said "all software tastes like chicken" - see for example this article on his work: https://www.forbes.com/sites/nathanvardi/2018/03/06/richer-than-oprah-how-the-nations-wealthiest-african-american-conquered-tech-and-wall-street/?sh=70444ed53584 Both Vista and Thoma are considered excellent training grounds for management teams - once a team has gone through the trial by fire that is a Thoma / Vista ownership, they are seen as well trained.

They are direct competitors on most deals, with e.g. rumour that Vista lost Coupa to Thoma just recently.

Hope this is helpful - I can't comment honestly on the WLB or culture at these places though. These are just my observations (true or imagined!) about the various players here. 

 

Growth equity offices in SF include Summit in Menlo Park, Spectrum Equity in SF, Blackstone in SF, General Atlantic in Palo Alto. Most of these places focus on efficiently-growing, profitable, often bootstrapped SaaS companies.

VC firms that take bankers include Accel, Battery, NEA, Iconiq, Greylock, IVP, Menlo Ventures, Norwest, a16z, TCV, G Squared. In comparison to the firms above, mostly investing in sexy, fast-growing, high burn companies in Series C and beyond

A few other crossover funds as well including Dragoneer, etc 

 

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