Software PE guys - how are you holding up
Now that we've had several months of depressed public co multiples and nearly zero buyout activity...how are folks holding up?
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How bad is investor sentiment for private b2b SaaS opportunities given the AI wave?
I know several MM/LMM funds that haven't done a deal since 2024. It's been bad for more than a few months lol. That's not to say I think the rerate and sentiment is warranted, I do think it's overblown. But as demonstrated by a founder who posted on this forum recently, I think it's more difficult because sellers are even more reluctant to accept the rerate on their assets (in some cases, understandably so).
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You guys are so fucked lol
Carry worth $0 (IMO). Left to do something other than pretend we are going to hit hurdle rate. Less hours and more $… good times after bad times.
Still within investing? Or operating / something entrepreneurial?
Investing with a maybe little operating / PM. Less structured than UMM teams which is very nice.
I can only imagine the mental willpower that must be required to sit calmly at your desk and not exact a mighty fury upon those around you watch your managing partner at the latest conference highlighting that the team has been internally 'preparing' for AI since 2023, meanwhile your day consists of portfolio work for three enterprise software companies (20x entry multiples) with accumulated tech debt and worse terminal value risk than the public comps you have been instructed to compartmentalize as screwed for different reasons
Gets harder with every zero
20x? You gotta pump those numbers up, those are rookie numbers
I work out 6 days a week now, fund is imploding but life is great
40% of our exits have been in software. We started to hear the market was shifting from valuating these companies from a multiple of ARR to a multiple of EBITDA. We’ve been pencils down on that vertical and have put more energy into the other sectors we’ve found conviction previously.
It’s been a different experience from what I expected when I took this role, but finding some positives in the midst of an expectation reset. Our fund is pivoting investment philosophy to better accommodate a post-AI era and that has opened up new opportunities that I’m excited for. Getting more hands on, quasi-operating experience too as we look to add more value to our portcos. Just gotta keep looking for ways to build new muscles and think creatively
I am in a MM fund with a more value turnaround angle rather than a growth strategy (e.g. we were never paying 20x EBITDA on SW) . And it's actually a good time as seeing processes where we were outbid at NBO stage now circling back, as buyers who offered 20-30% higher valuations walk away. The main challenge now is convincing founders and PE sellers that those valuations are gone
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Call me dumb af I know but can someone ELI5 what caused this saaspocalypse and why software and tech is so dead right now?
I assume it’s Claude and advanced labs just making the use of like 75% of these software companies just obsolete - is that literally just it? Thanks
That's basically it - no one wants to underwrite enterprise software at a mid-teens+ EBITDA multiple when there's broad uncertainty about their durability in a world where AI potentially 1) materially decreases the cost to create / replicate software and 2) reduces the number of seats that need to purchase software licenses
Thanks for the color! Helpful. Appreiciate you not being condescending to my painfully obvious question!!
AI also increases insourcing risk and narrows the value prop moat of many companies (e.g., analytics companies that pull data from various sources into dashboards >> Claude can generally replicate this, plus easier to manipulate for a layman versus software platform requiring power user/admin)
There's really a few ways to look at the risks and why investors are selling off:
There are probably more risks that I didn't cover, I just think of these as the main three. Time will tell if companies actually take route (1) and we'll see if any of the competitors that emerge via (2) actually start winning share. I think if you combine the fact that workflows just get shifted to model labs via (3) and then maybe you can get the supporting software cheaper via (1) or (2), then you get the storm that justifies the sell-off.
You’re forgetting an important few
There are 10+ yr old businesses that don’t generate GAAP profits.
It's so so so over
They're all just waiting until every software PE firm changes its thesis to "AI-native services"
Sorry guys but you're all wrong.
@Ozymandia @IsItREPE will educate us on how AI is just a useless bubble and how the macro trends in this thread are all imaginary.
Stop tagging me every time you have a thought about AI, retard
How about first don't have retarded takes on AI??
Literally amuses me how you clowns keep waiting for a "bubble pop" that's never going to happen. Keep waiting bro lmao.
This was my first time going through a cycle. Some interesting notes, maybe...
Bad. Those 2020/2021 funds are all screwed, and even some of the 2022/2023 ones. Even then, the DPI numbers have been bad across the board. 2025 and 2026 vintage funds might actually do very well knowing how cycles work and just how depressed software valuations were, but hard to know. Being a new tech-fund is probably really fun, especially since most sponsors are struggling to raise new money. I know it looks like all software is going to die and past performance is not indictative of future performance, but IGV has seen a clear up-tick from it's March 2026 levels already and bubbles bursting and then rebounding steadily is a pretty strong historical trend.
Also there is “scales falling from the eyes” risk where the AI hype causes the corporate buyers to question why they keep paying more and more in software rent, eclipsing actual rent, for things that they barely use.
Mine is doing pretty great actually. Most of our investments are geared towards AI and have done incredibly well. Had a pretty dope exit of a company above 2B and got higher than a 3x on
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