The growth in enterprise software companies in the Asia Pacific is expected to increase exponentially, according to Robert Smith, founder of Vista Equity Partners, a private equity company that invests exclusively in that sector.
Smith said his firm had spent the past 20 years investing in its own internal infrastructure to ensure it has access to the markets and regions it thinks will have growth in the enterprise software market.
“We have $750 million in revenue coming out of APAC. The growth in our space will be exponential in APAC region,” he told delegates at the Fiduciary Investors Symposium.
The private equity manager has been investing in enterprise software since inception, partnering with organisations at every phase of growth from lower-middle market to high-growth.
Smith said that the business, and his portfolio companies, have not only survived the COVID-19 pandemic, but that the use of technology has accelerated and benefited many investments.
“There has been a massive rotation to embrace technology and software so large companies globally can have more visibility of their supply chain and reorganise their business,” he said.
“For example, we built a software platform for curb side delivery for a food business. It’s one of the small businesses that would have been shut down but they are now more profitable than before. We had 68 portfolio companies at the time COVID hit and we didn’t have to provide $1 of financing. Now there are tailwinds for some businesses and we can capture that, we have great operating leverage in those businesses.”
Vista is touted as one of the top-performing private equity firms globally with $75 billion in AUM and has participated in 480 private equity transactions. Its current portfolio companies employ 70,000 people.
“Our strategy has remained focused on enterprise software and supplying capital across the entire enterprise software spectrum. It is an evolution of what we can provide but the fundamental element we focus on is how do we build sustainable solutions to grow their businesses faster and give them institutional scale.”
Smith echoed a theme in the conference, that the large technology companies are so large they can no longer innovate. He said one of the advantages of Vista was its organisational design including Vista Consulting where it houses and redistributes knowledge across all portfolio companies.
“One company might not have a CTO, we can take the knowledge from one company and repopulate it across the portfolio companies that are ready to embrace new technology to disrupt the space they are in. It’s a very unique design that allows us to do this at scale.”
Smith responded to the risk that technology could further bifurcate society saying “we as society have to ensure that doesn’t happen”.
Part of that is to ensure connectivity and access to some people who may have difficulty accessing capital to buy a home or start a business.
“Those are the things as a society we need to focus on. I’m a big believer in capitalism as social mobility, but opportunity is something we need to focus on to make sure everyone has opportunity. If you don’t have access to it then you don’t have the option,” he said.
Smith was the first African American to sign the Giving Pledge and says “there is no greater joy than liberating the human spirit”.
“For some of us that have been fortunate in business that means using our capital and knowledge to do that.”
Meanwhile another speaker at the conference, Ricardo Scavazza chief investment officer, private equity at Patria Investments touted the benefits of investing in Latin America, in particular Brazil.
He says the region requires investors to be selective, in both countries and sectors.
“Growth in Latin America has lagged for the past decade the global growth of other emerging markets such as Asia. But if you take selected industries such as healthcare, it has been growing at 5 per cent in Latin Am for the past decade. By being selective and looking at particular industries such as healthcare and agri-business, Latin Am really stands out as a compelling growth opportunity,” he said.
“There are some countries not so favourable, for example we exclude Venezuela, but there are some great environments for investing such as Brazil and Colombia.”
Scavazza also pointed to the food and beverage industry as one with huge growth potential. Many of the industries also have consolidation opportunities, he said.
“Lat Am is one of the largest consumer markets in the world. The large global conglomerates will never cancel out a presence here. But it is difficult for them to build themselves an acquisition strategy related to family-owned business in the regions, so there is a good valuation for having a quality platform already established. We are buying traditional family-owned businesses, that are good businesses but old fashioned and digitialisation is a great tool to create efficiencies and modernise,” he said.
“Lat Am has its own trends and specific industries to watch. If you have a portfolio that is well constructed with the right exposure to the right industries it could add a lot to portfolios, not just in absolute returns but by diversification.”