Over the last decade, we’ve witnessed a massive expansion in the software-as-a-service (SaaS) sector. According to IDC, forecasted worldwide revenue for enterprise applications will grow from $279.6 billion in 2022 to $385.2 billion in 2026, at a 5-year CAGR of 8.0% ¹. The primary driver behind this growth has been the overwhelming productivity that SaaS can provide, reaching into every aspect of the economy as a force for positive disruption. Yet, after a period of prolonged monetary expansion – in which capital and ambition were flowing through the economy and software multiples reached record highs – the broader tech sector has experienced a re-rating over the last two years. During this time, rising inflation and interest rates, as well as geopolitical uncertainly, have caused volatility in the financial markets. Many investors have struggled to make new investments and create realization opportunities for their portfolio and investors.  

Thanks to Vista’s disciplined investment approach, the firm has maintained its momentum. Since November 30, 2021 – when the market correction began – our firm has completed or signed 21 monetization events. Across these events, we have generated $18.7 billion in total value, including monetizations of $14.5 billion (including co-investment) with $4.2 billion in unrealized value still to be captured ². With over two decades of experience investing in enterprise software companies, Vista’s disciplined approach and focus on value creation, profitability, and innovation within our investments have been central to the firm’s long-term resilience. These principles are underpinned by a prioritization of talent and diversity among our investment team. 

A Focus on Value Creation 

Since inception, Vista has focused exclusively on enterprise software and has done more than 610 private equity transactions ³. This experience allows us to identify companies with market-leading potential – quickly and with conviction. Our team develops investment theses with an understanding of the operational factors we can control and influence that aim to de-risk and generate returns. We then partner with executives to accelerate the corporate maturity of their businesses, executing value creation strategies that can expand revenue and deliver EBITDA growth. 

A recent example of this value creation approach was our investment in Cvent, a provider of event management software. Early in our investment period, Cvent adopted one of Vista’s core best practices around pursuing longer-term, multi-year contracts with its customers. During the COVID-19 outbreak when live events shuttered, we pivoted the business and were able to retain much of its revenue, while at the same time investing in a virtual event platform. Within five months, Cvent scaled its virtual events business to over $60 million in bookings. Vista sold Cvent to Blackstone for $4.6 billion in June of 2023 ⁴.

A Focus on Profitability  

In today’s higher interest rate environment, more limited partners are focused on investments that have a path to profitability and the capacity to generate free cash flow rather than pursuing growth alone. At Vista, we’ve assessed over 9,000 companies since our founding, including over 2,000 deals since March of 2020. Yet, we only invest in about 5 percent of the companies they view or consider ⁵. We aim to transform our investments into highly profitable, mission-critical assets with defensible top-line growth and market positions.  

In June, we announced the sale of Apptio to IBM for $4.6 billion after a four-year transformation. During Vista’s ownership, Apptio evolved into a comprehensive IT financial planning platform, growing its total addressable market and opening new go-to-market channels to double revenue and increase EBITDA margins by more than four times. During the partnership, Apptio expanded its customer base by more than 3.3x and currently serves more than 60 percent of the Fortune 100 ⁶.

Innovation  

In addition to macro headwinds, today’s software companies face technological disruption with the arrival of generative AI – a technology which could alter our society in a similar fashion as the internet. By encouraging thoughtful AI adoption within our portfolio, we believe we can build more resilient businesses and create new opportunities in product development, demand generation, customer retention, and more. Vista is actively supporting its companies across several key vectors with a lens toward AI: product innovation, product uplift, portfolio enablement, and risk and readiness. We leverage our value creation and product innovation systems to programmatically understand the evolving generative AI ecosystem, establish best practices for success, and ensure the entire portfolio will benefit from shared learnings. 

We encourage our companies to explore AI use cases through Vista’s annual Global Hackathon. This year, 250 participants across 35 companies competed with generative AI use cases spanning from personalized student instruction to automated software testing. We also welcomed STEM students from historically Black colleges and universities to participate in the competition and gain hands-on experience. 

A Focus on Diverse Perspectives and Talent 

Our culture is founded on an engineering mindset and a commitment to excellence. We prioritize diversity and a team dynamic where everyone has a seat at the table. This is why people choose to grow their careers at Vista with a 95 percent retention rate at the Vice President level ⁷. Diversity and inclusion help fiduciaries to maximize value creation and set up their business for long-term success. Diverse organizations even see a 12 percent increase in employee performance and retention on average compared to nondiverse organizations ⁸. Vista reached gender parity at the start of 2022, and currently over 40 percent of the firm are people of color ⁹. Our talent strategy encourages a highly cohesive, integrated team that has evolved as our firm has grown.  

Today’s economic and technological environments present challenging dynamics for many investors and software companies. But thanks to our focus on value creation, profitability, and innovation, we feel confident in our ability to continue to successfully execute our investment strategies with purpose.  

1. IDC, “IDC Forecasts Steady Growth for Enterprise Applications through 2026 in Support of Digital Business Objectives” 01/12/2023

2. Vista Equity Partners, as of 11/30/2023. Unrealized value is based on 9/30/2023 valuations or latest transaction.

3. Vista Equity Partners, as of 12/31/2023. Note: inclusive of signed deals. Transactions include platform investments, add-on acquisitions, and monetizations, and excludes public toe-hold positions. Add-on transaction count reflective of platform investments with above 40% Vista ownership and excludes add-ons for public portfolio companies where Vista has less than 50% board representation.

4. Case study provided for informational purposes to illustrate Vista’s value creation experience. It should not be assumed that investments made in the future will be comparable in quality or performance to the investments described herein. Please visit www.vistaequitypartners.com for a list of current and former portfolio companies.

5. Vista database, as of 12/31/2022, inclusive of signed and/or closed Platform and add-on investments since 2000. Past performance is not necessarily indicative of future results. There can be no assurance that historical trends will continue during the life of any Vista Equity Fund. There can be no assurance that any pending acquisition will be consummated at all or on the current terms of the agreement.

6. Case study provided for informational purposes to illustrate Vista’s value creation experience. It should not be assumed that investments made in the future will be comparable in quality or performance to the investments described herein. Please visit www.vistaequitypartners.com for a list of current and former portfolio companies.

7. Vista Equity Partners, represents average retention rate from 01/01/2016 – 10/24/2023 for PE investment professionals (VP and above). Excludes operating professionals.

8. Gartner, “Diversity and Inclusion Build High-Performance Teams,” 09/20/19.

9. Vista Equity Partners, as of 12/31/2023. Data reflects all lines of business in VEP and VCG and includes employees across operations and all investment strategies – private equity, credit, public and permanent capital. VEP senior staff reflects employees at the Exec Office, MD/SMD, SVP