Amid tech pain, Thoma Bravo nears close of debut growth fund

Non-control investments through minority stakes is a new strategy for Thoma Bravo, but the firm will continue to target its area of expertise, which is software and technology.

Even as the market turns on tech-focused growth deals struck at skyhigh valuations over the past year, growth shops flush with capital are eyeing potential valuation and prices that have been available for years.

In this environment, Thoma Bravo, in recent years a fundraising machine, is eyeing a final close on its debut growth pool on at least $2 billion, sources told Buyouts. The fund had raised about $1.5 billion as of December, according to a Form D fundraising document.

Thoma Bravo Growth Fund has been quietly marketing to a select group of limited partners. The fund started investing and is expected to have a final close later this year. Because of the pace of deployment, Thoma’s growth team could launch Fund II sometime in the first half of 2023, sources said.

The growth strategy is being run by partners Ross Devor, who re-joined Thoma Bravo this year, and Robert Sayle, who started at the firm in 2005 as an associate. Devor first joined Thoma Bravo in 2009, left and worked at Insight Partners from 2013 to this year, according to his LinkedIn profile.

Non-control investments through minority stakes is a new strategy for Thoma Bravo, but the firm will continue to target its area of expertise, which is software and technology. The firm “expects its knowledge and a proactive deal-sourcing program to lead to many of the growth funds’ investment opportunities,” according to the firm’s Form ADV.

The growth fund will target investments in later-stage software companies, the ADV said. The firm will make an initial investment and may follow up with additional capital in later financing rounds, the ADV said.

A meaningful portion of the growth fund portfolio companies could seek investments from public markets, the ADV said.

A spokesperson for Thoma Bravo declined to comment.

Earlier this year, managing partner Orlando Bravo told CNBC the tech environment had changed from a philosophy of growth at any cost. “What happened recently is that multiples of these growth stocks went from 20x to 10x. They got cut in half. Now why is that? Our theme and our thesis on it in talking to the big investors, sovereign wealth funds, big state pension plans, the original sources of capital, is that people are getting tired of being money-losing operations,” Bravo said.

“They’re finally digging into the business models, looking at when profitability is going to come and discounting assets that have high growth, but no near-term prospects for profitability. So that correction is here and it’s happened and it’s in effect today.”

Thoma Bravo is in the market with a series of funds, including its fifteenth flagship pool that has been targeting $22 billion. It’s also raising its fourth mid-market fund called Thoma Bravo Discover, targeting $5 billion, and its second Explore fund focused on lower mid-market investments, targeting up to $1.75 billion, Buyouts previously reported.