Why Now is the Best Time to Buy Public Software Companies

Summary

• Lead Edge Capital operates as a disciplined investment "machine" designed for consistency, targeting 2-5x returns in 3-7 years via "singles and doubles," not grand slams.
• Core sourcing involves ~9,000 cold calls/year by junior staff, filtered through an "8 criteria" framework to yield ~5-7 deals annually, emphasizing $10M+ revenue, 25%+ growth, 70%+ gross margins, capital efficiency, and profitability.
• Unique LP base of ~800 world-class executives and entrepreneurs is leveraged for sourcing (via introductions), due diligence (back-channel references), and portfolio support (customer intros), driving high retention.
• Strong focus on selling discipline: constant underwriting of forward IRR, with ~1/3 of exits via secondaries; sold Toast positions at $40-50 in secondary markets before IPO (stock later fell to ~$30).
• Current market view: Best risk-adjusted returns are in public software companies, citing widespread pessimism and Warren Buffett's "be fearful when others are greedy" principle.
• Highly skeptical of current AI valuations, calling it a "capex bubble" that will end badly; believes AI models will commoditize, favoring incumbents (Google, Amazon, Microsoft) with data and cost advantages.
• Argues software's competitive advantage is distribution and sales, not R&D; incumbents often win unless over-leveraged (e.g., by private equity) or stagnant.
• Creative deal structuring is key: ~70% of deployments are in special situations, secondaries, or buying LP stakes (e.g., investment in Zoom via a fund interest).
• Culture is built on persistence, intellectual honesty, and playing to partners' strengths; includes an annual one-on-one process with every employee by the founder.
• Assesses portfolio companies on "AI readiness" based on data structure, product iteration pace, and revenue from new AI features.