Andrew Rea’s Post

Cool thing about life that they don't really tell you. You can just do stuff your way. Learning the playbooks, best practices, etc. all have merit. But eventually you figure out much of the biggest returns & most satisfaction comes from doing it the way you want to do it.

The software PE model of Vista, Thoma Bravo, etc. is fundamentally flawed. Buying legacy market leaders in B2B SaaS categories, raising prices, offshoring a % of R&D, buying adjacent products you can cross-sell, etc. etc. - doesn't work that well anymore. It might have worked from ~2000-2015. But it doesn't work in the modern era of software and AI. Markets are too competitive and technology is changing too quickly. --- Vista founder Robert Smith's thesis- "Software contracts are better than first-lien debt. A company will not pay the interest on its first lien until after they pay its software maintenance or subscription fee. We get paid our money first. Who has the better credit?" The problem with this premise is that software contracts have much shorter duration on average than debt. The typical loan duration in private credit is 5-7 years. The avg. enterprise software contract is 1-3 years. But in SMB and mid-market, it's rare to see contracts much longer than one year. Many companies with month-to-month contracts. Not to mention usage based pricing. Additionally, there's a lot more liquidity in B2B software than their used to be. Software is easier to build. Markets are more competitive. Customers have more choices. And LLMs make migrations easier than they used to be. The most under-discussed flaw in this thesis is that it treats the customer as a captive audience. Prisoners to your mission critical product that they can't live without. Software companies usually win by building a great product that solves a meaningful problem. It's trite to say, but this only happens if you're customer obsessed. Once you lose that, you become extremely vulnerable to up-starts that will obsess over the customer. No one that views their customers as debtors is going to be customer obsessed. This is less of an issue in commodity products / industries like CPG. Oreo's in 2024 are pretty damn similar to Oreos in 1987. But technology is constantly changing. State of the art software in 2010 is miles behind what people are doing in 2024. Distribution and brand moats can protect your legacy products for a while (esp in enterprise) but eventually you get lapped by competitors with better products, service, pricing, etc. Buying other products doesn't fix this either. The answer to customer problems is not to buy other products and jam them together with your existing solution just so you can call yourself a platform company (rather than point solution). Software is too competitive and changes too fast for this model to work in 2024. Anyone competing with incumbents recently purchased by private equity (like we are) knows exactly what I'm talking about.

A lot of these companies were just getting started a few years ago. Happy to see many friends companies here. Friends like Kirubha and Rollfi who were just getting started only a few years ago. Cool full circle moment to see what myself, Steven Schmatz, and team are building included on the list too. The On Deck community has and continues to be immensely supportive. One of the most give first, positive sum communities in tech. Very excited to see all the progress and direction under Julian Weisser. If you're considering starting a company, I highly recommend.

Spending the 4th of July with my gf & her parents. - 1st gen Chinese immigrants - Her dad grew up during the cultural revolution. Was the only 1 of 12 kids from his rice farm to go to college. - He and her mom came to America not long after Tiananmen Square. - Basically had to start over. - Built a middle class life and financial safety net for his children from nothing - Today, they are all citizens. Some of the kindest and most thoughtful people you'll ever meet. - Built a great foundation that my girlfriend and her brother are building on top of. My mom is also an immigrant (Ireland). Many of the founders and friends I have in tech are immigrants or 1st/2nd gen. People coming here and making there way from nothing, compounding generation after generation is about as American as it gets. Happy 4th. Happy America day. It's not perfect but I love this country. 🫡🇺🇸

The Twitter to LinkedIn pipeline at work 🫡