Orlando Bravo, the billionaire founder of Thoma Bravo, a private equity investment firm that specializes in software and technology-enabled services sectors, has said that there’s more pain to come for the technology industry.
The billionaire who reacted to the downward trend of tech stocks lately said investors asking for a path to profitability are not going to love what they see.
Notably, is the effect of the sell-off in tech stocks which is affected by tech giant companies around the globe.
What Orlando Bravo is saying
In his analysis, he noted that higher rates make growth-oriented companies’ future earnings less attractive. Hence, tech companies, especially those backed by venture capital, tend to prioritize growth over short-term profitability.
“I think there’s more pain to come,” Bravo told CNBC’s “Squawk Box Europe” on Thursday.
“When those companies really start getting down to answering the investor question, the path to profitability, they’re not going to love what they see. That requires a lot of cost reductions, it requires a lot of pain and it’s difficult to execute especially in a public setting,” said Bravo.
Why this matters
- In 2022, tech stocks have declined greatly as central banks move to tame increasing inflation compared to the previous years when tech led the stock market.
- Over the past few months, tech firms have seen their valuations slashed in both the public and private markets.
- Shares of Netflix and Zoom have plunged around 63% and 70%, respectively. Peloton, the fitness equipment company, has lost more than 90% of its value.
- The US fed on Wednesday hiked its benchmark interest rates by 0.75%, the largest increase it made since 1994.
What you should know
- Orlando Bravo is the first Puerto Rican-born billionaire who owns Thoma Bravo, a firm that focuses solely on software deals.
- In 2008, Thoma and Bravo split with healthcare-focused partner Brian Cressey and created Thoma Bravo, a software-dedicated buyout shop.
- Bravo filled planes with supplies after Hurricane Maria hit Puerto Rico and has committed $100 million to support the island’s entrepreneurs.
- According to Forbes, Bravo has a net worth of $6.3 billion.