← Good Bad Billionaire
Good Bad Billionaire
Orlando Bravo: Tech dealmaker
00:46:31
Orlando Bravo failed to become a tennis pro, but private equity made him a billionaire
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- [00:00]
Simon Jack
This BBC podcast is supported by ads outside the uk.
- [00:08]
Standard Bank Advertisement
This advertisement feature is paid and presented by Standard bank, corporate and investment banking Energy is at the heart of Africa's development With a burgeoning need to expand energy sources for a growing population, organisations must work together to increase access to affordable, reliable energy. At the inaugural African Markets Conference held in South Africa, business leaders, policymakers and government representatives came together to discuss what is needed to enable innovation and growth in the energy sector. To find out more about what is required for a just energy transition in Africa, visit standardbank.com CIB.
- [00:53]
Adam Grant
Hey, it's Adam Grant. The new season of my TED podcast, Work Life, is out now. The past few years have been full of changes to how we work. There's so much more we can rethink about our jobs. Join me as I dive into the science of making work not suck. This season we'll explore how to fix your meetings, bust bureaucracy, and make the most out of your breaks and vacations. Listen to Work Life with Adam Grant wherever you listen to podcasts.
- [01:19]
Sing Sing
Foreign it's the very start of the millennium. We're in San Francisco, the heart of the digital industry and things have not been going well. Stocks have been tumbling, the Y2K bug hasn't ended their world, but the future for tech investors is looking pretty uncertain. One of them is looking particularly desperate. He's a handsome man, tough looking, built like an athlete. He's got the poise of a sportsman too, which is useful right now as he runs around increasingly frant he's in a supermarket, looking up and down, left and right, haring down one aisle and then the next, desperate to find something. This is a man used to making deals worth millions of dollars. But the things he's looking for, they're virtually worthless. If he can find them, he'll buy five for a single dollar. But right now, they're the only thing he cares about. Nothing else matters to him right at this moment except finding a diaper for his newborn baby.
- [02:22]
Simon Jack
Welcome Bad Billionaire from the BBC World Service. Each episode we pick a billionaire and then we find out how they made their money.
- [02:29]
Sing Sing
And then we judge them. Are they good, bad, or just another billionaire?
- [02:33]
Simon Jack
I'm Simon Jack, I'm the BBC's business editor.
- [02:35]
Sing Sing
And I'm Sing Sing. I'm a journalist, author and podcaster.
- [02:38]
Simon Jack
Man we're talking about this episode is Orlando Bravo, magnificently titled man. He is the first ever Puerto Rico born billionaire. He has a net worth around $10.
- [02:47]
Sing Sing
Billion and his private equity company, Thoma Bravo is one of the largest in the world. It's managed well over $150 billion worth of assets.
- [02:57]
Simon Jack
And unusually for private equity, they focus on technology companies. And Orlando Bravo has overseen over 500 software and technology acquisitions.
- [03:06]
Sing Sing
And private equity is an industry which I have to admit, I don't know very much about. But Simon will no doubt explain to me in detail.
- [03:13]
Simon Jack
But first let's go back to the start and take Orlando Bravo from zero to his first million.
- [03:22]
Sing Sing
Now, Orlando Bravo was born in 1970 in Mayaguez, a port city on the west coast of Puerto Rico. So Puerto Rico then, as is now, is an unincorporated territory of the usa. So its citizens enjoy some, but not all of the rights of American citizens. They can live anywhere in the US but on the island itself, they don't vote in any presidential or national American.
- [03:44]
Simon Jack
Elections, but they do have duty free trade with the US and from the 1960s to the 1990s, Mayaguez, Bravo's hometown, was also home to the largest tuna canneries in the world. And that industry had made the Bravo family pretty rich.
- [04:00]
Sing Sing
Bravo's granddad had started a shipping agency called Bravo Shipping, which supplied services to the many boats moving the tuna in and out of the city. Now, that was later run by Bravo's father. And Bravo has called both men his role models, saying they both worked hard and loved doing it and that they had a strong sense of business ethics. Both his grandfather and his father mother were also called Orlando Bravo, by the way. So that's where he got that really rather glamorous name.
- [04:26]
Simon Jack
As a child, Orlando and his family lived in a gated community up in the hills. He and his brother attended private school. They enjoyed playing on the family motorboat. And then when he was eight years old, his mother took him to watch a tennis match featuring the then famous U. S. Tennis professional, Vitus Garrilitis. Well, Bravo was hooked. He started playing on court at a local university, at a local hotel, and his parents got him lessons with the best coach they could find. At weekends, they'd drive him to the nearest big city, to a and a half hours away so he could play in competitions. And he got pretty good.
- [04:55]
Sing Sing
So good, in fact, that when he was 15, he left Puerto Rico to train at a tennis academy in Florida run by a really famous coach called Nick Bollettieri. Now, this was a really elite tennis institution, so Bravo was hobnobbing with kids who would go on to become superstars. His roommate was actually the future world number one, Jim Cora, and he regularly played against a young Andre Agassi really.
- [05:19]
Simon Jack
Famous the Bollecheri Academy. Unsurprisingly, it comes with a very grueling workload. You wake at dawn, school in the morning, tennis from midday till sunset, bit more studying, then bed six days a week, all year round. Jim Courier called it the tennis version of Lord of the Flies.
- [05:35]
Sing Sing
I would not like to grow up as a teenager in there. I mean, Bravo says on his part, it was a different level of hard work altogether. But he says he also discovered he could cope with what he's called super high levels of pain.
- [05:48]
Simon Jack
And Bravo said he could manage the training, but he wasn't quite good enough to become an elite tennis player. Only a tiny, tiny number of people make it in that game. And while Bravo managed to rank in the top 40 of us junior players pretty good, he got no further than that.
- [06:03]
Sing Sing
He says that failure was actually humbling. Sport did, however, open an important door for him. So it got him a place at an Ivy League college called Brown University on their tennis team. He was the first member of his family to attend university outside Puerto Rico. But being a sports scholar, he worried he wouldn't be able to keep up with the academy academic work.
- [06:24]
Simon Jack
But his work ethic pulled him through with flying colors. He, in fact, graduated in the top 2% of his class. So his fears about his academic prowess were misplaced. He also became a member of one of the oldest US Fraternities called Phi Beta Kappa. So he's really fitting in. Phi Beta Kappa is something you're invited into. People like Michael Bloomberg, for example, the former New York mayor and owner of the financial information service. He was Phi Beta Kappa. And he's also lined up his next classic billionaire move, studying at, what is it, Stanford, of course, the elite university in Palo Alto, California.
- [07:02]
Sing Sing
So Orlando Bravo had actually planned to do a law doctorate. So he's not quite the classic billionaire Stanford MBA move. Instead, however, he deferred that course and he went to work on Wall Street. A friend had recommended him to an investment bank called Morgan Stanley. Very famous, very established, and he was employed in their mergers and acquis department. And while he was there, Bravo's Spanish language skills gave him an advantage over non Spanish speaking graduates. He was promoted from a desk job to getting out and working with some very rich clients. And actually, one deal saw him assist a Venezuelan billionaire acquire a Puerto Rican supermarket chain. So you can kind of see how Orlando Bravo's background would have been a little bit helpful there.
- [07:45]
Simon Jack
He's working in mergers and acquisitions, which is like buying and selling companies. Advised by banks. Super high pressure, super long hours, super high pay though. So he got some good experience, made some useful contacts. But ultimately he decided investment banking wasn't for him. Like I say, there was a culture of really tough all nighters. And perhaps after working so hard in his teens, he didn't want the rest of his life to be like that. It was also 1994. The US economy wasn't in great shape at that point, so it wasn't the best time to be on Wall Street. There weren't that many deals going on.
- [08:18]
Sing Sing
So instead he took up that deferred place to study law at Stanford. But it seems like Orlando couldn't quite resist the allure of hard work. He insist that they let him simultaneously study for his MBA alongside his law degree. And he says he repeatedly called Stanford until they agreed to let him take both courses at once.
- [08:36]
Simon Jack
I mean, it's a monumental amount of work that. I mean, the MBA course at Stanford is legendary for just, you know, you have to work all day every day, sometimes all night. So to do two at once is a monumental effort.
- [08:49]
Sing Sing
You have to wonder what his tutors were thinking like, mate, pick one, you're either doing law or you're doing business.
- [08:54]
Simon Jack
We mentioned it again, didn't we? Stanford. We should probably do a tally of how many of our billionaire startups at Stanford MBA. But unlike a lot of the Stanford MBAs that we've covered who go on to billionaires, he actually finished the course. He graduated with a law doctorate and an MBA. We're in 1997. And he had a plan of what he wanted to do next. He wanted to work in private equity.
- [09:14]
Sing Sing
So private equity was something Bravo had never even heard of when he'd gone to Morgan Stanley. He'd only kind of heard about it when he was working on the bid for that supermarket chain in Puerto Rico with that Venezuelan billionaire. Now, one of the other bidders had actually been a private equity company. And Bravo had noticed that their employees seemed a little bit more relaxed than he was. So he asked around to find out what private equity actually was. So now it's my turn to ask an expert. Simon, what is private equity and why do you think it appealed to someone like Orlando Bravo?
- [09:47]
Simon Jack
Okay, equity is the ownership of companies. There are two types of way you can own a company. You can lend it money and they pay you back over time. That's debt. And then there's, you put money into a company and they don't pay it back. And that is equity equity. And basically you own whatever's left after all the bills are paid. The people who own the equity own that stuff. Sometimes they'll pay it to you in dividends, sometimes they'll leave it in and they'll grow the company. So that's the equity bit. And there are two types of equity. There's public equity, that means shares that you can go along and buy on the stock exchange that you or I could go and buy, anyone could buy. That's public equity. And then there's private equity. These are pools of money which are contributed to by very rich, very sophisticated investors. And you really have to be at the top table of finance to have a stake in private equity. Like for example, if I'm a rich person, I'll give some of my money, let's say $10 million to a private equity company. They'll get 10 million from lots of others, they'll have a couple of billion and they'll go out and they'll buy companies and they'll turn them around or they'll break them up, or they'll grow them and then they'll sell them again and then they give the money and the profits back to all the people who put the private equity in. So it is an exclusive club, it's very big business. And it is an increasingly big part of the world financial markets. And these days, lots of companies, we used to be on public stock exchanges. Private equity will come and buy them off, take them off the stock market, change them around away from the prying eyes often of regulators.
- [11:17]
Sing Sing
Is that why it's often considered a slightly controversial part of the industry?
- [11:21]
Simon Jack
It used to be very controversial because particularly during the 80s, 1980s, there would be these corporate raiders who would come in, buy a company, strip it down to the bare bones, fire a bunch of people, split up the company, sell off bits and pieces for more than they actually bought it for in the first place. So got a kind of controversial reputation. It is much more mainstream and there's lots of ways of doing it. And Orlando Bravo has a slightly different way, as we will see.
- [11:48]
Sing Sing
So what was the appeal for Bravo in getting involved in private equity other than the fact people seemed a bit more relaxed in that industry?
- [11:54]
Simon Jack
Well, one thing is you tend to get paid more in private equity than you do elsewhere on Wall Street. And you don't do that many all nighters because you're kind of working for yourself. Whereas if you're working for Morgan Stanley or Goldman Sachs as a paid employee, you get very well paid, but you are providing a service. They call the shots. You're working for them, and you have to work very incredibly hard. Private equity firms are often smaller. They're much more in control of their own destiny.
- [12:23]
Sing Sing
Right.
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Simon Jack
And so are the people who work for them. But as a result of that, because they pay more, it's a bit more relaxed, you have more autonomy. It's very attractive. And they can afford to be much more selective in who they hire. So it makes sense that Bravo decided to go and get his Stanford degrees before trying to get a job in private equity.
- [12:42]
Sing Sing
Once he graduated, Bravo actually starts cold calling all these private equity firms, looking for jobs. He says it was really competitive, so he got some opportunities in Latin America, but he wasn't interested. He told them, no, the money is actually in the North. Eventually, though, he did get a meeting with a private equity pioneer who would change his life. So his name was Kao Thoma, a guy Orlando Bravo has called the OG of private equity. OG the original gangster.
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Simon Jack
Oh, really?
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Sing Sing
Yes, that is what OG stands for, basically means someone who was the godfather.
- [13:16]
Simon Jack
Okay. The original gangster of private equity. Gosh, I'd love to be called that of something. So Thoma was an Oklahoman, a generation older than Bravo. He'd been in private equity since the 1970s. He'd started out much like other private equity investors, by buying companies, streamlining their operations. That's a euphemism. So it means sacking a bunch of people and selling them on. But after founding his own firm in 1980, he developed a new way of doing things, of buy and build. He'd still buy businesses, work with the management there to improve operations, but then he'd acquire similar businesses and put them together, growing the original business before selling it on. This had been hugely successful for him. And by 1997, when Orlando Bravo met him, he was running a partnership called Cressy Thoma in Chicago. And this buy and build things. Interesting. So I own this little company over here. Wouldn't it be a good fit if I put it together with this company over here? They would be very complementary. They do similar and sympathetic but not.
- [14:16]
Sing Sing
Identical things, but not competing against each.
- [14:18]
Simon Jack
Other, but not competing against it. They enhance each other. And therefore, because I've already got this company, this company over here, if it's a good fit, this company's worth more to me than it might be to other people. So I get a better deal in a way, because it means more to me than it would to somebody else. So that's the buy and build strategy. There's also the buy and strip the asset Strip model, which private equity got famous for in the 1980s. He's not averse to a bit of buy and strip, as we'll see later on in this story.
- [14:44]
Sing Sing
But we're still at the point where Bravo is meeting Thoma for the very first time. So that meeting went well, but you know, it was only a meeting. Bravo came out desperate to work for Thoma, but he didn't have a job offer. So he basically worked his contacts. After six months, he got a mutual friend to invite the two guys to a dinner together. And Thoma was so impressed by Bravo's aggressive approach that this time he offered him a job.
- [15:08]
Simon Jack
Perhaps too aggressive. Because Bravo pushed his luck, he turned down Thomas first offer, instead asking rather than for a paid job, he wanted a share of the profits after a Stanford friend told him that's what he deserved. And it's a ballsy play. And actually for most private equity you do get a share of the profits at some point. But Thomas said no. Bravo spent a week worrying that he'd missed his opportunity, the door had closed, eventually went back, said, okay, I'll take the original offer. And Thomas accepted. So he's on board.
- [15:38]
Sing Sing
So Bravo started working in Kresi Thomas San Francisco office. And when he was there, he was just one of three employees, like you say, much smaller than the big firms like Morgan Stanley. So he was given a lot of autonomy in terms of what he was doing.
- [15:52]
Simon Jack
And just to set the scene, Francisco in the late 90s, everywhere Bravo looks, there's a new tech company. He can see that tech is clearly the big thing. So he focuses his search for startups in Silicon Valley and he buys pretty big. He invests $100 million of the partnership's money in a couple of startups, installs himself and his people at the top table of those companies. But unfortunately for him, he can't at that time do anything to boost those companies value. And that's because there's a big earthquake about to happen. Something we've spoken about many times on this podcast. Before the dot com bubble was about to burst, then the value of tech companies, the good ones as well as the bad ones, was about to drastically plummet.
- [16:32]
Sing Sing
And yep, sure enough, Bravo's two big investments come crashing down. They cost his company the majority of that hundred million dollars that he invested. So he was convinced Thoma was going to sack him. But Thomas has since joked that Bravo cost him so much money that he had to give him another chance. Just to get that return back is quite an interesting way of putting it, yeah. Bravo has said the experience taught him that he didn't want to invest in risky things ever again. And he says it was just too painful to live through. I'm sure a lot of people from the dot com bubble will say the same thing.
- [17:04]
Simon Jack
I know. Although, you know, it's funny, the ones that made it through became mega companies, you know, the Amazons of this world.
- [17:10]
Sing Sing
True.
- [17:11]
Simon Jack
And also a lot of people will say that the secret to success in Silicon Valley is failing a few times first, and you can't be put off by risk. But anyway, Bravo does change tack. He decides startups that too risky and it's actually not usually something that private equity get involved in. In startups, they tend to take on more developed companies. So he starts looking for established technology firms, but tries to find them in little niche parts of the market, places that other investors aren't looking. And he finds one in something called enterprise software. Now that is software for businesses, often big businesses, they do things like databases, distribution software, client management systems. You know, you go into a big corporation, you clack in, it'll have some kind of welcome to Lumen Corporation or whatever. And it'll have the database of all the people work there, all the contacts, it'll have the accounting software. Everything's connected together. That's called enterprise software. The kind of thing that Oracle or SAP do. But there are lots of other companies in that market. They were seen as kind of unattractive because they are basically seen as old news. They're likely to be put out of business by younger startups who come up with better ideas and they didn't make enormous profits.
- [18:23]
Sing Sing
But Bravo realized that this kind of enterprise software was actually much more important to the businesses that used it than home computing software was to their customers. So that software was basically essential to how these companies were run. You know, it's how they do their accounts, it's how they pay their staff, it's how they conduct their entire business. If you've ever used a really clunky old program on your work computer and thought to yourself, when did they buy this?
- [18:49]
Simon Jack
I know, we seem to have had this for decades. This year.
- [18:51]
Sing Sing
Exactly. Savvy Bravo realized that businesses would always need this software and changing supplier would be complicated. It'd be risky, potentially expensive, because it basically means you have to retrain all your staff.
- [19:04]
Simon Jack
It's a massive deal changing that kind of enterprise software. I mean, I think a lot of people listening will have been through painful upgrades to their own company's enterprise software. And it's Basically scuppered many mergers between companies. I've seen banks try to merge and call it off because actually integrating their two computer systems is just too difficult. So once you've got a client, a customer, if you're an enterprise company, they are very loyal because leaving you is painful.
- [19:32]
Sing Sing
I remember when one company I used to work for changed their enterprise software for a particular kind of service and the IT department had to go around with chocolate bars begging everyone to attend the training session because everyone was so against moving software. So that just goes to show how loyal people can be.
- [19:49]
Simon Jack
And those same IT departments get absolutely deluged when there's a change to those systems. Because every five seconds someone, if you work of building a company with thousands of employees, you change it and no one knows how to work the new thing. They get completely overwhelmed. So people tend to stick with the enterprise software they've got. That's a valuable thing.
- [20:06]
Sing Sing
Yeah, the companies are really stable. And what's more, after, you know, the dot com bubble had burst, Bravo realized investors were wary of even the best tech companies. So the sector was really undervalued. So he says it was the opportunity of a lifetime.
- [20:21]
Simon Jack
And there was another big change that Bravo makes in his strategy at this point. And it goes back to that moment we had at the start of the show, the diaper moment, when he's running up and down looking for diapers, nappies, if you're listening, in the uk. And it was the day his daughter was born. He and his wife thought they were ready, but it turns out they weren't ready. They'd simply forgotten to buy any diapers. So in that moment, getting diapers was the only thing in the world that he cared about.
- [20:45]
Sing Sing
Have you ever had this moment, Simon?
- [20:47]
Simon Jack
It's not so much a diaper moment, but I do know that when you've got kids, you can have a hundred problems in the world. If you've got a big problem with a kid, you've got one problem and that never goes away. Diapers or not even into their 20s, I hope they're not listening.
- [21:02]
Sing Sing
So Orlando Bravo actually talks about this moment being the moment that changed his whole business philosophy. Not sure if you ever had one of those.
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Simon Jack
I'm a little bit skeptical about this story, if I'm perfectly honest. Oh, the diaper moment it was. Changed my business philosophy. It's just like him trying to make himself sound a bit more homespun, isn't it? Like a family man. I don't by this, I don't know.
- [21:20]
Sing Sing
If I had A business philosophy, Eureka moment. I probably wouldn't attribute it to nappies, but you know, maybe that's just me. So Bravo claims however, that it focused him on only the most important thing. Much like you were just talking about the thing right in front of his face that needed him most, just like that newborn baby's diapers. So it made him realize, and I think you know, you are right in saying this is a little bit of a stretch. It made him realize that he didn't need to take total control of the companies he was investing in. He just needed to find companies with existing management teams that he could trust. And instead he'll just apply Thomas old buy and build strategy to new tech. He'll buy one tech company where he trusts the management, then he'll buy up similar companies, bring them under a single structure and supercharge growth that way.
- [22:05]
Simon Jack
And he proves this new strategy with a company called Profit 21. That's profit with a ph profhet. And this was a company that supplied software to medical and manufacturing companies. They had a very loyal customer base, but it was struggling to turn a profit. So when Bravo led the acquisition, the board assumed as usually like a new manager in a footballs team, he would bring in a whole new bunch of people. But he was happy with the team in place. He realized they just needed better advice, bit of operational support, clearer analysis of their own data, all the things that Bravo's company could provide them with. And he kept on. The company's chief exec worked alongside him to increase profits, mostly by acquiring their competitors.
- [22:46]
Sing Sing
So Bravo was really hands on with this as it was the most important thing, you know, the thing in front of his face where he knew, knew he could make the biggest difference. When they wanted to buy one small competitor, he flew to the owner in San Diego and spent five days with the owner hammering out every single detail of the deal in the owner's garage. Now, Prophet 21 CEO was impressed that Bravo could do high level strategy, but wasn't actually above getting involved with the grunt work. So for Bravo, it was all about what was most important at that moment.
- [23:16]
Simon Jack
Yeah, and that is quite common in really effective business people is that saying what is the problem we need to fix? You know, you could apply that kind of mantra to people like Steve Jobs. I was listening to Sir Johnny Ives on Desert Island Discs. If you haven't listened to that. Well, worth a listen. Johnny Ives, famous designer of the imac, the iPhone, pivotal person in the development of Apple into a 3 trillion dollar company. And he talked about when they were making the imac and the iPhone, they were literally sleeping in dormitories in the factory to make sure everything got done right. Focusing on the detail is how you get companies to that kind of scale.
- [23:53]
Sing Sing
And throwing yourself in with the ranks as well.
- [23:56]
Simon Jack
Now, Bravo did oversee an increase in pricing at profit 21, but it was only in line with inflation and it was enough to edge back to profit without frightening off those loyal customers. You can't abuse them. They are loyal, but you can't take the mickey. Their big gains came in acquisitions. They made six acquisitions, bought six other companies in just a few years. And that way you increase your customer base and if you make it more efficient, you increase your margins a lot. Lot. And this is the great thing about software, is that once you've got the software product, every additional customer is pure profit.
- [24:29]
Sing Sing
Right, because you're not making anything physical.
- [24:31]
Simon Jack
Yeah, because it's digital, so it's a very attractive business model.
- [24:34]
Sing Sing
Whereas if you're literally creating computers from scratch, you still have to pay for the resources to build those computers.
- [24:39]
Simon Jack
You've got the plastic, the people to put it together. Once it's on a server and people can download it, it's free. So all of this meant that after three years, Bravo was able to sell on profit 21 for almost five times what it was bought for a times five on investment in just three years. So that's a good investment.
- [24:56]
Sing Sing
So Bravo would almost certainly have been a millionaire before profit 21 was sold. But the profit he'd have got when it sold in 2005 would have confirmed that status.
- [25:06]
Simon Jack
And the success of that deal set him on his way to becoming a billionaire.
- [25:10]
Sing Sing
And that's because at the age of 35, he was named managing partner of the company and Thoma Cressy became Thoma Cressy Bravo.
- [25:18]
Simon Jack
Yeah, he got the big deal, so he gets elevated to the top level of the partnership. And just a few years on from, from that, Thomas and Bravo would set up a new venture, a private equity firm that would focus solely on software. So given that success, they wanted to make a feature of that and they called that business Thomas Bravo. And that's the company that would make Bravo a billionaire.
- [25:53]
Standard Bank Advertisement
This advertisement feature is paid and presented by Standard Bank Corporate and investment banking. Energy is at the heart of Africa's development. With a burgeoning need to expand energy sources for a growing population, organisations must work together to increase access to affordable, reliable energy. At the inaugural African Markets Conference held in South Africa, business leaders, policymakers and government representatives came together to discuss what is needed needed to enable innovation and growth in the energy sector. To find out more about what is required for a just energy transition in Africa, visit standardbank.com CIB.
- [26:37]
Adam Grant
Hey, it's Adam Grant. The new season of my TED podcast, Work Life is out now. The past few years have been full of changes to how we work. There's so much more we can rethink about our job jobs. Join me as I dive into the science of making work not suck. This season we'll explore how to fix your meetings, bust bureaucracy, and make the most out of your breaks and vacations. Listen to Work Life with Adam Grant wherever you listen to podcasts.
- [27:10]
Sing Sing
So let's Take Orlando Bravo to a Billion it's the end of the 2000s, a decade that has seen Orlando Bravo get richer and richer, and he's becoming one of the wealthiest people ever from Puerto Rico, outstripping his own very successful tuna shipping family, Thoma Bravo.
- [27:26]
Simon Jack
The firm has found investors for private equity funds that specialized only in software. And they succeeded by investing in companies big enough to have, as we've discussed, an established customer base, but still too small, too niche for the big giants like Microsoft or Apple to come and take an interest and gobble up.
- [27:43]
Sing Sing
And even the financial crash of 2008 didn't have a serious impact on Thoma Bravo.
- [27:48]
Simon Jack
In fact, their specialism in this field meant they were ready to pounce when other invest investors stepped away. This is what they call contrarian investors rushing in where other people are rushing out of. Probably the most famous example of that all is Warren Buffett. He made a killing picking up undervalued stocks after a big crash back in the 1980s. Warren Buffett always said the time to invest is the point of maximum pessimism and greatest fear. That's when you go and he's also.
- [28:13]
Sing Sing
One of our other billionaires we've covered. So if you want to hear more about that strategy, go listen to the episode. Yeah, so by the 2000 and tens, Bravo and his team understood the market so well, they were confident they could predict the next big thing. And the place they saw the biggest potential upside was something called Software as a service, or SaaS.
- [28:31]
Simon Jack
SaaS. Now this. You may never have heard of this, but you've definitely used it. If you've been anywhere near a computer in the past decade, it's the system by which software downloads and updates from the Internet. The old days of going in and buying a box with a few CDs in it and loading it onto your computer and whatever those are over, you now go to, let's say, the Microsoft website site. You download your version of the software that you want, you pay an upfront fee, and then you pay a licensing fee for that. So you get updates. You're basically now not a purchaser. You're a subscriber to a service. And what's great about that, it means regular income. Money keeps coming in, trickling in, flooding in in some cases.
- [29:11]
Sing Sing
I know it sounds quite outlandish to younger listeners, but there was a point. How long ago was this? Probably like 15, 20 years ago. You had to go into a shop to purchase the latest upgrade and you could get by easily if you never wanted to purchase another upgrade. But now you can't.
- [29:25]
Simon Jack
That's right. I mean, basically, once you went in, you bought your, you know, two or three little disks in a box. Your financial relationship with that company was over for the foreseeable future. Not anymore.
- [29:36]
Sing Sing
Now, SaaS wasn't actually a brand new thing in the 2010s, but this massive development in cloud storage meant that it was about to become pretty much the only way that software would be installed.
- [29:47]
Simon Jack
Yeah, Bravo knew this. He said years before it was common knowledge in the business community. We at Thoma Bravo saw the massive disruption that cloud infrastructure was going to have on software as a service and the tech sector as a whole. And in 2012, they found this company he knew would profit from this huge shift to cloud computing. And it was an Austrian firm called Dynatrace.
- [30:06]
Sing Sing
But before Thoma Bravo had a chance to buy them, Dynatrace were bought by a huge publicly traded tech company called compuware. Now, Bravo didn't rate Compuware, but he knew they wouldn't sell Dynatrace immediately. So he backed off and he bided his time.
- [30:21]
Simon Jack
And luckily for him, pretty soon CompuAir itself started struggling and was having to sell off parts of their business. And by 2014, Thoma Bravo were able to buy the whole of compuware outright for $2.4 billion. Even though Bravo only really wanted Dynatrace, they bought the whole thing.
- [30:39]
Sing Sing
So Thoma Bravo was saddled with a lot of things they didn't want. A declining mainframe business, an enormous building in Detroit, $200 million in annual expenses. But Bravo knew it was worth it for the thing that they did did want, which was Dynatrace. So he split Dynatrace back out from the rest of the company, and Bravo installed a seasoned CEO at CompuServe who was able to take it back into profit before they eventually sold it for $1.5 billion.
- [31:06]
Simon Jack
And that's quite a classic private equity move. You have to buy a bunch of businesses because they're all under the same roof, but there's only one that you really want. So Orlando Bravo focused on that one big thing, and that was building up Dynamics.
- [31:20]
Sing Sing
But in September 2017, one even bigger thing was about to distract Orlando Bravo. So as his plane landed back in San Francisco from a business trip in Japan, he learned that hurricane Maria had struck Puerto Rico. He desperately called his parents, who still lived on the island, to check if they were okay but couldn't get through. He eventually discovered they were fine, but by then, he, like everyone knew, the whole island had been devastated by this hurricane.
- [31:47]
Simon Jack
Yeah, Hurricane Maria was the largest hurricane to hit Puerto Rico in over a hundred years. It killed around 3,000 people there. Five days after it stuck, Bravo was back on his private jet. This time, he was headed to Puerto Rico loaded with supplies. Water, satellite phones, food. He'd even remembered to pack diapers.
- [32:04]
Sing Sing
On the island. He realized just how much more help was needed. So pretty soon, he was doing what he did best, Getting people to give him their money. But this time, it wasn't for investments. It was to raise money and for more supplies. Bravo said it was like cold calling for deals.
- [32:19]
Simon Jack
So two weeks after his first trip, he came back with a bigger chartered plane. His next TR was an even bigger plane. He then managed to fill two container ships to deliver £600,000 of supplies. And a few weeks after the hurricane, he formed a non profit Bravo family foundation to help with rebuilding in Puerto Rico after the hurricane, but also with education, healthcare, entrepreneurship schemes for young adults in Puerto Rico. I'm sure that will come up when we look at his giving back his philanthropy scores.
- [32:47]
Sing Sing
And if we want to keep track of the numbers, in the first months, Orlando Bravo had put in $10 million. In 2019, he donated another hundred million dollars to his foundation to support Puerto rican entrepreneurs.
- [32:59]
Simon Jack
And 2019 was an auspicious time for Bravo, and certainly a time when he could afford to make that donation. Because Thoma Bravo had begun 2019 by joining a select group of private equity giants to have closed buyout funds worth over $10 billion when they closed their 13th fund. And just to explain what that means is when you're trying to put together a fund, if you like, a war chest to go and buy companies, go and do something stuff, you go around, ask a bunch of people, saying, will you commit to when I've got these investments Ready to go, give me 10 million, give me 100 million, whatever. And there's only a select few who can raise a fund, a war chest of that kind of size of $10 billion.
- [33:38]
Sing Sing
So it speaks to your clout and power.
- [33:40]
Simon Jack
It peaks to your clout and power. It speaks to the esteem and the esteem with which others hold you in that they trust you with that kind of money. So he's at the top table.
- [33:49]
Sing Sing
So in August, Dynatrace, that company that Bravo had been so short, was first traded on the stock market. So a really big moment for them. The IPO valued the company at $4.5 billion. And Thoma Bravo had a 70% stake in it. So this was one of Thoma Bravo's biggest sales. And it led the financial magazine Forbes to estimate Thoma Bravo's worth at $7 billion.
- [34:11]
Simon Jack
And sure enough, they added Orlando Bravo's name to their list of billionaires, placing his net worth at 3 billion, making him the first ever Puerto Rican born billionaire billionaire.
- [34:20]
Sing Sing
So he's a billionaire. But two massive tech scandals are about to bring the whole way Orlando Bravo does business into question.
- [34:39]
Simon Jack
So remember, Orlando Bravo is on top of the world in 2019. Two years later, though, his reputation took a bit of a battering. First, a company called Solar Winds was hacked. This was a company providing cloud based corporate services widely used by US government agencies. Thoma Bravo taken SolarWinds private in 2016, and it was hacked in spring 2020. The hackers had inserted what is known as a backdoor into systems that could be activated when customers installed updates.
- [35:07]
Sing Sing
So that basically means that when a customer uploaded an update to their software, the hackers would have a way in to access and edit their systems. And it was estimated that some 18,000 customers of SolarWinds downloaded the hacked updates.
- [35:21]
Simon Jack
And in response to this hack, the U.S. cybersecurity Security and Infrastructure Security Agency, the CISA, issued an emergency directive ordering federal agencies to immediately disconnect or power down certain products from SolarWind. Thoma Bravo's involvement in SolarWinds meant the firm was facing reputational damage of its own and substantial financial loss. So for a company heavily invested in cybersecurity, this is more than an embarrassment.
- [35:46]
Sing Sing
And then when the Financial Times reported that Thoma Bravo and their partner had sold $286 million of SolarWinds stock just days before the company had disclosed the cyber attack. There was uproar, of course.
- [35:59]
Simon Jack
Selling a quarter of a billion dollars worth of SolarWinds stock days before the company disclosed the cyber attack had reduced Thoma Bravo's financial exposure to all this. But instead, when the hack became public, the buyer of that stock suffered a massive and immediate loss on their investment. And that buyer, by the way, was Canada's public Pension Plan Investment Board. You know, this is federal government agents, Canadian investment funds. These are high stakes play and very public ones, right?
- [36:28]
Sing Sing
In a joint statement, Thoma Bravo and their partner said they weren't aware of the potential cyber attack at SolarWinds prior to entering into a private placement to a single institutional investor on December 7th.
- [36:40]
Simon Jack
Well, I guess that was remarkably lucky then that the hack had been instigated in spring 2020 and wasn't discovered and made public until December 15, just a week after they'd sold those, those shares. Some felt the hack had brought into question this model of buying similar companies, merging them to grow. The American commentator Matt Stoller wrote that while Bravo's strategy was great for increasing accounting profits, a lot of IT professionals saw SolarWinds as a financial project based on cobbling together random products from endless set of acquisitions. In other words, you buy a bunch of things which aren't that compatible, and when you put them together, there are chinks in the armor of this software. So, Stoller argued the hack was inevitable given that business model.
- [37:22]
Sing Sing
In fact, a member of SolarWinds security team had resigned before the hack because he didn't think the company was willing to spend enough on security. And one incredible detail that did emerge from the hack was that one of the passwords the hackers cracked to break into their SolarWinds system was SolarWinds 123.
- [37:39]
Simon Jack
That's amazing. That's my. I'm just kidding, it's not my password. Now, all of this led to the SEC, which is the U.S. financial Police, basically bringing various fraud charges against SolarWinds. They deny the charges, but while a judge dismissed some of them in 20, others are still making their way as we speak through the courts.
- [37:56]
Sing Sing
And SolarWinds continued to deny the charges. And then Orlando Bravo got himself involved in an even bigger financial scandal. He took a call from one of his old professors from Brown, a guy called Joseph Bankman.
- [38:09]
Simon Jack
Does that name Bankman ring any bells? You may remember it from another episode of Good Bad Billionaire, one we did on his son, crypto king Sam Bankman. Fried, if you've heard that episode, you probably know where this is going. If you haven't definitely listened to it. One of the best with our special guest Michael Lewis on that one. Joseph Bankman was phoning Bravo to ask if he'd advise his son Sam on some philanthropic projects. And Bravo readily agreed.
- [38:34]
Sing Sing
Yeah, we talk about the billionaire cinematic universe, right? How all our billionaires kind of seem to run into each other all the time. So this is really a classic example of one of those times. So when Bravo spoke to Sam Bankman Fried, he learned about Bankman Fried's cryptocurrency trading firm, ftx. Now, Bravo was impressed. He oversaw an investment of more than $125 million in FTX from Thom Bravo. And he actually became a bit of a public cheerleader for crypto and was later quoted in an FTX press release saying it was the most cutting edge, sophisticated cryptocurrency exchange in the world. And in a news article, he described Sam Bankman Fried as combining being a visionary with being a phenomenal operator. I'm sure he lies awake fuming over those words.
- [39:20]
Simon Jack
Well, to be fair, Thoma Bravo and Orlando were not the only people to be entranced by Sam Bankman Fried. But if you want to know that whole, whole story, go and listen to the episode. Suffice it to say, in November 2022, FTX filed for bankruptcy and Thoma Bravo lost their entire investment. They were one of many companies named in a class action lawsuit that alleged investment firms made deceptive and misleading statements to promote the failed crypto exchange. The case cited a tweet from Bravo in which he urged his Twitter followers to only trade bitcoin with ftx. At the time of this recording, that is all still on ongoing.
- [39:56]
Sing Sing
But in 2024, Bravo did tell CNBC that Thoma Bravo would not invest in crypto again, saying, once you make a mistake and once you get burned on something, our philosophy, and my philosophy is you never touch it again.
- [40:09]
Simon Jack
Yeah, that little echoes there of his first faltering investments just before the dot com boom more than 20 years previously. So Orlando Bravo's reputation took a bit of a battering there, but his wealth has not. It's grown steadily since he became a billionaire. And he's now worth, what?
- [40:24]
Sing Sing
Nearly 10 billion dol I think it is time that we judge Orlando Bravo.
- [40:34]
Simon Jack
So this is where we judge our billionaires on various categories out of 10 before we decide whether he's good, bad, or just another billionaire. We always start with wealth. So what do we think of the.
- [40:45]
Sing Sing
Numbers worth about $10 billion. So I think that puts him in the top 300 richest people in the world. He owns a lot of, you know, the typical billionaire assets. Private jet, helicopter. He's got a $65 million Y named Catherine which is presumably named after his wife, who is called Catherine.
- [41:02]
Simon Jack
I just think it's so naff naming a boat after your wife.
- [41:05]
Sing Sing
What would you name your superyacht after?
- [41:07]
Simon Jack
Well, not that. I mean, I'm not gonna call my superyacht Susie, that's for sure. If you're listening, apologies. Apologies to my wife. But I think, you know, I just. I think it's embarrassing for everyone all round.
- [41:19]
Sing Sing
I think it shows a lack of imagination, maybe.
- [41:22]
Simon Jack
Yeah. Anyway. And he literally lives like a rock star in that he bought Phil Collins former beachfront home in Miami for $39 million in 2022. Apologies to Rock stars everywhere for calling Phil Collins a rock star. All right, so. So what are we going to score him for? Wealth. Because it's not just the numbers, but also how they spend it. So top 300, pretty respectable, pretty good. If he's in top 300 and he's spending money, it's a solid six for me.
- [41:48]
Sing Sing
Yeah, I would say it's a solid six out of 10 for me. Because we also judge our billionaires based on the journey they've made to that ultimate billionaire.
- [41:55]
Simon Jack
Oh, that's true. How far they come. Rags to riches.
- [41:58]
Sing Sing
He hasn't really come that far. His family were rich.
- [42:00]
Simon Jack
They were tun canning royalty. But he is the first Puerto Rican billionaire to have made this or any list. So. Okay, I'm gonna stick with six.
- [42:10]
Sing Sing
I think six is respectable.
- [42:12]
Simon Jack
Okay. Villainy. We've had that scandal about companies that he put together, turned out not to have great cyber security. And there were hacks involved. The US Federal agencies got involved. Canadian pension. I wonder whether that is out and out villainy or whether that.
- [42:28]
Sing Sing
That's just careless, careless, bad business sense.
- [42:32]
Simon Jack
There's also been criticism about the way Thoma Bravo sacks people are replaced then with employees in cheaper labor markets. These are the words of the Wall Street Journal. So, you know, quite a bit of noise around certain things. They have done over 500 acquisitions over time. Not all of them are going to go smoothly. And remember, he himself was of the view that he bought management teams that he trusted and let them get on with it to a certain extent. He didn't replace them all with his people. So I don't know, I wonder if.
- [43:03]
Sing Sing
The criticism of Thoma Bravo and Orlando Bravo is because of the wider criticism around private equity. So you mentioned, you know that political commentator Matt Stoller, who says that typically the only way that firms can cut costs is to squeeze the software companies. They buy hard and at the expense of employees and customers. They Used a full arsenal of weapons, including cost cuts, price price hikes, debt funded mergers and consolidations, and eventually outsourcing. But that just seems like par for course, right?
- [43:32]
Simon Jack
Those accusations could be laid at pretty much any private equity firm and have been over time. So that is the private equity model. You can have your problems with it. The case in defense of it is that it basically kills off bloated, inefficient companies and allows capital to go to more productive assets. And that is actually good for an economy. It's good for profit, profitability. The shareholders can take the money that they make and go and invest it in other things. That's just a better, healthier, Darwinistic ecology of capitalism.
- [44:07]
Sing Sing
Survival of the fittest.
- [44:08]
Simon Jack
These are old arguments, but they still rage.
- [44:11]
Sing Sing
I feel like with villainy, it would be unfair to judge him based on the fact that the industry he occupies just gets this criticism generally. Like in terms of unique acts of villainy, he doesn't seem to have done all that much.
- [44:24]
Simon Jack
No, I agree with you. It's hard to find his individual fingerprints in a particularly villainous way on charges which are leveled generally at private equity. So I don't think he's any better or any worse than the rest of the industry in which he operates.
- [44:39]
Sing Sing
3 out of 10 for me, I.
- [44:41]
Simon Jack
Feel like I think 3 is fair. I'll go with it. 3. 3. 3 out of 10.
- [44:45]
Sing Sing
I mean, giving back. This is actually an interesting section for me because I think, you know, we don't have a billionaire who saw his homeland in crisis and then just stepped in so quickly to plug the gap.
- [44:58]
Simon Jack
George Soros, possibly. Yeah. So you come from Puerto Rico. You come from a pretty wealthy family. You became the first Puerto Rican billionaire ever. Puerto Rico gets devastated. If he didn't give, I think there'd be some big question marks. But that doesn't mean we can't congratulate him and admire him for doing so.
- [45:17]
Sing Sing
That is true. He's also donated some amounts of money. He's donated 25 million to Brown University University. He's also made donations of unknown amounts for medical research at Stanford Healthcare, UCSF Health and the Mount Sinai Hospital. So, you know, he's also made donations to medical.
- [45:34]
Simon Jack
Those are pretty classic rich guy donations, aren't they? Yeah, you know, to your alma mater, to a bunch of hospitals. But 100 million for entrepreneurs in Puerto Rico, obviously trying to make a better path for people to follow in his footsteps.
- [45:49]
Sing Sing
I think a seven out of ten.
- [45:50]
Simon Jack
Yeah, not bad. Not bad. And also getting on the plane, bringing.
- [45:54]
Sing Sing
Them back Personally chartering emergency supplies.
- [45:56]
Simon Jack
Yeah. Okay. A 7 out of 10 for Orlando on that one. What about power and legacy?
- [46:04]
Sing Sing
So he gave $500,000 to a Republican mayor of Miami to his election campaign in 2023. So he's, you know, he makes some political moves.
- [46:15]
Simon Jack
And of course, there was the infamous moment when a speaker at a Donald Trump rally described Puerto Rico as a floating island of garbage in the midd the ocean in 2024. Many prominent Puerto Ricans were critical, but Orlando Bravo could not be reached for comment at that time. According to Forbes, they also highlighted that Bravo had not donated to Trump or Harris political campaigns. So he's nibbling at the edges of politics. He's not stuck in, is he?
- [46:40]
Sing Sing
No. He's definitely more of a stealth billionaire.
- [46:43]
Simon Jack
Yeah.
- [46:44]
Sing Sing
Like I would guess, unless you're in private equity, you probably haven't heard of him.
- [46:48]
Simon Jack
So it's not the kind of person he speaks. The Wall Street Journal literally sort of holds its breath. Can he make, or in a small way maybe, you know, at the margin of these small companies. So I would not put him in the top tier of financial titans, but he's up there. But I'm going to give him five.
- [47:08]
Sing Sing
I think I would go for less than that. I think I'd give him a 3 out of 10.
- [47:13]
Simon Jack
I mean, Thoma Bravo now is at the top table of private equity. Private equity is powerful, so I'm going to go middling. Five.
- [47:19]
Sing Sing
Okay, so we'll disagree by two points on that. So finally, the big question. Is Orlando Bravo good, bad, or just another billionaire?
- [47:28]
Simon Jack
This one's pretty easy for me. I think he is just another billionaire. I don't think he's any better or worse than the people who've worked in his fields. You'll have your own views about whether private equity is a force for good or evil in the world. He's made a bunch of money. There's been the whiff of scandal. Yeah, to me, he is just another billionaire. And the first Puerto Rican billionaire, but just another billionaire.
- [47:50]
Sing Sing
I think that's quite a persuasive case. I think he is just another billionaire. As much as a lot of people's instinctive response to the words private equity will be to immediately start taboo, to throw, to throw rotten fruit from the stands. But you're right, he is no better or worse than many people who work in private equity. So for that reason, Orlando Bravo, you are just another billionaire.
- [48:13]
Simon Jack
So who's next?
- [48:14]
Sing Sing
We have a pop star turned beauty mogul. And no, it's not Rihanna 32 years.
- [48:19]
Simon Jack
Old now, but already had a 25 year career.
- [48:22]
Sing Sing
What? Yeah, Selena Gomez. She's currently worth $1.3 billion. She's one of the few women in pop who have made that kind of money.
- [48:31]
Simon Jack
And it's not just her music, it's her beauty brand, Rare Beauty that made her one of America's youngest female self made billionaires. Are we allowed to mention Justin Bieber?
- [48:41]
Sing Sing
I think we're allowed to mention Justin Bieber.
- [48:42]
Simon Jack
There we go. Good Bad Billionaire is a BBC World Service podcast. It's produced by Mark Ward with additional production by Tamsin Curry. Paul Smith Smith is the editor and it's a BBC Studios audio production for.
- [48:54]
Sing Sing
The BBC World Service. The senior podcast producer is Cat Collins and the Commissioning Editor is John Minnell.
- [49:19]
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