The Crypto Industry Isn’t As Ethical As Private Equity, Says Takeover Billionaire

Orlando Bravo, billionaire co-founder of Thoma Bravo and bitcoin enthusiast, said he was disappointed to find that ethical standards in some parts of the crypto industry are not as high as in private equity. .

Bravo, whose buyout group invested around $150 million in Sam Bankman-Fried’s FTX cryptocurrency exchange last year and has stakes in four other companies in the industry, said in an interview with the Financial Times that his company was suspending investments in other crypto companies.

The private equity executive said he was happy with the deals Thoma Bravo had made so far, but had run into problems in the wider industry.

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“I’ve gotten to know this world a little bit more, and some of the business practices aren’t up to the level of ethics that we’re all used to in private equity with your investors, your customers, and your community, and that has been a little disappointing,” he said.

Bravo, who said he personally owns bitcoin, criticized the crypto market for what he called a “worrying” lack of transparency. But he stressed that he was still optimistic about bitcoin and believed the industry was “just young” and the ethical issues would “be worked out over time.”

Miami-based Bravo’s profile has skyrocketed as his private equity firm has grown from a niche player to a $122 billion behemoth in recent years, pumping tens of billions of dollars in cash from investors in leveraged buyouts of enterprise software companies just as valuations rose. Its companies include UK-based Sophos and Stamps.com.

He has been a strong supporter of bitcoin, tweeting about his optimism and speaking at a bitcoin conference in Miami. In January, he wrote on Twitter that cryptocurrency “stands as the ultimate store of value.”

This year, the price of bitcoin fell by 50% and the crypto industry was rocked by a series of crises. TerraUSD, a token designed to track the dollar, crashed, crypto lending platform Celsius went bankrupt, and stablecoin provider Tether came under scrutiny over the nature of its reserves.

In addition to FTX, Thoma Bravo has taken minority stakes in crypto companies Anchorage Digital, FalconX, Figment and TRM Labs, using a growth fund he raised last year. The fund has $1.5 billion to deploy in total, according to figures from PitchBook.

When asked if he would do more crypto trades in the current climate, he said, “We are doing more of what has been very, very successful and if something is still not successful we are not rushing to do 10 other things. . . We are really happy with what we have and we want to see it grow and succeed before we can do much more.

However, he said, the company would “definitely consider” putting more money into FTX if it held another round of funding. The Bahamas-based crypto firm was going to be “a big winner,” he said, describing Bankman-Fried, 30, as “one of the best entrepreneurs” he had come across.

Bravo’s comments came as he and other dealmakers from around the world gathered for the IPEM private equity conference in Cannes and the economic conditions that propelled a decade-long boom in the industry faltered. reverse.

Thoma Bravo considered providing equity to Elon Musk’s bid to buy Twitter earlier this year, which would have been a departure from his model of buying enterprise software companies. “It looked like an enterprise software deal in terms of all the metrics,” Bravo said.

Twitter relies on advertising for a large portion of its revenue, unlike many enterprise software companies which have stable and more stable revenue from enterprise customers who pay to use their products. When asked if the two were really comparable, he replied: “You have a very, very good point. . . you have to be pretty creative if you want to do the newest things in software.

“Can you see other companies like [having] recurring revenue streams looking at them a little differently? Sometimes you can, sometimes you can’t. »

Bravo, whose company jumped into the booming market for special purpose acquisition companies, or Spacs, said the model should look more like private equity. The Spacs have been criticized for enriching the so-called “sponsors” who set up the cash shells, even if the target company loses value after its IPO.

Thoma Bravo’s Spac merged with Israeli software company IronSource last year. IronSource shares fell from a high above $13 to $3.56.

“The market was on fire and we fired,” he said. “There just needs to be better alignment, and if people could just copy the private equity model into a Spac, that would be much better. . . That the Spac sponsor only makes money if the stock goes up”.

He said investing in software was “the perfect place to face inflation, no doubt” because with a $100,000 software product, a company “could hire 50 people or do a lot more with it.” the job you have”.

Earlier at the conference, Mikkel Svenstrup, chief investment officer of Denmark’s largest pension fund ATP, compared private equity to a pyramid scheme, saying companies were selling too many companies either to other buyout groups. , or to their own funds. Bravo disagrees with the comments.

“We’ve sold so many private equity companies and they’ve done so well with them,” Bravo said. “They can have a thousand ideas that you don’t have in your five years of ownership and they crush them, and good for them.”

“People don’t say. . . that public procurement is a pyramid scheme,” he added. “Fidelity buys from Capital Group who buys from a hedge fund. . . you are simply looking to make the best trade.

Additional reporting by Scott Chipolina

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The Crypto Industry Isn’t As Ethical As Private Equity, Says Takeover Billionaire


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