🎥 Vista Equity Partners' Robert F. Smith - on who will benefit from AI

Welcome back to the Alt Goes Mainstream podcast.Today’s episode welcomes a pioneer and visionary in enterprise software investing to Alt Goes Mainstream.Robert F. Smith is the Founder, Chairman, and CEO of $100B AUM Vista Equity Partners. He sits on the firm’s Investment Committees for Vista’s Flagship, Foundation, Endeavor, and Perennial Funds and serves as a member of Vista’s Executive committee. Vista’s portfolio spans 90 enterprise software, data, and technology-enabled companies that employ over 100,000 people worldwide.He’s also heavily involved and committed to the firm’s wealth channel efforts, serving as the Chairman and Investment Committee member for VistaOne, the firm’s evergreen private equity vehicle. Since Vista’s founding, Robert has supervised on over 600 completed transactions that represent more than $330B in aggregate transaction value.Robert founded Vista after a career at Goldman Sachs in tech investment banking, where he was Co-Head of Enterprise Systems and Storage, executing and advising on over $50B in M&A activity with companies that were foundational players in the early days of the internet and technology, including Apple, Microsoft, Texas Instruments, eBay, and Yahoo.Robert has an innate understanding of technology and the trends that are shaping the way that companies and people interact with the world and conduct business. It’s no surprise that he was early in seeing the rise and impact of AI because he was early in seeing the dawn of the internet in the 1990s.Robert and I had a fascinating and thought-provoking conversation about the evolution of both enterprise software and Vista as a firm. We covered:* The early days of enterprise software and what Robert saw then that gave him conviction to focus on enterprise software as a banker and then as an investor building Vista.* The investment characteristics of enterprise software.* The power of product superiority in enterprise software.* Why “sovereignty and dominion of data” are so important — and why it matters for AI.* Can the “Rule of 40” become the “Rule of 50, 60, 70” with AI?* What aspect of AI is most impactful for companies.* How Vista approaches value creation.* What it took to scale Vista to a $100B investment platform.* Why the wealth channel is core to Vista’s business and the firm’s DNA.Thanks Robert for coming on the show to share your expertise, wisdom, and passion for enterprise software and building businesses.Thanks for reading Alt Goes Mainstream! Subscribe for free to receive new posts and support my work - writing and podcasting about the convergence of private markets and private wealth since December 2020.Clip #1: Vista - “it’s an elegant solution to a complex problem.”Clip #2: “If you don’t have sovereignty and dominion over workflows and datasets, you don’t have a right to exist as an enterprise software company.”Clip #3: “AI is going to feed software that’s going to eat services.”A word from AGM podcast sponsor, Ultimus Fund SolutionsThis episode of Alt Goes Mainstream is brought to you by Ultimus Fund Solutions, a leading full-service fund administrator for asset managers in private and public markets. As private markets continue to move into the mainstream, the industry requires infrastructure solutions that help funds and investors keep pace. In an increasingly sophisticated financial marketplace, investment managers must navigate a growing array of challenges: elaborate fund structures, specialized strategies, evolving compliance requirements, a growing need for sophisticated reporting, and intensifying demands for transparency.To assist with these challenging opportunities, more and more fund sponsors and asset managers are turning to Ultimus, a leading service provider that blends high tech and high touch in unique and customized fund administration and middle office solutions for a diverse and growing universe of over 450 clients and 1,800 funds, representing $500 billion assets under administration, all handled by a team of over 1,000 professionals. Ultimus offers a wide range of capabilities across registered funds, private funds and public plans, as well as outsourced middle office services. Delivering operational excellence, Ultimus helps firms manage the ever-changing regulatory environment while meeting the needs of their institutional and retail investors. Ultimus provides comprehensive operational support and fund governance services to help managers successfully launch retail alternative products.Visit www.ultimusfundsolutions.com to learn more about Ultimus’ technology enhanced services and solutions or contact Ultimus Executive Vice President of Business Development Gary Harris on email at [email protected] thank Ultimus for their support of alts going mainstream.Show Notes00:00 Introduction to Ultimus, Our Sponsor01:20 Welcome to the Alt Goes Mainstream Podcast02:05 Robert F. Smith’s Background and Career04:31 Engineering Background05:08 Early Career and Transition to Banking08:30 Insights from Goldman Sachs09:18 Enterprise Software Investment Strategy11:37 Product Superiority and Execution Excellence13:02 Vista’s Approach to Value Creation16:32 AI’s Impact on Enterprise Software17:49 Underwriting Criteria for Enterprise Software18:53 Challenges and Opportunities in Enterprise Software20:15 Future of Enterprise Software with AI23:32 Cultural Elements for Success24:49 Importance of Contracts in Enterprise Software28:44 Vista’s Best Practices29:23 Enterprise Software’s Risk-Return Profile29:56 Conclusion and Final Thoughts30:06 Introduction to Enterprise Software Investment31:05 The Stability of Enterprise Software31:53 Transitioning to Hosted Environments32:18 Economic Benefits of Hosted Solutions32:43 Stacking Economic Rent Curves32:58 The Rule of 40 in Software Investment33:59 Impact of Gen AI on Development Costs34:59 GenAI in Customer Support35:25 GenAI in Sales Processes36:02 From Rule of 40 to Rule of 7036:31 Agentic Tools and Exponential Opportunities38:07 Challenges in Enterprise AI Implementation38:54 AI in Personal Productivity vs. Enterprise40:56 Vista’s Internal Use of AI41:17 The Role of AI Agents at Vista44:12 Data Sovereignty in AI Models44:58 Skills Needed in the Age of AI47:08 Generative AI vs. Traditional AI48:02 Agentic AI in Enterprise Software49:42 The Future Impact of AI on Companies52:35 Vista’s Wealth Business and AI54:07 AI for Wealth Managers55:18 Conclusion and Final ThoughtsEditing and post-production work for this episode was provided by The Podcast Consultant. Join over 13,800 Substack subscribers & followers who are thought leaders and executives from top private markets firms and wealth management like Blackstone, Apollo, Ares, KKR, EQT, Carlyle, Blue Owl, CVC, TPG, Brookfield Oaktree, Vista, Goldman Sachs, J.P. Morgan, BlackRock, Fidelity, iCapital, Franklin Templeton, Nuveen, Hg, Permira, Stonepeak, Hightower, Focus Financial, Cerity Partners, and more. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit altgoesmainstream.substack.com