Silver Lake Vet Eyes Software Deals

Hollie Moore Haynes had built a PE career at Silver Lake Capital for 15 years but in 2014 decided to start her own firm. She’s using her experience gained in large-cap technology deals involving software to look for underappreciated established businesses outside of the normal hunting grounds.

When it came time to launch her own private equity firm, Hollie Moore Haynes was confident she could use the experience she had learned over 15 years at Silver Lake Partners to build a PE shop, and a brand, that spoke to what she wanted to do.

Silver Lake’s focus is on private equity buyout and recapitalization investments in technology businesses—it’s a leader in large-cap tech deals—and Haynes focused on software within that. Luminate is a continuation of her efforts at that firm, and her industry relationships and deal flow have followed.

“Most of what we’re doing is what I’ve been doing already—the deal flow sourcing and working with companies,” says Haynes. “It’s taken some effort to make sure people know that we’re doing it at Luminate, and we’re different from Silver Lake. It’s a process that takes time.”

The firm focuses on midsized companies in the software and software-enabled services areas that are located across the U.S. “We like this market because there are thousands of companies focused on enterprise software with less than $100M of revenue,” Haynes says. “Most are not in Silicon Valley. These companies are not on the screen of the venture firms in the Valley.” Luminate’s first portfolio company, Professional Datasolutions, Inc., is based in Texas.

Luminate focuses on making control investments in companies. The firm gets involved with a portfolio company, providing liquidity for founders or shareholders, and adding operating capabilities that are not already present. They bring their expertise and an active engagement from running other businesses.

The work can be about managing costs, she adds, “but also often around helping them grow the revenue, and position businesses well in the market.” The easy part of the private equity playbook is to cut costs, but the tough part of the playbook—which matters in software—is revenue and product.”

“The deep, dark secret in enterprise software is it takes a long time to build a product,” says Haynes. “We can get involved when early investors might get tired and they want some liquidity.”

The firm’s first portfolio company, PDI, is a provider of back-office retail software systems to the convenience stores and food service industries, used for things like tracking inventory. “It’s crucial software for the operations of these companies,” says Haynes. “It’s all attributes that a PE investor might like. We were fortunate to invest in a business with almost a 30-year legacy.” The PE firm partnered with the management team at PDI—which stayed intact—and bought out the parent company. The firm put in place a 100-day plan and is working with management on detailed ways to map out revenue goals and product strategy.

Luminate Capital operates a bit differently from Silver Lake and Bay Area or Silicon Valley venture capital or PE shops, Haynes says, starting with a nationwide eye view for investment opportunities. “It’s a frothy time in venture, and what we’re doing is anti-venture,” she says. “We buy established companies generally not in the Bay Area that have these incredible businesses and are underappreciated by so many investors in tech.”