Leaders cannot be sure they are assigning deal teams to the most favorable areas. These factors can hinder a private equity firm’s effectiveness on both strategic and tactical levels. ![]() Many technology providers market their solutions in vague, inconsistent terms and cover a crisscrossing range of use cases, leaving investors unsure how to categorize any given software firm. At times it can even be difficult to know what a software product does. Private equity firms need an understanding of underlying market growth factors and customer behavior that is anchored in empirical assessments. ![]() ![]() Investors may struggle to recognize external indicators of adoption and growth across a technology sector, such as patterns of customer purchases of a type of software or rising revenue among similar vendors. However, software is also an extremely heterogeneous part of the economy. A software provider with a compelling B2B product can quickly use investor capital to fuel growth and innovation to address this demand-and there is no better driver of returns for private equity investors than growth. Enterprise software is also highly scalable, making technology a fundamental, ever-evolving resource with high customer demand. Private equity’s commitment to technology is easy to explain: enterprise software is everywhere, holding up nearly every corner of a business, no matter the industry or region. To find lasting advantage in such an active and intricate space, private equity firms must have a way to identify potential target software companies with clarity and efficiency. Software is one of the most popular sectors for investors to pursue-and one of the most complicated.
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