We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

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When Services Revenue Helps a Software Company and When It Hurts Valuation

You’re deep in a sale process, sitting across from a buyer’s diligence team, and someone asks the question you’ve been quietly dreading. “Can you break out your recurring software revenue from everything else?”

You know the answer. It’s just not as clean as you’d like.

Implementation fees. Customization work. A managed services wrapper you built to keep a key customer three years ago. Support contracts that blur the line between software and labor. Together, they’ve funded growth, kept customers happy, and filled gaps your product couldn’t cover on its own. But now, in this room, they’re making the revenue story complicated.

This is the services revenue paradox. The same line items that built your customer relationships can quietly undermine your valuation story. For most lower-middle-market software companies, services revenue is a market reality. The question is whether yours is working for your valuation or against it.

Why Services Revenue Exists, and Why That’s Okay

Most software businesses below $20M in revenue aren’t running a clean, frictionless SaaS motion. They’re selling complex products to real organizations that need help getting them live, keeping them live, and extracting value from the investment.

“Pure-play SaaS metrics in a high-complexity vertical can be a warning sign, not a badge of honor.”

In construction tech, healthcare IT, and ERP-adjacent categories, professional services are structurally expected. Buyers in those verticals know this. A software business with zero services revenue in a complex vertical isn’t necessarily leaner; it might just have a churn problem nobody’s talking about.

Services revenue, at its best, is how you earn the software relationship. The question is what happens after you’ve earned it.

When Services Revenue Is an Asset

Done well, a services play creates exactly the conditions that software buyers pay premiums for: deeply embedded customers, high switching costs, and durable retention.

When implementation is thorough, customers are using the software with custom workflows and have integrated your product into how their business operates. That’s not a customer who churns when a competitor sends a cold email. That stickiness shows up in net revenue retention, and NRR above 110% tells a compelling story regardless of how the customer got there. If your services cohorts show NRR of 115%+ versus 95% for self-serve customers, that single data point reframes the conversation – services become proof of stickiness, not a valuation drag.

Services also accelerate the land-and-expand motion. A customer who goes live in 60 days instead of 180 proves ROI faster, expands to additional seats sooner, and generates referrals earlier. A $180K software deal with $40K of attached implementation services is still a $180K software deal, and one that’s far less likely to become a year-one churn event.

The clearest sign that services revenue is helping your story is when you can show a buyer that customers who go through your services retain at meaningfully higher rates than those who don’t. Buyers will price it accordingly.

When Services Revenue Becomes a Valuation Problem

Here’s where founders often get surprised, and the math is worth understanding before you’re in a process.

Software revenue in the lower middle market typically gets valued at 4–8x ARR, depending on growth rate, retention, and margin profile. Services revenue, even if it recurs contractually, is typically valued at 0.5–1x. That’s a structural discount.

Consider a $10M revenue business with $6M in software ARR and $4M in services. A buyer doesn’t apply a blended 5x multiple to get to $50M. They might value the software at 5x ($30M) and the services at 0.75x ($3M), arriving at a $33M enterprise value. That’s a big difference and one that can come as a surprise. At a 40% services mix, you’re getting a big mixed-model haircut.

Beyond the multiple compression, high services revenue raises a specific concern for sophisticated buyers: if customers consistently need heavy customization to use the product, why isn’t that functionality baked into the product? Persistent, high-attach services can signal that the software isn’t actually scalable.

Gross margin compounds the problem. Software businesses at this scale typically carry 70–80% gross margins. Services margins run 20–40%, depending on how efficiently the team is deployed. Blended margins drag, and buyers underwrite against margin. Lower margins mean lower multiples, independent of revenue quality.

The danger zone is often services revenue above 30–35% of total revenue, with a flat or growing mix over the past two years, and gross margins below 35% on the services side. That combination makes the valuation conversation more difficult.

How Buyers Actually Read Your Revenue Mix

When a PE firm or strategic buyer opens your financials, one of the first things they do is recast your revenue into buckets: recurring software, professional services, support contracts, managed services. Then they apply different underwriting assumptions to each.

The metrics that shift the narrative in your favor are specific:

• Net revenue retention above 110% suggests services are driving software expansion, not masking software weakness.

• Services gross margins above 40% indicate a scaled, efficient delivery model rather than a cost center.

• A declining services-as-a-percentage-of-total-revenue trend over 24 months signals your strategy and tells a buyer you understand the model and are actively managing toward a cleaner story.

What to Do Before You Go to Market

If a transaction is on your 12–24 month horizon, there are practical steps worth taking now.

Start by separating and clearly labeling every revenue stream in your financials. Buyers will do this anyway, but you want to control the framing, rather than have to react to someone else’s categorization. Build the retention data that links services engagement to software outcomes. If that data doesn’t exist yet, start capturing it.

Examine whether any recurring services revenue could be restructured as software revenue. For example, a managed services wrapper repriced as a platform fee under a restructured contract – same economics, cleaner label for a buyer. Explore whether implementation work could be partially productized, automated, or transitioned to a certified partner channel, which improves your margins without abandoning the customer success model.

Among all of the considerations mentioned, the single-highest-leverage action is building the retention data that links services engagement to software outcomes - because that’s the one number that can reframe the entire conversation.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base.

Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Parker Woods - Associate - parker.woods@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

Podcasts

Top Metrics for Professional Services in a B2B SaaS Company

SaaS Pricing Strategy: From $60K Project to $25.5M Exit

Articles

• SaaS Revenue Mix: How Subscription vs. Services Impacts Margin, Forecasting, and Valuation

• SaaS Valuation Multiples 2026: What Founders Must Know

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

Why Waiting for a Perfect Market to Exit Can Backfire

Every founder who has thought about a transaction in the last few years has probably had a version of the same internal conversation. The market is better than it was, but it’s not back to where it was. Maybe one more year. Maybe after the next Fed cycle. Maybe when multiples feel less complicated to explain to a board.

It’s a reasonable instinct, but it’s also one of the more expensive mistakes a founder can make.

Waiting for a perfect market may seem like a smart decision and a neutral one at that. It’s not. It’s an active bet on macro conditions you can’t control, made with a business that won’t stand still while you wait.

Waiting for Mental Benchmarks

Most founders who are waiting for better conditions are looking to hit a specific number, one they saw or heard about at the peak of the 2020–2021 market. A competitor sold for 12x ARR. Someone in a peer group mentioned a term sheet at 9x. That figure becomes the mental benchmark, and everything below it feels like leaving money on the table.

The problem is that benchmark was anomalous. It reflected a moment of near-zero interest rates, abundant growth capital, and a seller’s market that briefly untethered itself from the underwriting discipline typical of higher cost-of-capital environments. It is not the baseline to which markets reliably return.

Waiting for that number to come back is not being patient. For most founders, it’s loss aversion dressed up as strategy.

What Can Change While You Wait

Here is the assumption buried in the decision to wait: that the business will be in the same or better shape when the market window finally opens. That assumption deserves real scrutiny.

Growth trajectories compress. A software business growing at 25% today may be growing at 12% in 18 months — not because of any failure of execution, but because market maturation, a larger revenue base, and tougher year-over-year comparisons are doing what they always do. Buyers price current revenue and trajectory. A growth deceleration story is a harder transaction in any market.

Retention may soften. Customer cohorts that looked strong at 36 months can look different at 48 or 60. A key account loss, increased budget scrutiny, or a competitor offering a credible alternative can shift net revenue retention in ways that take years to rebuild. NRR that moves from 115% to 104% may not be a crisis, but it is a different business in the eyes of a buyer.

Competitive dynamics also shift faster than markets do. AI-enabled entrants, platform consolidation, and well-funded competitors moving into adjacent categories don’t wait for macro conditions to stabilize. The differentiation story that’s clean and defensible today can become complicated in 18 months, and a complicated competitive narrative compresses multiples, regardless of where interest rates are.

People change, too. A CTO departure, sales leadership transition, or founding team fatigue are normal for businesses in the five-to-ten year range. Buyer confidence is partly a function of team continuity, and that’s not a variable that improves with time.

And the founder’s own position is not static, either. What feels manageable at 45 may feel genuinely different at 50. Energy, personal circumstances, and appetite for another three-year push are real inputs into the decision, and they deserve honest accounting.

The Math on Waiting Rarely Works Out

Nobody times the M&A market precisely. Not sophisticated PE firms with dedicated deal teams, not investment bankers who live inside these cycles, and not founders running their first or second process. The idea that there’s an identifiable 90-day window of optimal conditions, and that you’ll recognize it when it arrives, is mostly an illusion.

Unless you get lucky, the math doesn’t work in your favor most of the time. If you wait 18 months and market conditions improve modestly, you might capture an additional 0.5x on your multiple. If the business softens during that same window — growth slows, retention dips, a competitor gains ground — you might lose 1.5–2x on a smaller, slower revenue base. The expected value of waiting is rarely as favorable as it feels in the moment. On a $10M ARR business, that’s the difference between a $5M upside and a $15M+ loss — before accounting for the time value of two years of your life.

Quality businesses transact in every market. PE firms with capital to deploy don’t wait for perfect conditions; they underwrite the business in front of them. A software company at $12M ARR, growing 20% with 115% NRR, transacts well in today’s market. The same business at $14M ARR, growing 10% with 104% NRR, may not transact as well in a “better” market two years from now because the asset has changed, even if the market improves.

The Right Questions to Be Asking

The framing of “when is the market good enough right now” is more useful than “when is the market perfect?”

Current lower-middle-market software multiples, while below 2021 peaks, remain historically reasonable for quality businesses. The spread between a good market and a great market is often narrower than founders assume. What isn’t narrow is the spread between a business in peak operating condition and one that has quietly softened while the founder waited.

Ask yourself these two questions honestly: Is the business in its best possible condition right now? Are current market conditions sufficient to support a good outcome? When both answers are yes, waiting for something better to come along is a bet with long odds.

A quiet market conversation costs very little. A missed window, because the business changed underneath you while you watched the Fed, costs a great deal more. Is that a risk you want to take?

The business you have today may be the strongest version of it you’ll ever get to sell.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base.

Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Parker Woods - Associate - parker.woods@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

What Private Equity Buyers Really Want From Sellers

The Exit Strategy Most Founders Miss

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

How to Cash Out Your Early Backers Without Selling the Whole Company

You’ve built something real. $12 million in ARR, a product customers actually renew, a team that executes. By any reasonable measure, you’re in the middle of the best chapter yet.

But your phone keeps buzzing.

An angel investor who wrote a check in 2019 wants to know “what the timeline looks like.” A minority fund is quietly asking if you’ve considered running a process. And somewhere in the back of your mind, you know this pressure isn’t going away.

This is cap table fatigue. And it’s one of the most common, least-discussed forms of gridlock in the sub-$20M software market.

The Hidden Drag Nobody Talks About

Cap table fatigue isn’t dramatic, and it doesn’t show up as a board revolt or a lawsuit. It shows up as misaligned incentives, distracted conversations, and the slow erosion of the founder’s ability to think long-term.

Early angel investors and small VC funds typically operate on 7–10 year funding cycles. If they wrote your seed check in 2018 or 2019, they are being fiduciarily responsible to their own LPs. Their need for liquidity is legitimate. The problem is that their timeline and yours have simply diverged.

For founders of $5–20M revenue software businesses, this creates a particular kind of trap. You’re too big to quietly ignore the pressure, and not yet at the scale where a clean strategic exit or IPO makes obvious sense. So, you wait, the tension builds, and eventually someone suggests running a sale process you didn’t actually want.

There Is a Third Path

The conventional wisdom is that early investors only get liquidity when you sell the company. That framing is wrong, and it costs founders real leverage.

A majority recapitalization is a structured transaction that solves the liquidity problem without requiring a founder to hand over the keys. It’s the third path that most founders in this position have never been shown.

How a Majority Recap Works

Here’s the mechanics of such a play. A PE firm acquires a majority stake in your business (typically 60–80%), while you retain a meaningful equity position (often 20–40%), and stay in the CEO seat running the company. The transaction has two components working simultaneously.

The secondary component buys out your early investors at a negotiated valuation. Your angels get their return. The minority fund gets its exit. The cap table gets cleaned up in a single, structured event.

The primary component injects fresh capital directly into the business that you can put to work. This becomes the war chest for your next growth phase: the enterprise sales team you haven’t been able to invest in[PW1] , the bolt-on acquisition that keeps coming up in strategy discussions, the product expansion you’ve been deferring.

Here’s a real-world example. Imagine a $15M ARR SaaS business recapping at a $45M enterprise value. Early angel investors, who came in at a $3M post-money valuation, see a 10x+ return and a clean exit. The founder takes $5M in secondary proceeds off the table. And $7M of new primary capital goes into the business to fund the next few years of growth. The founder still owns a meaningful portion of the company and is now positioned to scale toward an enterprise value exceeding $100M and another liquidity event on the horizon.

What You Walk Away With

Founders often underestimate what the transaction is worth beyond the dollar amounts.

You get liquidity, but without loss of the potential upside[PW2] .

You are still the operator, still setting the direction.

You get life-changing secondary proceeds, the kind of personal financial security that eliminates the anxiety that comes with having your entire [PW3] net worth locked in an illiquid asset.

You also get a reset cap table, one aligned institutional partner with a clear investment thesis, rather than a fragmented group of early backers with competing timelines and motivations. And you get fresh primary capital with a partner who can help you deploy it, not just watch from the sidelines.

Is This the Right Move for Your Business?

A majority recap works best when a few conditions are true: you’re generating $5–20M in revenue, you’re profitable or tracking toward profitability, your early investors are approaching the end of their patience or you are looking to take chips off the table, and you have a clear growth plan that requires capital to execute and not just runway to survive.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base.

Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Parker Woods - Associate - parker.woods@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

The Founder Liquidity Playbook for SaaS & AI

Recapitalization Secondary Financing Before Exit

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

Capital Optionality in Uncertain Markets: When to Raise, When to Wait, and When to Self-Fund

Capital remains available, and credit markets are functioning. However, underwriting is more disciplined, covenants are tighter, and performance expectations are clearer than in prior cycles.

The environment may not have closed, but it has certainly sharpened. That shift makes capital optionality a central strategic question for boards and founders. Capital optionality is not merely access to funding. It is the ability to evaluate, with discipline, whether raising capital advances durable outcomes or simply changes the company’s risk profile.

Having Options vs. Exercising Options

This distinction is the conceptual core of the decision. Having options means that capital providers are willing to transact. Exercising options means accepting the governance structure, ownership implications, and performance expectations embedded in that capital.

Confusing the two has real costs. Boards often equate market interest with validation, yet the existence of capital does not obligate its use. Exercising an option alters control, strategic pacing, and future flexibility in ways that compound over time.

A disciplined board evaluates whether capital accelerates a durable strategy or merely extends runway under tighter oversight.

Boards typically exercise capital optionality in three ways: majority investment, minority growth capital, or continued self-funded growth.

Path 1: Majority Private Equity Investment

A majority PE investment is a structural shift. It introduces formal governance, defined reporting rhythms, and a shared exit horizon. Capital is paired with institutional discipline.

This path is most appropriate when the growth opportunity is time-sensitive and capital-intensive. If market leadership requires rapid geographic expansion, significant M&A, or meaningful product investment, majority capital can compress timelines and professionalize execution. But it transfers operational control, it embeds a defined liquidity expectation, and it changes the strategic cadence from open-ended to milestone-driven.

This path works when founders are genuinely aligned with a shared exit timeline and governance structure, not merely willing to tolerate one. If the founder’s horizon or risk appetite diverges, friction will surface later.

Path 2: Minority Growth Capital

Minority capital appears less intrusive. It preserves day-to-day autonomy while injecting fuel for expansion. Governance rights may be lighter, and control is formally retained. Yet, minority capital defers the control conversation.

Performance expectations are embedded in the structure. If growth targets are not met, future financing rounds can shift leverage. Founders who take minority capital without acknowledging this dynamic often find themselves more constrained at the next inflection point than they anticipated.

Minority capital is effective when expansion requires funding, but the company retains strong internal control of its growth levers. It is less effective when capital is used to compensate for structural inefficiencies that will resurface under investor scrutiny.

In structures like this, even minority rounds embed return thresholds that can shift control dynamics over time if performance deviates from the plan.

Path 3: Self-Funded or Organic Growth

Self-funded growth maximizes control, limits dilution, and preserves cultural continuity. It removes external governance pressure and exit timelines. It makes sense when the growth plan does not require external capital to succeed and when the value of control preservation exceeds the incremental benefit of outside funding. Companies with strong sales efficiency, positive cash conversion, and manageable capital intensity often fit this profile.

The constraint is competitive response speed. In markets that reward rapid scale or aggressive consolidation, a self-funded company may move more slowly than a capitalized competitor. Boards must evaluate whether pacing risk outweighs dilution and governance tradeoffs.

The Core Variables Boards Must Weigh

There is no universal sequence for evaluating capital decisions. The relative weight of each factor depends on context. What matters is understanding how they interact.

Capital Intensity of the Growth Plan

If the strategy requires heavy upfront investment in product, infrastructure, or acquisition, external capital may compress execution risk. If growth is incremental and internally financed, outside capital may be unnecessary.

Sales Efficiency and Cash Conversion

Strong unit economics reduce reliance on external funding. Weak efficiency increases vulnerability to investor expectations. A company with rapid payback periods and predictable cash flow has more optionality than one reliant on sustained burn.

Competitive Pressure

Markets characterized by rapid consolidation or platform dominance often reward speed. In slower-moving or fragmented markets, disciplined organic growth may outperform capital-fueled expansion.

Risk Tolerance

Capital introduces governance oversight and performance milestones. Leadership must assess whether they prefer shared accountability with acceleration or independent pacing with concentrated risk.

Long-Term Ownership Goals

Exit horizons and legacy objectives matter. A founder seeking liquidity within a defined timeframe may rationally pursue majority capital. A founder prioritizing long-term stewardship may find the cost of external control too high.

A capital-intensive plan in a competitive market may justify dilution if sales efficiency is proven and leadership is aligned on exit timing. Conversely, a capital-light business with strong cash flow and long-term ownership goals may rationally avoid external funding even if investors are interested.

Capital optionality means evaluating these interactions deliberately rather than defaulting to whichever option is currently accessible.

Capital Optionality in Practice

Consider a software company generating $10 million in ARR, growing at 25% annually. The company raises $30 million from a growth investor at a $120 million pre-money valuation, implying a $150 million post-money valuation and a 12x revenue multiple. The investor acquires 20% ownership and underwrites to a 3x return over five years, implying a target exit valuation of approximately $450 million.

To support that outcome, the company must sustain or accelerate growth while expanding margins. If growth slows or efficiency declines, the required exit multiple increases or additional capital may be needed, introducing further dilution.

If the company raises a second round two years later at a lower multiple, early dilution compounds. A 20% initial stake can expand meaningfully depending on structure, liquidation preferences, and performance shortfalls. The decision to raise capital established a performance threshold, a return expectation, and a future ownership trajectory.

This is the practical expression of capital optionality. The question is not whether capital is available but what the company commits to deliver when it accepts it.

Conclusion: Choosing Capital With Discipline

Capital decisions shape governance, risk profile, and long-term outcomes in ways that compound over time. Raising capital is neither inherently aggressive nor conservative. Waiting or self-funding is not necessarily risk-averse. It may reflect the most disciplined assessment of growth requirements and control preservation.

The strongest companies treat capital as a strategic instrument, not a milestone. The discipline isn’t in keeping all paths open but in knowing which one to close. Boards that make that choice deliberately, against a clear set of criteria, will consistently outperform those that raise because the option was available.

For continued analysis on private capital dynamics, strategic positioning, and decision frameworks for operators and investors, subscribe to future updates from Bloom Equity Partners.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base.

Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes. Reach out to: Abe Borden, Principal – abe@bloomequitypartners.com​

What We’re Reading and Listening To…

Podcast: How to Scale Without Burning Cash with Manu Diwakar, Chief Financial Officer, Virta Health

Podcast: Strategic Planning for Fundraising Success

Article: 6 Key Lessons on Bootstrapping vs Fundraising for Founders

Article: Startup bootstrapping: Understanding the pros and cons

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

Selling to Private Equity vs. Staying Independent: A 5-Year Scenario Comparison for Founders

Despite slowing growth rates in some corners of the economy, interest in M&A activity in the tech sector remains exceptionally strong. Global deal value finished 2025 up 43% to $4.7 trillion — 20% above the ten-year average of $3.9 trillion — according to McKinsey’s 2026 M&A Report. Technology led the charge: PwC data shows global TMT deal values rose 49% in 2025, with technology alone accounting for 84% of deal volumes and 76% of deal values across the sector. Lazard’s 2025 M&A Review similarly pegged technology M&A growth at 65% year-over-year, far outpacing the broader market’s 40% gain.

Momentum has carried into 2026. EY’s April 2026 M&A Activity Report found that corporate deals above $100M rose 65% in value and 17% in volume in the February–April 2026 window versus the same period in 2025, with technology remaining the highest-value sector at $282.6 billion in deal value — up 27% year-over-year. For software founders, this sustained activity creates meaningful, time-sensitive opportunities.

As companies scale, however, founders often struggle with three capital paths:

• Remaining independent and growing organically

• Selling a minority stake to private equity or growth investors

• Selling a majority stake to a sponsor

Each option affects control, liquidity, risk, and long-term wealth in distinct ways over time.

The Three Structural Paths

In this analysis, we compare each option over a five-year horizon for a hypothetical software company at roughly $30 million ARR with solid recurring revenue and growth potential.

Remaining Independent

Founders keep 100% ownership and full decision rights.

• Growth comes from internal cash flow, modest debt, or non-dilutive sources.

• No new board seats or investor covenants are introduced.

• Strategic decisions on hiring, product development, and expansion stay fully founder-led and flexible.

Selling a Minority Stake

Founders sell 20–40% equity, often at a growth premium.

• Investors typically receive board observation rights or minority seats but limited operational veto power.

• Founders gain immediate partial liquidity while retaining majority control and most upside potential.

• Governance adds some enhanced reporting and milestone alignment without shifting day-to-day authority.

Selling a Majority Stake

Founders sell 51% or more, usually with 10–30% rollover equity to align incentives for a future exit.

• Sponsors gain majority board control and approval rights over budgets, key hires, acquisitions, and major strategy shifts.

• This path brings professional resources, capital for acceleration, and sponsor networks for add-on deals.

• Founders influence outcomes but lose unilateral authority.

Control and Governance Over Five Years

Independence preserves complete founder authority. Board composition remains founder-centric, and decisions reflect long-term vision rather than external targets.

A minority stake introduces lighter oversight: improved reporting and occasional strategic input. Founders retain primary control and can push back on suggestions if needed.

A majority sale changes dynamics significantly. Sponsors emphasize value creation through operational discipline, margin improvement, and inorganic growth — a dynamic currently amplified by PE’s capital deployment pressure and the prevalence of add-on acquisitions (which now represent 73% of all buyouts, per Cherry Bekaert’s 2026 PE Outlook). Board focus shifts toward KPIs, capital allocation, and exit planning. Founders influence outcomes but lose unilateral authority. Over five years, this often professionalizes processes but can limit cultural or intuitive pivots.

Liquidity Timing and Risk Distribution

Independent founders defer all liquidity until a future exit or dividend event. Risk remains fully concentrated on the founding team and management. Economic cycles or execution challenges directly impact personal wealth.

Minority deals deliver immediate cash for the sold portion while keeping substantial ownership. Risk is shared with investors, providing some downside protection alongside retained upside.

Majority sales offer the largest upfront liquidity. Rollover equity keeps founders participating in future gains, but the sponsor assumes primary risk through capital deployment and potential leverage. Management often receives refreshed incentives tied to sponsor goals. This de-risks a large part of founder wealth early while linking remaining exposure to the second exit and compound the value of the founder’s existing equity meaningfully.

The current environment tilts the calculus in a specific direction: with PE exit activity having surged in 2025 (Cherry Bekaert notes double-digit growth in exit volume), and the pipeline of sponsor-to-sponsor transactions expected to normalize further in 2026, rollover equity in a quality software asset has a reasonably clear path to a second liquidity event within the four-to-seven-year window and with a higher likelihood of producing an outsized outcome.

Strategic Pacing and Operational Expectations

Organic independence allows measured pacing aligned with cash availability. Hiring, acquisitions, and expansion proceed opportunistically without pressure for rapid scaling.

Minority investments support selective acceleration — targeted sales hires or product initiatives — while founders maintain the overall tempo. Reporting becomes more formal but remains manageable.

Majority PE ownership typically accelerates activity sharply. The current environment reinforces this: sponsors facing deployment pressure and expiring commitment periods are moving faster than in prior cycles. Operating reviews increase in frequency, and performance targets focus on recurring revenue, margins, and AI positioning — a factor that can now move valuation meaningfully, given the 30–50% premium buyers are paying for genuine AI capabilities. This can drive faster growth and professionalization but raises execution intensity.

Wealth Outcomes Across Scenarios

Assume the company could reach $75–100 million ARR in five years, depending on pacing, with valuations reflecting current private software multiples.

Independent ownership offers the highest potential terminal wealth if the company compounds successfully and exits at a strong multiple. At current pricing, a top-quartile $100M ARR business could command 7–9x ARR at exit — but growth may be slower without external capital, and all downside risk stays personal. Liquidity arrives only at exit, and the bifurcation in the current market means timing matters significantly.

With a minority sale, founders get partial liquidity at today’s growth-premium multiples while retaining majority ownership. The added capital enables competitive growth — particularly important as buyers increasingly reward AI positioning and net revenue retention above 110%.

Under a majority sale with rollover, most liquidity comes immediately upon closing, at valuations reflecting the current 4–6x ARR median for quality assets (with upside to 8x+ for best-in-class metrics). Rollover equity participates in any sponsor-led value creation. Second exits in years four through seven frequently deliver compounded returns on the rollover portion. Given PE’s record dry powder and active secondary market, this path today carries a more visible exit pathway than in the 2022–2023 cycle. Total wealth capture may be lower than a home-run independent scenario due to dilution — but it de-risks personal wealth at a moment when the window for premium valuations remains open and competitive.

Which Path Is Right for You?

Ultimately, selling to private equity is not a one-time transaction, and founders need to understand the impact across a multi-year strategic path. Founders should align their choice with personal goals around involvement, risk appetite, and timeline.

Subscribe to Bloom Equity Partners’ bi-weekly newsletter for more insights.

Market data sourced from McKinsey 2026 M&A Report (February 2026), PwC Global M&A Trends 2026 Outlook, EY M&A Activity Insights (April 2026), Bain 2026 M&A Report, KPMG Q4 2025 Pulse of Private Equity, Capstone Partners/IMAP 2025–2026 Global M&A Trends Survey, Gartner (February 2026), SaaS Capital, Aventis Advisors, and QuantPillar 2026 Private Market Multiples.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base.

Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

Podcast: Lessons Learned, Exits Reimagined: PE’s 2026 Playbook

Podcast: The Second Bite of the Apple: Why Your First Private Equity Deal Depends on Modeling the Second

Article: Liquidity As Legacy: Why Investors And Founders Should Plan For An Exit From The Start

Article: Private Equity’s New Exit Playbook

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

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The Quiet Repricing of Software Risk: What Boards Should Take Away From Today’s Valuation Gaps

A visible disconnect has emerged across software markets. Public multiples have corrected materially from prior-cycle highs, yet many private expectations remain anchored to benchmarks formed in a different cost-of-capital environment.

This gap is often framed as a temporary dislocation. In reality, public markets are functioning as fast-moving risk-pricing mechanisms. They are not simply compressing multiples; they are repricing assumptions about durability, efficiency, and capital intensity.

For private boards and sponsors, the more important question is not whether multiples will expand again. It is which risks, specifically, are being repriced.

Public Markets as Risk-Pricing Engines

Public software valuations adjust continuously based on macro conditions, capital availability, and operating performance. The correction in revenue multiples reflects more than sentiment. It reflects underwriting discipline recalibrated to higher discount rates, tighter capital, and greater scrutiny of execution risk.

Recent transaction data shows capital remains active but is being deployed more selectively, with growth and strategic investors driving the majority of deal volume and traditional buyout activity more constrained. This reinforces a broder shift toward disciplined underwriting.

Markets are distinguishing more aggressively between durable growth and growth dependent on continued access to external capital. They are rewarding predictability and penalizing volatility.

In effect, public markets are answering a question every private board should be asking: how durable is this revenue stream, and how efficiently is it being generated?

What Is Actually Being Repriced

The correction in multiples is not uniform. The market is repricing specific risk dimensions.

Revenue Durability

Recurring revenue alone is no longer treated as sufficient evidence of durability. Investors are scrutinizing net revenue retention, churn sensitivity, contract length, and customer dependency. Businesses with concentrated customer bases or exposure to cyclical end markets often experience sharper compression.

Durable revenue commands premium multiples. Fragile revenue tends to be discounted more heavily.

Sales Efficiency

The cost of growth is receiving greater scrutiny. Companies with elevated customer acquisition costs, elongated payback periods, or declining marginal efficiency are more likely to face valuation pressure. Growth supported by heavy marketing spend or aggressive discounting is often valued more conservatively.

In prior cycles, top-line expansion could offset inefficient sales engines. That tolerance has narrowed in many segments of the market.

Cash Burn and Capital Intensity

Free cash flow conversion and burn multiples are central to public scrutiny. Businesses requiring sustained external capital to fund operating losses are repriced as capital-intensive assets rather than scalable platforms.

Capital discipline has increasingly become a baseline underwriting consideration for many investors.

Customer Concentration

Single-customer or single-vertical exposure introduces fragility. When this concentration is visible, public markets tend to penalize it quickly. Concentration amplifies earnings volatility, which directly affects discount rates applied to forward cash flows.

Realistic Growth Trajectories

Forward guidance is evaluated more conservatively than in prior cycles. Aggressive growth forecasts unsupported by visible pipeline or product differentiation are more frequently discounted. The market has become more skeptical of long-duration growth narratives.

Where Private Expectations Lag

At the same time, private market data from PitchBook indicates valuations have adjusted more slowly, reinforcing a growing disconnect between public pricing and private expectations.

Boards often anchor to precedent transactions executed at peak multiples. Growth plans are built assuming exit valuations derived from prior-cycle benchmarks. Capital raises are sized to achieve scale based on outdated pricing assumptions.

This creates blind spots.

Companies may pursue expansion strategies that only create value at multiple levels unlikely to return in the near term. If growth requires sustained capital and assumes exit multiples north of historical medians, the plan embeds risk that may not be fully acknowledged.

Capital needs may also be underestimated. If follow-on financing occurs at lower valuations, dilution can increase materially. Boards that model funding under prior assumptions risk misalignment between runway, financing needs, and market conditions.

Exit timing expectations can drift. Sponsors planning liquidity based on peak comparables may encounter extended hold periods if buyer underwriting reflects current public benchmarks.

Public Comparables as Planning Inputs

Public multiples should not be treated as negotiation tools or dismissed as irrelevant to private markets. They are forward-looking indicators of how investors are currently pricing risk.

A disciplined board should treat them as calibration mechanisms. Ask direct, diagnostic questions:

• If your company were public today, how would the market price your risk profile?

• What multiple would investors assign to your net retention?

• To your sales efficiency?

• To your cash burn trajectory?

• To your customer concentration?

• To your forecast growth?

This exercise forces clarity. It exposes whether internal projections rely on valuation environments that no longer exist. It also sharpens strategic decision-making. If public markets reward capital efficiency, boards may prioritize margin expansion over aggressive geographic expansion. If durability commands premium valuation, investment in retention and customer diversification may outweigh incremental product adjacency.

Using public comparables as planning inputs shifts valuation from aspiration to discipline.

Strategic Implications for Boards and Sponsors

The objective is not to manage public markets quarter by quarter. It is to understand how risk is currently being priced.

Boards that ignore valuation signals risk misaligning strategy, capital structure, and timing. Growth strategies premised on outdated multiples can erode long-term equity value if capital becomes scarce or expensive. Conversely, companies that internalize risk repricing can position themselves as scarce assets when liquidity conditions improve.

Valuation gaps are not noise. They are signals about how markets assess durability and efficiency under present conditions.

Get more insight from Bloom Equity Partners by signing up for our bi-weekly newsletter.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base.

Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

Podcast: How to Bridge Valuation Gaps in M&A

Podcast: Rising AI worries drag on market momentum

Article: 5 M&A shifts that will define SaaS exits in 2026

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

Inside the Strategic Buyer’s Diligence Room: Why Most Deals Die Before Price Is Even Discussed

There is a persistent assumption in founder and sponsor circles that once a strategic buyer expresses interest, pricing leverage follows. The reasoning feels straightforward: strategics can justify synergies, they are not constrained by fund return math, and therefore can pay more.

In reality, most strategic transactions never reach serious valuation discussions. Many stall long before discounted cash flow models are built. The failure rarely stems from disagreement over price. It stems from internal approval friction.

Strategic deals are internal approval processes first and valuation exercises second.

What Happens Before Price Is Debated

When corporate development initiates dialogue, the external process appears familiar: NDAs, management presentations, and product walkthroughs. Internally, however, a more consequential review begins.

Roadmap Alignment

The first question is not “what multiple makes sense?” It is “does this accelerate our strategy?” If the target reinforces a clearly articulated product initiative, momentum builds. If it competes with an internal roadmap, threatens a product leader’s mandate, or distracts from a flagship launch, resistance emerges quickly.

A company that compresses time to market survives. A company that requires strategic reordering often stalls.

Budget Ownership

In large organizations, capital has an owner. If the acquisition requires business-unit P&L absorption, someone must accept near-term margin impact. Corporate development may advocate, but unless a division leader agrees to fund and operate the asset, enthusiasm dissipates.

Ambiguity around who owns ”the deal” is a structural deal killer. Without defined budget accountability, pricing is irrelevant.

Integration Risk

Strategics are acutely sensitive to execution risk. Does the architecture align with internal systems? Are customer contracts portable? Will integration distract key engineering teams? What happens if core technical talent departs?

Integration anxiety is evaluated long before valuation models are circulated. If perceived complexity exceeds available bandwidth, processes slow or quietly end.

Operational Bandwidth

Timing is decisive.

If leadership is mid-replatforming, digesting a prior acquisition, or managing turnover, incremental risk becomes unattractive. Strategic transactions require internal champions willing to invest political and operational capital. Without bandwidth, interest remains theoretical.

The Silent Killers

Beyond formal criteria, two categories of friction quietly shape outcomes: structural and behavioral.

Structural Friction

Technical incompatibility, unclear reporting lines, and cross-functional funding requirements create inertia. A vertical SaaS platform generating meaningful ARR may appear attractive. But if it runs on a legacy architecture incompatible with the acquirer’s tech stack, internal IT resistance can halt progress before valuation is discussed.

Similarly, if funding must be split across multiple business units, disagreements over cost absorption can stall approval indefinitely.

Behavioral Incentives

Incentives matter as much as economics. A division head may fear cannibalization. A CFO may prioritize margin stability over adjacency growth. A sales organization compensated on existing products may resist integrating a new offering that complicates quotas.

These reactions are rational within organizational incentive structures. But they often outweigh theoretical synergy.

This is why “strategic interest” does not equal pricing leverage. A corporate development conversation reflects curiosity. Pricing leverage emerges only when internal stakeholders feel risk is contained and alignment is secured.

When Leverage Actually Exists

Strategic buyers pay premiums when three conditions are met:

1. Senior leadership endorses a clear roadmap fit.

2. Budget ownership and financial impact are defined.

3. Integration complexity is credible and manageable.

Once those elements align, valuation discussions become substantive. Until then, multiples are hypothetical.

Private equity firms, by contrast, evaluate risk through underwriting frameworks and investment committee discipline. They are less encumbered by internal politics. Strategics must navigate both economics and organizational alignment.

Implications for Founders and Sponsors

The takeaway is not to avoid strategics. It is to position assets to survive internal scrutiny.

First, reduce integration friction. Clean technical documentation, standardized APIs, transferable customer contracts, and disciplined data governance materially reduce perceived risk. Companies that appear easy to integrate advance further.

Second, align with stated strategic priorities. Rather than presenting as a broad adjacency, demonstrate how the asset accelerates a publicly articulated initiative. The clearer the strategic narrative, the easier it is for internal champions to advocate.

Third, anticipate incentive misalignment. If the acquirer’s go-to-market model differs, provide a pragmatic cross-sell framework. Show how compensation or packaging adjustments could occur without margin shock. Lower the cognitive and political burden.

None of these steps changes revenue growth overnight. They materially improve survivability inside the diligence room.

For founders and private equity firms, the objective is to make it easy to approve deals. Companies built with that lens are the ones that move beyond curiosity and into real pricing leverage.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base.

Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Adam Kaseff – Senior Associate – adam.kaseff@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

Cultural Diligence in Mergers and Acquisitions Podcast: M&A Success Depends on More Than Finances

Podcast: How Are Dealmakers Really Feeling About 2026?

One of the Main Reasons Why M&A Fails: Poor Due Diligence

Analysis: Software Selloff Is Disrupting Some M&A and IPO Deals, US Bankers Say

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

Dissecting the Strategic Buyer Premium: How and Why Private Equity May Be the Better Option

Among founders, there is a widely held belief that selling to a strategic buyer almost always results in a higher valuation.

The logic is intuitive, as strategic acquirers can often justify paying more because they expect synergies that increase value. It’s easy to think this way when you see financial headlines with eye-popping multiples.

However, this assumption oversimplifies things, especially in how buyers evaluate risk, value, and timing.

You shouldn’t automatically think you can get a strategic premium or that they are evenly distributed across businesses or market cycles.

Understanding when they exist, why they appear, and when they disappear is far more useful than assuming one buyer type is your best option.

What a Strategic Buyer Premium Is (and Is Not)

A strategic buyer is typically an operating company acquiring another business to enhance its existing platform. The rationale is rooted in adjacency, integration, or competitive positioning rather than purely financial return.

The strategic premium is the incremental value a buyer can justify paying above a standalone valuation because of benefits unique to that buyer.

That premium often reflects buyer-specific economics, such as:

• Anticipated cost savings

• Internal synergies or consolidation

• Cross-selling opportunities

• Accelerated market entry

In some cases, defensive motives or timing pressures also play a role.

What these premiums really represent is an objective assessment of the seller’s intrinsic quality. The same company may command a premium from one buyer and not from another, depending entirely on the buyer’s situation.

So, it’s typically not you. It’s them.

Why Strategic Buyers Sometimes Pay More and Sometimes Don’t

Strategic buyers are most likely to pay premiums when the path to value creation is clear and immediate. This tends to occur when there is:

• Strong overlap with existing products or customers

• When synergies can be quantified and realized quickly

• Where scarcity or competition forces aggressive bidding

• When it’s cheaper to buy assets rather than build them yourself

Just as often, however, those conditions do not exist.

Integration risk is also a concern, particularly in software and tech businesses where culture and architecture are key. If buyers are uncertain about their ability to execute clearly and quickly, it can erode the theoretical value of synergies.

So, even when strategic logic exists, the risk may simply be too great to move forward.

Beyond execution risk, buyer culture plays a significant role. If a buyer doesn’t have a history of aggressive M&A or struggled to successfully integrate past acquisitions, they typically tend to behave conservatively in pricing.

Organizations without a proven acquisition playbook may discount uncertainty more heavily, regardless of how compelling the logic may appear on paper.

Balance sheet constraints further complicate this dynamic. A buyer may value an asset strategically but still be unable to pay a premium due to leverage limits, capital priorities, or board-imposed constraints.

In many cases, ongoing integration from prior acquisitions may also suppress appetite. When teams are already stretched thin, a company’s risk tolerance level may be lower than after integration.

Even when everything aligns, deals can still go south. Companies shift priorities, capital dries up, or market conditions change. As a result, strategic appetite is cyclical and highly context-dependent. The same buyer who pays a premium in one market may sit on the sidelines in another.

When planning for an exit, this volatility means risk, and it’s often underestimated in making pricing decisions.

Strategic Sale vs. PE Sale: Understanding the Tradeoffs

Comparing a strategic sale to a private equity transaction requires looking beyond valuation alone. There’s real value in the certainty of a close, simplifying process complexity, and the post-close dynamics that affect outcomes.

Strategic buyers often present binary outcomes. Interest can be intense when alignment exists, but absent that alignment, options may be limited.

At the same time, value realization is typically integration-driven, which introduces execution risk and often reduces seller involvement post-close.

On the other hand, PE buyers more typically underwrite businesses on a standalone basis. They focus on growth, resiliency, operational improvement, and scalability rather than synergies that depend on integration.

The result? You often get a more predictable process and clearer alignment on value creation.

It’s difficult sometimes when you see these high headline prices to realize that they don’t always add up to the best outcomes. In reality, though, timing, control, and risk-adjusted value are just as important as the multiple.

Preserving Strategic Options

For many founders, the goals are two-fold: rapid growth and positioning for an exit.

Yet, we often see founders build their business specifically to appeal to a strategic buyer, which can distort how decisions are made. If that buyer never comes calling, the company is exposed.

Private equity ownership avoids this trap by focusing first on fundamentals that make a business attractive to multiple buyer types. By strengthening core operations, building scalable processes, and maintaining clean reporting and governance, companies become more profitable now while remaining well-positioned for a range of exit outcomes.

This discipline emphasizes substance over cosmetics.

Rather than engineering features or narratives to fit a specific buyer, PE-backed companies are positioned to perform well independently. In doing so, you get more options.

If strategic interest emerges, the business is prepared. If not, other exit paths are still viable.

Build the Business First. Let the Exit Follow.

Strategic premiums are real, but they are neither guaranteed nor evenly distributed. They emerge only when a specific buyer can clearly and quickly capture value that others cannot, and those conditions are often outside a founder’s control.

Betting an entire exit strategy on that outcome introduces risk that is easy to underestimate.

Private equity offers a different lens. By underwriting businesses on their standalone merits, PE buyers reward durable growth, operational discipline, and scalability, qualities that appeal to a wide range of future buyers.

That approach doesn’t eliminate the possibility of a strategic exit; it preserves it without requiring founders to contort the business around a hypothetical acquirer.

In practice, the most successful exits are rarely the result of chasing premiums. They are created by building resilient, well-positioned businesses that perform regardless of who ultimately writes a check.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base.

Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Adam Kaseff – Senior Associate – adam.kaseff@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

Episode 385: 2026 Deal Outlook and Market Trends with Brian Meegan

Masters in Business by Bloomberg

At the Money: Investing in Freedom Podcast

M&A Outlook 2026: Expectations Are High—Again

Private Equity 2026 Outlook

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

Pricing Reset Playbook: Why So Many Founder-Led SaaS Businesses Undercharge

Pricing is often treated as a downstream decision in SaaS companies. Too often, it’s set-it-and-forget-it until external pressures force a change. In founder-led, product-centric businesses, this pattern is especially common.

Yet, pricing signals how a company understands its product, its customers, and its place in the market. When pricing fails to evolve alongside those elements, it can quietly limit growth.

Why Founder-Led SaaS Companies Rarely Revisit Pricing

Here’s a statistic that should grab your attention:

Nearly 40% of SaaS companies don’t revisit pricing at least annually. Yet, companies that optimize their pricing see 30% higher growth rates than those that do not.

So why are founders so concerned about even small price bumps?

Most founder-built SaaS companies establish pricing during the earliest phase of product development. Initial price points are often shaped by design partners, early adopters, and founder-led sales conversations.

The objective at that stage is speed: reduce friction, accelerate adoption, and validate product-market fit. Makes sense, but even after proof-of-concept, these early decisions tend to persist.

Founders often anchor to early customer wins that no longer represent the core buyer. There’s also a natural hesitation to revisit pricing out of concern that change will slow momentum or introduce friction.

So, pricing becomes fixed even as the product, customer mix, and use cases mature.

Underpricing Can Quietly Constrain Traction

Pricing that understates the value can drive away more sophisticated buyers. When there’s a lack of clarity about pricing and value, it can:

• Blur distinctions between customer segments

• Attract customers whose needs won’t scale with the product

• Forces sales teams to over-explain value instead of reinforcing it

It may simply attract the wrong kind of customers, those that can’t grow with you or be candidates for higher tiers.

Price is not just a transactional mechanism. It functions as a filter that shapes who engages with SaaS products and how they are evaluated.

When that filter is misaligned, you can miss higher-value segments and convince yourself you can’t charge more.

Pricing for Early Product-Market Fit Versus Pricing for Scale

Early-stage pricing is designed for accessibility. Simplicity matters more than precision, and speed of adoption outweighs segmentation.

As the business matures, however, the role of pricing shifts. Multiple buyer personas emerge, product depth increases, and customers derive value in different ways. At that point, pricing needs to reflect clearer segmentation, more distinct value drivers, and expansion paths that align with how the product is actually used.

A pricing model built for early product-market fit can prevent you from serving a broader and more profitable customer base.

Supporting Pricing Evolution Without Disrupting Founder Culture

Pricing resets are most effective when they are not framed as top-down mandates or short-term optimization efforts. In founder-led organizations, abrupt changes can undermine trust with both management teams and customers.

Private equity firms can support pricing clarity by:

• Bringing structure and data to customer segmentation and packaging

• Encouraging experimentation rather than wholesale change

• Positioning pricing as a growth-aligned operating lever

More collaborative pricing reinforces founder intuition rather than replacing it and helps translate product strength into scalable go-to-market execution.

When Pricing Increases Make Sense

Pricing changes tend to work best when they follow evidence of product and market maturity rather than financial pressure.

Signals often include:

• Strong inbound demand from more sophisticated buyers

• Consistent expansion behavior among existing customers

• Sales resistance driven by unclear packaging rather than product fit

Applying new pricing to new customers first and clearly tying changes to product evolution helps preserve trust while supporting growth.

It can be done. Many elite SaaS companies are moving away from annual reviews, favoring 90-day pricing sprints to make more frequent, low-risk adjustments.

Is anybody doing this successfully? Yes. In 2025, the top 500 SaaS and AI players made more than 1,800 pricing and packaging changes.

Reframing Pricing as a Growth Lever

In founder-led SaaS businesses, pricing is rarely just a number. Early on, it reflects speed, experimentation, and the push to reach product-market fit.

Over time, though, that same pricing can quietly fall out of step with who the product serves and the value it delivers.

Revisiting pricing on a regular basis creates clarity. It sharpens sales conversations, reinforces positioning, and helps attract customers who are aligned with the company’s next stage of growth.

Underpricing doesn’t just leave money on the table; it can blur segmentation and weaken how the product is perceived in the market.

As products mature and expand to support different buyers and use cases, pricing needs to mature with them. When resets are grounded in value and handled thoughtfully, they become a lever for growth rather than a disruptive event.

Done well, pricing discipline strengthens the business without undermining trust, culture, or long-term relationships and signals a company that’s building toward scale with intention.

In Case You Missed It: 2025 Year In Review

We recently published our 2025 Year in Review, reflecting on portfolio performance, operational milestones, and the themes that shaped our investment strategy over the past year.

From value creation initiatives to market positioning, the review outlines how we’re building durable, software-focused platforms in the lower middle market.

Read the full 2025 Year in Review here.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base.

Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Adam Kaseff – Senior Associate – adam.kaseff@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

Your Pricing is WRONG (even Sam Altman Made This Mistake)

The SaaS Pricing Strategy Mistake Costing You 6 Figures | Mike Moll

14 Pricing Mistakes to Avoid (& Tips to Fix Them)

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

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We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

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The Boring Business of Not Going Broke: Why Private Equity Loves GRC Platforms

When most people hear governance, risk, and compliance, their eyes glaze over faster than a compliance officer reading their tenth audit report of the day. Checklists, frameworks, regulatory acronyms—it’s the broccoli of B2B software and services.

But here’s the thing: private equity firms keep writing checks for GRC platforms like they’re going out of style.

Why? Because boring, in this case, is code for structurally resilient, strategically essential, and reliably profitable. And in the world of enterprise software, predictable returns beat flashy innovation almost every time.

The Regulatory Moat: Why GRC Spending Doesn’t Disappear

GRC platforms have something most technology vendors would kill for: customers who have to use them.

Not “should probably use them” or “it would be nice if they used them,” but have to—as in, regulatory agencies and auditors will come knocking if they don’t.

Organizations face compliance requirements from legislation, industry frameworks, and regulatory bodies that simply don’t care about quarterly earnings or economic downturns. When budgets tighten and IT departments start cutting discretionary spend, compliance work doesn’t get shelved. If anything, it intensifies as regulatory frameworks multiply and enforcement becomes more aggressive.

For investors, this translates into a beautiful thing: non-cyclical demand.

While your typical SaaS platform might see churn spike during economic headwinds, GRC platforms keep humming along. Compliance budgets are sticky because the alternative—regulatory penalties, operational shutdowns, or legal liability—makes cutting corners prohibitively expensive.

Embedded and Indispensable: The Stickiness Factor

Once a GRC platform embeds itself into an organization’s operational DNA, it becomes nearly impossible to extract.

These systems manage access controls, maintain audit trails, enforce policies, track risk registers, and provide continuous monitoring. Their outputs aren’t nice-to-have reports; they’re the evidence trail that keeps regulators satisfied and auditors at bay.

This embeddedness creates two investor-friendly dynamics:

High switching costs
Years of historical compliance data, carefully mapped processes, and audit evidence don’t migrate easily. Replacing a GRC platform isn’t just expensive—it’s operationally risky and introduces gaps that auditors will notice immediately.

Extended customer lifetime value
When your platform supports ongoing regulatory obligations rather than discretionary projects, renewal conversations become remarkably straightforward. Retention rates in GRC tend to be strong because customers aren’t weighing whether they want the platform—they’re acknowledging they need it.

The Fragmentation Opportunity: Building Platforms Through M&A

The GRC landscape isn’t monolithic—it’s splintered across domains and geographies.

Privacy regulations differ by jurisdiction. Third-party risk management follows different frameworks than cybersecurity governance. ESG reporting has its own requirements. Now, AI governance is emerging as yet another compliance domain.

This fragmentation creates a natural consolidation playbook.

Private equity firms can acquire point solutions that excel in specific niches, then stitch them together into comprehensive platforms that serve multiple compliance needs under one roof. Each acquisition becomes accretive—expanding total addressable market while deepening switching costs as customers rely on the platform for multiple regulatory obligations.

PE capital accelerates this strategy by funding both:

• Horizontal expansion (new compliance domains)

• Vertical depth (more robust capabilities within existing domains)

The result is a platform that becomes increasingly difficult to displace as it expands its footprint across the compliance stack.

AI in GRC: Value Without the Hype

Gartner projects global AI spending will reach $1.5 trillion by the end of 2025. Some of these bets will pay off spectacularly. Others will flame out just as spectacularly.

That’s the nature of speculative innovation.

GRC platforms, however, benefit from AI in ways that are incremental, pragmatic, and anchored in real operational needs:

• Automating grunt work
  Evidence collection, policy mapping, and control testing are labor-intensive tasks that AI can increasingly handle.

• Smarter risk assessment
  Machine learning improves risk scoring and prioritization, helping teams focus on the most material threats.

• Reducing manual overhead
  Continuous monitoring and routine compliance checks become less resource-intensive over time.

Here’s the twist: AI itself introduces new compliance requirements.

Because GRC outcomes must withstand audit scrutiny, AI’s black-box tendencies create challenges. Regulators and auditors demand explainability, traceability, and governance of AI models themselves. New frameworks are emerging to govern how AI is deployed—creating yet another compliance domain.

This creates a self-reinforcing cycle:

AI improves GRC efficiency → AI introduces new governance requirements → GRC platforms expand in scope.

It’s compliance all the way down—and investors love it.

What Makes “Boring” Beautiful

The qualities that make GRC platforms feel unglamorous are exactly what make them attractive investments:

• Non-cyclical demand
  Regulatory obligations persist regardless of economic conditions.

• Mission-critical workflows
  Deep integration into audit and compliance processes makes these platforms indispensable.

• Regulatory complexity drives growth
  Each new framework or oversight regime expands the addressable market.

• AI delivers real, incremental value
  Efficiency gains are measurable and defensible—not speculative.

• Durability over flash
  Predictable revenue beats headline-grabbing growth when building long-term value.

Our Take

For software executives and investors navigating today’s market, GRC represents a category where fundamentals matter more than hype cycles.

These platforms don’t promise to reinvent industries or create entirely new markets. They promise something arguably more valuable:

Durable revenue underpinned by regulatory obligation, operational necessity, and structural defensibility.

Regulatory regimes continue to expand. Cybersecurity threats intensify. New oversight domains—especially around AI—are emerging rapidly. Each trend reinforces demand for structured GRC capabilities.

In a market where many software categories face saturation, pricing pressure, and uncertain ROI, GRC platforms offer something refreshingly straightforward:

• Customers who need what you sell

• Budgets that persist through downturns

• Switching costs that protect market share once earned

Call it boring if you want.

We call it a business model that works.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Adam Kaseff – Senior Associate – adam.kaseff@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

Introducing the Top 10 Trends in Risk & Compliance for 2026

The Regulatory Climate Is Getting Hotter for Private Equity

Using Enterprise Governance to Infuse Innovation

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

AI in the Boardroom: What Executives Should Be Asking Before Investing in GenAI

In a rush to beat the competition, many organizations fail to define what they hope to achieve using generative AI (GenAI). A Gartner survey found that nearly half report difficulty identifying how to measure ROI. So for those exploring the technology, clarity must come first.

But where does value actually appear?

Cross‑industry research highlights three primary domains where GenAI can deliver measurable impact:

• Cycle-time compression: Time spent on document-heavy workflows can be significantly reduced with AI assistance.

• Quality and consistency: AI-enabled copilots help maintain brand voice alignment and knowledge across teams.

• Knowledge access: Find relevant case studies and precedents instantly, slashing research and decision timelines.

Companies combining AI adoption with process redesign achieve 30% higher ROI than those simply bolting AI onto existing workflows. Rather than replacing staff, true value comes from redirecting human capital toward strategic work.

Organizations treating GenAI as a measured investment report 55% ROI, compared to 5.9% for ad hoc approaches. Some reports have found top performers can achieve full implementation within a few months, although the average is 2-3 years.

Defining Goals: Where Will GenAI Deliver Value?

Understanding where value comes from is step one. Then, an organization can figure out how to make that value translate into profit. To achieve an optimal outcome, executives should aim to achieve clarity on a few key questions.

For example:

What specific business outcome are we targeting?

Common examples include:

• Reduce proposal turnaround from 10 days to five

• Compress research cycles from 40 hours to 15

• Cut contract review from eight hours to three

How does GenAI support our growth priorities and customer needs?

If clients expect faster turnarounds, GenAI becomes a customer experience lever. However, if you compete on deep analysis, forcing speed may erode data quality.

Is there an internal champion accountable for ROI?

Assign a business owner, not IT, to each initiative. This person owns before-and-after metrics, workflow redesign, and adoption timelines.

Data Governance and Responsible Risk Management

It’s critical to assess the feasibility and safety of AI models, and whether they can reliably support their domains. In doing so, managers should ask the following questions:

Do we have clean, accessible data that GenAI can work with today?

GenAI performs only as well as the data it works with. Bad data quality and governance have been attributed to a 30% failure rate in AI implementations yet remain commonly overlooked.

AI hallucinations spike when training data is incomplete or contradictory, and in regulated professional services, even small hallucinations trigger compliance violations.

If the answer is no, pause deployment. Successful teams start by consolidating high-value knowledge assets (proposals, contracts, case studies) into a single source of truth with version control and clear ownership.

GenAI amplifies whatever it touches; inconsistent data guarantees inconsistent output.

How do we protect sensitive client data and intellectual property?

GenAI systems must enforce granular access policies: a consultant building a proposal for Client A should never see confidential data from Client B. Weak governance creates IP leakage and regulatory exposure.

Protection requires enforcing access controls at the retrieval layer, not through policy alone. GenAI systems should inherit existing client-segmentation rules so outputs are scoped by role, engagement, and authorization.

If permissions can’t be enforced programmatically, the use case isn’t production-ready.

How do we monitor for accuracy and model drift (gradual degradation in output quality)?

Treat accuracy as an operating metric. Define acceptable error thresholds by use case (e.g., zero tolerance for regulatory contexts; 1–2% acceptable for draft text), implement citation checks and output logging, and require human review for regulated or client-facing deliverables.

Drift is inevitable; unmanaged drift is optional.

Takeaway: Governance works when questions trigger decisions. If data isn’t clean, don’t deploy. If access can’t be enforced, don’t scale. If accuracy can’t be monitored, keep humans in the loop.

Another question is: modular or monolithic architecture?

For mid-market firms, modular approaches are superior. Retrieval-augmented generation (RAG) systems that pull from your knowledge base are easier to iterate on than fine-tuned models.

Some opt for a hybrid approach to balance speed and control, i.e., buying platforms for standardized work, building custom AI for differentiated workflows.

Operational Readiness and Change Management

GenAI is ultimately a productivity tool, and gains require redesigned workflows, not just new software. Organizations treating GenAI deployment as a change management challenge outperform peers three-fold in adoption and ROI.

Companies moving early into GenAI are seeing on average about $3.70 in value per $1 invested, with “top performers” reporting up to $10.30 per $1 in certain functions.

But with many AI implementations still stuck in pilot mode, boards and CFOs are increasingly asking for GenAI impact in hard metrics (hours saved, cycle‑time reduction, cost avoidance, and revenue contribution).

Image source

It’s important to identify which workflows change from day one and who approves them to resolve friction points in advance. Crucially, define who approves outputs. In professional services, a senior consultant must review AI-drafted content before delivery.

To this end, appropriate training is critical. Monitor adoption through daily active users, session depth, and feature utilization.

If adoption lags, conduct focus groups to understand barriers. Implement review requirements for high-stakes deliverables, quality metrics tracking, escalation thresholds, and audit trails.

Critically, align KPIs to AI-augmented processes. If performance metrics still reward proposal volume, consultants won’t leverage AI for higher-quality, personalized proposals.

Redesign KPIs to reward outcomes: win rate, margin per engagement, cycle time reduction, and utilization of freed-up time on higher-value activities.

Takeaway: Productivity gains come from reshaping work and aligning incentives, not just automation. Ownership and change management determine wins, not model choice.

Build vs. Buy: What Are the Benefits?

The build-versus-buy decision is often framed as a technology choice. In practice, it’s a strategy question about differentiation, speed, and organizational readiness.

Which GenAI capabilities truly differentiate your business?

If a use case simply accelerates existing workflows, like email drafting, CRM assistance, and meeting summaries, it’s rarely worth building. Buy commercial platforms and deploy quickly.

Reserve custom development for workflows that create defensible advantage, enable new offerings, or materially change pricing power.

How much customization is needed and at what cost?

Consider, for example, commercial platforms like Microsoft Copilot and Salesforce Einstein. They deploy in 1-6 weeks with implementation costs of up to $150,000–$600,000 and recurring fees of up to $5,000–$20,000 monthly.

Alternatively, custom builds can take 3-12 months, costing $500,000+ upfront for enterprise-scale projects, and require in-house MLOps talent.

A hybrid approach (buying for standardized work, building for proprietary workflows) balances speed, cost, and control.

If meaningful value depends on proprietary data, unique decision logic, or domain-specific outputs, off-the-shelf tools will plateau quickly.

In those cases, a modular build, often starting with retrieval-augmented generation layered on internal data, allows teams to validate impact before committing to deeper investment.

What are the ongoing operating costs?

GenAI incurs substantial ongoing OpEx: compute ($5,000–$15,000 monthly), data maintenance ($50,000–$200,000 annually), governance ($100,000–$300,000 annually), and support (20–30% of initial deployment cost annually).

If the organization lacks MLOps capability or a clear business owner accountable for outcomes, buying is usually the lower-risk path.

What does the full three-year cost of ownership look like?

A $500,000 build often generates $1.1 million+ total cost of ownership over three years.

The decision should be made on total cost, not upfront spend. Platform fees may look expensive until governance, talent, and maintenance costs are modeled for custom builds.

Many teams land on a hybrid approach, buying for standardized work and building only where differentiation justifies the overhead.

Takeaway: Buy for speed and reliability. Build only where GenAI changes what you can offer or how you compete. Use modular architectures to keep options open as needs evolve.

The Real Determinant of GenAI ROI

GenAI doesn’t fall short because the technology isn’t ready. The best results come when the technology is treated as a business initiative built on solid data, clear governance, and disciplined execution.

Across industries, the pattern is the same: define the outcome first, prepare the data, assign a business owner accountable for ROI, and redesign workflows so time savings translate into real value.

GenAI enables progress, but leadership determines whether it scales or stalls. For boards and executives, the question isn’t whether GenAI can deliver returns. It’s whether the organization is ready to execute with focus and intent.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Adam Kaseff – Senior Associate – adam.kaseff@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

Podcast: Your Everyday AI Podcast, Ep 648: How 74% of Enterprises Get Real AI ROI While Pundits See Failure

Video: HatchWorks AI: The Business Case for GenAI in 2025 – ROI Insights from a CFO and CTO Perspective

BDO Advisory: GenAI and ROI: Building the Business Case

Amazon AWS: Governance by design: The essential guide for successful AI scaling

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

Preparing for a Take-Private: What Mid-Market CEOs Should Know

Take-privates are no longer reserved for large-cap companies. Mid-market SaaS and tech-enabled businesses—historically overlooked in favor of high-growth outliers—are increasingly drawing sponsor attention. Public markets have repriced faster and more visibly than private markets, creating openings that favor companies with predictable revenue, strong retention, and operational headroom.

Sponsors are rediscovering what many boards have been slow to internalize: cash flow, transparency, and the ability to execute operational improvements matter more than narrative. Companies that understand this shift early will shape the terms of engagement. Those that don’t will find themselves responding to a process already in motion.

Bain & Company’s latest analysis highlights this shift clearly: with valuations still elevated and competition for deals intensifying, investors are prioritizing businesses where operational improvements and margin expansion can drive meaningful value. This aligns with rising sponsor interest in mid-market public companies with clear paths to EBITDA uplift.

Why Take-Privates Are Accelerating

Recent data shows a meaningful resurgence in public-to-private activity. White & Case highlights that take-privates are one of the most active areas of PE deployment this year, supported by several reinforcing dynamics:

• Public SaaS valuations have corrected more sharply than private markets.

• Recurring revenue remains the cleanest underwriting signal for buyers.

• Public sellers aren’t anchored to outdated multiples—the market has already reset expectations.

• Operational improvement math works again, accelerated by modern tooling and AI-driven margin levers.

Sponsors see the opportunity clearly: stable revenue, high retention, and under-optimized cost structures supported by transparent disclosures. Investment Manager AllianceBernstein notes that recurring revenue businesses remain scarce at rational prices—and today, more of that inventory sits in the public markets than in private auctions.

What This Means for Operators

Mid-market CEOs often underestimate how early a take-private process truly begins. The first indicators rarely show up as a formal outreach—they surface in public-market dynamics:

• A valuation gap versus peers that persists even as fundamentals improve

• Declining liquidity and reduced analyst coverage

• A shareholder base becoming stagnant or overly concentrated

• Increased outreach from sponsors positioned as “research” or “market diligence”

• Governance friction or strategic drift that attracts activist attention

• Difficulty getting operational progress reflected in the stock price

These are not abstract signals—they are early markers that sponsors may already be evaluating your company as a candidate.

What Buyers Prioritize

Sponsors focus on predictable performance and clear value-creation levers, especially within the first 12–24 months of ownership:

• Retention quality: GRR/NRR drive underwriting confidence.

• Durable cash flow: Not adjusted EBITDA, but real, repeatable cash generation.

• Operational levers: Pricing, GTM efficiency, system modernization, and cost-to-serve improvement.

• Board alignment: Misalignment slows deals and weakens negotiating leverage.

Companies that treat readiness as an ongoing discipline—not a last-minute exercise—enter conversations with significantly more control.

Deal Landscape

Sponsors today are prioritizing “predictable + fixable,” not simply “cheap.”

Profiles That Attract Buyers

• Mid-cap SaaS with GRR > 90%, diversified customer bases, and clear cash flow visibility

• Tech-enabled services with contractual revenue and margin inefficiencies that AI can address

• Public issuers whose operational progress isn’t reflected in their valuation

• Under-covered companies with solid fundamentals but low visibility

Profiles Facing Headwinds

• Single-product businesses with renewal or concentration risk

• Management teams still anchored to 2021 multiples

• Companies with inconsistent financial discipline or disclosures

Expect increasing activity across U.S. mid-cap issuers on NASDAQ and the NYSE, with potentially faster execution on AIM and OTC exchanges due to lighter governance structures.

A Leading Indicator: Valuation Gap Persistence

Definition: How long a company’s forward-multiple discount to peers persists despite improving fundamentals.

Why it matters:
When a valuation gap becomes structural—not event-driven—the market is signaling that it does not expect to re-rate the business. Sponsors see this as an opportunity because the public market has already done the work of resetting expectations.

Benchmarks:

• 3–4 quarters → elevated sponsor interest

• 6+ quarters → you are a take-private candidate, whether intended or not

Operator perspective:
If retention and cash flow remain strong but your valuation gap widens, your next meaningful conversation may be with a private equity firm—not a sell-side analyst.

Closing Perspective

Take-private readiness is now a core responsibility for mid-market SaaS and tech-enabled leaders. Clean financials, disciplined forecasting, aligned boards, and clearly articulated operational levers give management teams agency and negotiating power. Companies that internalize this shift early will set the pace; those that wait may find themselves reacting to a process already under way.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Adam Kaseff – Senior Associate – adam.kaseff@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

Podcast: Bending the Revenue Curve w/ Permira’s Dipan Patel (Dry Powder: The Private Equity Podcast)

Podcast: Integration Starts with Hiring, Not the Deal with Brandon Batt (M&A Science)

Cursor at $30B, The End of IPOs, and Why the Best Companies Will Never Go Public

Human Capital Management 2025: Navigating Growth, AI & Regulation

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

5 Operational Metrics Every Software Executive Should Benchmark Before an Exit

In today’s software market, valuation is no longer defined by a headline number. It’s earned through the operational story behind the numbers. Private equity buyers have always valued fundamentals, but in this environment, they expect proof, not just of growth but of discipline. They want to see expansion that is efficient, retention that is defensible, and margins that are both credible and scalable.

No two SaaS companies are identical. Metrics have meaning only in context — by stage, vertical, pricing model, and strategy. A $15M ARR vertical SaaS platform with 120% NRR and measured spending discipline may command higher multiples than a $50M horizontal player growing quickly but inefficiently.

The following metrics represent how institutional investors assess execution quality and readiness for a liquidity event. They are not thresholds to meet but lenses through which operational maturity is evaluated.

1. Net Revenue Retention (NRR)

Definition: The recurring revenue retained and expanded from existing customers. It’s the clearest indicator of product-market fit, pricing power, and long-term durability.

Example: Datadog, a cloud-based monitoring, analytics, and security platform for IT, operations, and development teams, reported a net retention above 120% in Q2 2025, driven by a usage-based model and a broadening product portfolio. CEO Olivier Pomel shared that customers with $100K+ ARR rose 14% year-over-year and generated nearly 90% of total ARR — evidence of expansion and adoption across its platform.

Sustained NRR above 120% signals deep product value and efficient growth. Investors view this as a proxy for customer engagement and product velocity, the foundation of durable SaaS economics.

2. CAC Payback Period

Definition: The number of months required for gross margin from a new customer to cover acquisition costs, a direct measure of sales efficiency and scalability.

Example: DevSecOps platform GitLab reported a median CAC payback of roughly 10 months in FY2026, reflecting an efficient, product-led growth model. The company continues to scale capital-light expansion with rapid cash recovery, a dynamic that supports internal reinvestment.

“Only invest aggressively if you have a short CAC payback.” — Bessemer Venture Partners, a leading technology-focused venture capital firm known for publishing the Bessemer Cloud Index, a benchmark that tracks the performance and metrics of public cloud companies

A payback period under 15 months indicates a growth engine that can fund itself, a core attribute of operational resilience.

3. ARR Growth Efficiency

Definition: How effectively each dollar of operating spend converts into new recurring revenue, the measure of capital productivity.

Example: Digi International, a U.S.-based industrial IoT solutions provider specializing in connectivity and remote monitoring, raised its full-year guidance after acquiring Jolt Software, a digital operations platform serving restaurants and convenience stores, projecting 28% ARR growth and 8–9% adjusted EBITDA growth for FY2025. The company emphasized expanding high-value subscriptions and improving profitability while paying down $30 million in debt, a case study in disciplined scaling.

Accretive acquisitions and cross-sell synergies that expand ARR while improving margins exemplify efficient, durable growth that appeals to institutional investors.

4. Gross Margin and Net Dollar Retention

Definition: Gross margin reflects operating leverage, while net dollar retention connects profitability to customer durability. Together, they indicate the quality and scalability of earnings.

Example: Enverus, a global energy data and analytics company acquired by leading investment firm Blackstone in August, operates a subscription-based data platform with an estimated 90% recurring revenue mix and gross margins in the mid-to-high 70s (per Pitchbook and Moody’s). Serving 8,000 customers across 50 countries, the company demonstrates the high-margin durability and retention strength that drive premium valuations in data SaaS.

“PE buyers and the lenders that fuel them are focused on gross dollar retention because it gives them confidence in the stability of your revenue and the long-term profitability of your business.” — Bessemer Venture Partners

High recurring margins tied to sticky contracts remain a hallmark of scale-ready, PE-attractive businesses.

5. Rule of 40 and Burn Multiple

Definition: The Rule of 40 balances growth and profitability; burn multiple quantifies capital efficiency in generating ARR. Together, they summarize overall business health.

Example: Dayforce, a global human capital management software company formerly known as Ceridian, reported mid-teens recurring growth and 30%+ adjusted EBITDA margins, producing a Rule of 40 score near 45 — a level that supported PE firm Thoma Bravo’s 32% take-private premium. As global management consulting firm McKinsey notes, “Investors reward companies that are at or above the Rule of 40 with consistently higher revenue multiples.”

Institutional buyers favor balance over speed: growth that compounds efficiently rather than expansion that depends on constant capital inflows.

Strategic Implications

Each metric informs the next. Reducing CAC payback frees capital for product investment, which improves NRR. Automating workflows raises gross margin, enhancing Rule of 40 performance. Sustainable performance reflects a system — not a single ratio — of efficiency, reinvestment, and retention.

Operational readiness is the connective tissue between these metrics. In the 2025 market, investors are rewarding software businesses that can demonstrate how operational rigor translates into consistent, compounding returns.

Key Takeaways

• There is no universal benchmark. Context and trajectory matter more than static numbers.

• PE buyers seek evidence behind the metrics: how NRR improved, how CAC compressed, how margins scaled.

• Efficiency, not pure growth, defines the premium outcomes in 2025.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Adam Kaseff – Senior Associate – adam.kaseff@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

How to Maximize Your SaaS Exit Multiple in 2025

SaaS Company Valuations: What Buyers Look For – Acquire.com

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

The New Software Moats: Stickiness Beyond Product Features

In a world where artificial intelligence is rapidly closing the gap between competitors, software value no longer lies in what a product does but in how it fits, learns, and earns trust. The most durable SaaS companies of the next decade will win not because of the features they release but because of the workflows they own, the learning systems they build, and the trust they sustain.

AI has flattened the product landscape. APIs, open data standards, and cloud-native infrastructure have democratized access to innovation. In this environment, traditional software moats — switching costs, network effects, and data lock-in — remain relevant but are no longer sufficient.

The next generation of software defensibility will be defined by integration, intelligence, and integrity.

The Evolution of Traditional SaaS Moats

For years, the strongest SaaS businesses built value around a familiar playbook:

• Switching costs: Retraining teams, migrating data, and enduring downtime made it costly to leave.

• Network effects: Products became more useful as more users joined.

• Data lock-in: Proprietary data made switching both difficult and expensive.

• Ecosystems: Developer and partner networks created community-driven stickiness.

While these traditional moats still matter, the cloud environment is maturing. The interoperability of modern systems now allows customers to switch faster and integrate alternative tools more easily than ever before.

What was once a structural advantage has become a behavioral and relational one. Defensibility has shifted from ownership to participation.

How Modern Moats Are Built in the AI Era

1. Workflow Embedding: Integration Is the New Stickiness

When software becomes deeply integrated into a customer’s operations, it stops being a tool — it becomes infrastructure.

• Salesforce exemplifies this through AppExchange, where thousands of extensions and automations connect Salesforce to nearly every business function, from marketing to finance.

• Adobe Creative Cloud achieves a similar outcome by owning the standards of digital creation — file types, training resources, and cross-app workflows that collectively define the creative process.

• Square illustrates how integration compounds across dimensions — hardware, payments, and software. A merchant switching away from Square doesn’t just lose functionality; they break the rhythm of their business.

Workflow-embedded products build dependency-driven defensibility. Their stickiness grows with every new integration, not just every new feature.

2. Data and Learning Moats: Compounding Intelligence

The most powerful software today is self-improving. These products grow smarter, faster, and more efficient with use, creating learning loops that continuously compound advantage.

• GitHub Copilot is a standout example. Each developer interaction fine-tunes its AI model, improving performance for the entire user base. The more it’s used, the better it becomes, driving a flywheel of value creation and retention.

• Databricks demonstrates another form of this moat through data network effects. Every customer contributes to a growing library of connectors, data models, and best practices. As the ecosystem expands, so do the platform’s utility and defensibility.

In the AI era, data moats are no longer about ownership; they’re about learning velocity. The faster a product improves itself through user feedback, the harder it becomes to displace.

3. Trust and Governance: The New Brand Equity

As AI systems increasingly touch sensitive decisions — from hiring to credit scoring to creative production — trust has become a moat of its own.

• OpenAI’s enterprise appeal is anchored not just in its technology but also in its perceived safety, auditability, and brand reputation. Executives want systems they can explain, measure, and defend.

• Notion, similarly, has cultivated loyalty through transparency, security maturity, and community-driven innovation. Its product roadmap is public, and its users help shape it — a modern expression of trust at scale.

The next generation of brand equity is founded on governance, security, and transparency. In markets where AI-driven decisions must be explainable, trust serves as both a growth driver and a competitive barrier.

Quick Download

As AI reshapes software economics, the strongest companies will be those that own outcomes, not just interfaces. Investors are already rewarding platforms that integrate deeply, learn continuously, and lead transparently.

• Defensibility now lives in integration, data, and trust — not features.

• Workflow-embedded platforms create stronger long-term value than isolated tools.

• Learning loops generate compounding intelligence and investor confidence.

• Trust and governance are emerging as the new benchmarks of software brand equity.

For executives, building durable moats means prioritizing embedded workflows, continuous learning, and transparent operations over incremental feature expansion.

ICYMI: From our Portfolio

Soutron Global Announces CEO Transition and Continues Growth Through Strategic Acquisitions

Bloom Equity Partners is pleased to announce the appointment of Brad Frasher as Chief Executive Officer of our portfolio company, Soutron Global.

Brad brings extensive experience scaling SaaS businesses and executing strategic M&A. His proven track record in driving customer success and achieving significant ARR growth positions Soutron Global perfectly for its next chapter.

This leadership transition follows successful acquisitions and integrations of Auto-Graphics and MINISIS, strengthening Soutron’s position as a global leader in library, information, and archival management solutions.

We’re grateful to Tony Saadat for his exceptional leadership over the past decade. Tony will continue supporting the company in an advisory role.

Full announcement here.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Adam Kaseff – Senior Associate – adam.kaseff@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

Forget the data moat: The workflow is your fortress in vertical SaaS

Will Agentic AI Disrupt SaaS?

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

The AI Revolution Coming for Your Software: What Bain’s Latest Report Really Means

Remember when Netflix killed Blockbuster? We’re about to watch something similar happen to the software industry—but with a twist. This time, AI isn’t just replacing software outright. It’s forcing the entire industry to evolve, supercharging some applications while making others obsolete. AI agents aren’t just coming for every app on your desktop—they’re transforming what those apps can do and how we use them.

Bain just dropped their 2025 Technology Report, and the message is crystal clear: AI isn’t just enhancing software anymore. It’s replacing entire workflows. And if you’re a business owner, software buyer, or just someone curious about where tech is heading, this affects you more than you think.

The $800 Billion Question

Here’s the reality check: Software-as-a-Service (SaaS) is an $800+ billion industry built on one simple premise—humans need apps to get work done. But what happens when AI can do that work directly?

We’re already seeing the early signs:

• AI writes code in development tools like Cursor

• It handles customer service tickets in ServiceNow

• It prepares financial reports in Workday

• It creates marketing copy in Adobe’s suite

This isn’t experimental anymore. OpenAI’s latest reasoning model dropped 80% in cost in just two months while getting more accurate. In three years, Bain predicts any routine digital task could shift from “human using an app” to “AI agent using an API.”

That’s a fancy way of saying: the AI won’t need the pretty interface you click on. It’ll go straight to the source.

The Four Futures of Software

Bain breaks down what’s coming into four scenarios, and each one impacts businesses differently:

AI Enhances SaaS (The Sweet Spot)

These are workflows where humans still call the shots, but AI makes them superhuman. Think project cost accounting or clinical trial management—stuff that needs deep expertise and strict oversight.

What this means for you: If you’re using these tools, expect them to get dramatically more powerful. If you’re buying them, expect to pay premium prices for the AI boost.

Spending Compresses (The Danger Zone)

This is where third-party AI tools can sneak in and do parts of your workflow cheaper. Like when a smart AI agent can build your marketing lists instead of you paying HubSpot’s full price.

What this means: Your software costs might drop, but you’ll also have less control. Companies in this space are fighting for their lives.

AI Outshines SaaS (The Gold Mine)

Here, AI can automate entire processes that software companies currently charge per user for. Code generation tools like Cursor are already doing this—why pay for 10 developer seats when AI can write the code?

What this means: Massive productivity gains, but also a complete rethink of how you budget for software. You’ll pay for results, not access.

AI Cannibalizes SaaS (The Bloodbath)

The full replacement scenario. Customer service, invoice processing, time tracking—all the routine stuff that currently requires software subscriptions could be handled by AI agents.

What this means: Either your current tools evolve fast or get replaced entirely. The winners will be whoever builds the best AI orchestration.

The New Tech Stack That’s Forming

Here’s where it gets interesting. Bain sees a three-layer stack emerging:

1. Systems of Record (The Foundation): Your core business data—the stuff that’s hard to replicate

2. Agent Operating Systems (The Brain): AI orchestration platforms that plan and execute tasks

3. Outcome Interfaces (The Communication Layer): Where you tell the AI what you want in plain English

The battle isn’t just for any one layer—it’s for control of how they all talk to each other.

Why This Isn’t Just About Tech Companies

If you’re thinking “this is just tech industry drama,” think again. Here’s how this affects real businesses:

For Business Owners:

• Your software costs could plummet or skyrocket, depending on which scenario your tools fall into

• You might need fewer employees for routine tasks, but more for AI management

• The competitive advantage will shift to whoever adopts AI workflows first

For Employees:

• Routine digital work is going away faster than anyone expected

• The premium will be on understanding how to direct AI, not just use software

• Job security increasingly means being irreplaceable by an algorithm

For Investors:

• SaaS companies trading at 10x revenue might be overvalued if AI can replicate their core functions

• The winners will be those who control unique data or set industry standards

• Traditional metrics like “seats per customer” become meaningless

The Companies Making the Right Moves

Some software companies are already adapting:

• Salesforce is betting big on becoming both the data source and the AI platform

• Intercom is shifting from charging per support agent to charging per ticket resolved

• ServiceTitan is open-sourcing key standards to maintain industry influence

• Workday is positioning itself as the secure hub for both human and AI workflows

The pattern? Stop charging for access, start charging for outcomes.

What You Should Do Right Now

Whether you’re running a business or just trying to stay ahead of the curve:

1. Audit your software stack: Which tools could be replaced by AI? Which ones are getting AI features that justify higher costs?

2. Rethink your budgets: Start planning for outcome-based pricing instead of per-seat licensing

3. Invest in AI fluency: Everyone on your team should understand what AI can and can’t do in your industry

4. Secure your data: The companies that win will be those that control unique, valuable data sets

5. Stay flexible: This transformation is happening faster than anyone predicted

The Bottom Line

We’re not just watching software companies adapt to AI. We’re watching the entire concept of business software get rebuilt from scratch. The companies that figure this out first won’t just survive—they’ll reshape entire industries.

The question isn’t whether AI will disrupt your software tools. It’s whether you’ll be ready when it happens.

The transformation is already underway. The only question is: are you watching from the sidelines or getting ahead of the wave?

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Adam Kaseff – Senior Associate – adam.kaseff@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

Podcast: Operating Partners Are the Future of Private Equity | Jeremiah Wanzell on Consumer Brand Growth

Are we in an AI-driven bubble?

Podcast: 452: Proof: SaaS Growth Lessons from $0 to $100M ARR - with Pat Kinsel

Top Trends in Fintech Software Development Company: Predictions from Industry Experts

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

Software M&A Market Update: Deal Volume Soars as Strategic Buyers Lead the Charge

Key Takeaways:

• 2025 is on track to be a record year for software M&A deal volume

• Strategic buyers are paying significant premiums (5.4x vs 4.6x for PE) for highly strategic assets

• AI capabilities and vertical software specialization are driving the most buyer interest

• Public market growth premiums are substantial—>20% growth companies trade at 13.6x revenue vs 3.7x for slower growers

• PE activity expected to accelerate in H2 as strategic deals create market liquidity

The Market is Back: Record Deal Activity Signals Strong Recovery

The software Mergers and Acquisitions (M&A) market is having its strongest year in recent memory. New data from Kroll's comprehensive Global Software Sector Update reveals that 2025 is on track to be a record year for deal volume and the second highest by value, with H1 2025 deal activity up 44% in volume and 21% in value compared to the same period last year.

But here's what makes this recovery particularly interesting: it's being driven almost entirely by strategic buyers, not private equity firms.

The Strategic Buyer Renaissance

The gap between what strategic and financial buyers are willing to pay has reached its highest level since 2023. Strategic buyers are now paying a median Enterprise Value (EV) to Last Twelve Months (LTM) revenue multiple of 5.4x compared to just 4.6x for Private Equity (PE) buyers—a premium that has doubled from earlier in the year.

This isn't just about higher prices. Strategic buyers are clearly focused on highly strategic acquisitions that complement their existing platforms, particularly in areas where they see long-term competitive advantage. The result is a bifurcated market where the best assets are commanding premium valuations from strategic acquirers, while PE firms are being more selective about deployment.

What's Driving Deal Activity

Vertical Software Dominance: The sustained appeal of vertical market software continues, particularly in sectors that remain under-digitized. Healthcare, aerospace, hospitality, and legal verticals saw significant deal activity in Q2, with buyers targeting companies that have proprietary data, sticky customer bases, and platforms for domain-specific workflow automation.

AI as the New Core Strategy: Artificial Intelligence has moved from nice-to-have to must-have in strategic acquisition theses. Buyers are specifically seeking software vendors with embedded AI features, particularly in document intelligence and conversational AI. Data governance and management companies are seeing especially strong interest, as evidenced by major deals like Salesforce's $8.9 billion acquisition of Informatica.

Public Market Recovery: Public software markets have stabilized, with median Enterprise Value to Next Twelve Months (EV/NTM) revenue multiples trading at 5.3x—right in line with the 15-year historical median of 5.2x. More importantly, there's a significant valuation step-up for companies showing double-digit growth, with the highest growth companies (>20% revenue growth) trading at 13.6x EV/NTM revenue.

Sector Performance Standouts

The public market data tells a compelling story about where investors are placing their bets:

Winners:

• Enterprise Resource Planning (ERP) and Supply Chain: 10.4x median EV/revenue multiples, driven by 36% revenue growth and 51% EBITDA margins

• Cybersecurity: Strong performance with 32.9% median stock price appreciation over the last 12 months

• Engineering Software: 8.1x median multiples supported by 37% revenue growth

The Growth Premium is Real: Companies with >20% revenue growth are trading at nearly 2.5x the multiple of companies with <10% growth. This suggests that in the current environment, growth quality matters more than profitability metrics until companies reach the >40% EBITDA margin threshold.

Looking Ahead

With private equity firms having been relatively quiet in H1 2025, we expect to see increased PE-led deal activity in the second half as strategic activity unlocks liquidity in the market. The focus will likely remain on capital-efficient growth stories, strong customer retention metrics, and companies benefiting from regulatory complexity, labor efficiency, or data security tailwinds.

The software M&A market has clearly turned the corner from the 2022-2023 downturn. For companies and investors who have been waiting for the right time to make moves, that time appears to be now—but only for assets that meet the increasingly sophisticated requirements of today's strategic and financial buyers.

Sources:

• Kroll: Global Software Sector Update Summer 2025

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Adam Kaseff – Senior Associate – adam.kaseff@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

The Difference Between a Turnaround CEO and a Growth CEO

The Best Companies are Dictatorships

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

The Agentic AI Advantage: Why Gen AI Isn’t Showing Up on the Bottom Line

Generative AI adoption has scaled rapidly, but the results haven’t kept up. Nearly 80% of companies report using gen AI across their organizations, and Microsoft 365 Copilot is already deployed at nearly 70% of Fortune 500 companies. Yet more than 80% of these same companies say they’ve seen no material contribution to earnings.

According to McKinsey, this disconnect—what it calls the “gen AI paradox”—stems from three factors: an overemphasis on horizontal tools like copilots, a failure to scale high-value vertical use cases, and the absence of the infrastructure and leadership needed to move from pilots to enterprise-level execution.

This is where agentic AI enters the conversation. These autonomous systems can execute multi-step workflows, integrate with enterprise systems, and unlock the kind of transformation that earlier tools haven’t delivered. For investors and operators, this signals a clear shift in where value will be created and how to capture it.

The Horizontal vs. Vertical Divide: Where the Real Opportunity Lies

At the center of this paradox is a structural imbalance that matters deeply to investors. The enterprise AI market has largely bifurcated into two categories:

• Horizontal use cases (e.g., enterprise-wide copilots and chatbots) have scaled quickly. Tools like Microsoft Copilot help employees with tasks like summarizing meetings or drafting emails—valuable in isolation, but often diffuse and hard to tie directly to financial outcomes.

• Vertical use cases (e.g., AI embedded in underwriting, operations, or compliance workflows) offer much higher potential for ROI, but fewer than 10% of these use cases have made it past the pilot stage.

This divide creates a unique dynamic. Horizontal tools scale easily but struggle to show impact. Vertical solutions promise real value but are often blocked by organizational and technical complexity.

Enter AI Agents: A Path to Scale What Matters

McKinsey’s research points to a path forward: agentic AI. These are autonomous systems that understand goals, break them into tasks, and execute actions across business systems with minimal human input.

Unlike first-generation AI tools that assist with isolated tasks, agents are designed to operate across full workflows. They integrate reasoning, planning, memory, orchestration, and business system integration. This moves AI from reactive support to proactive execution.

One Case Study: Rethinking Legacy Modernization

Among the most compelling case studies in the McKinsey report is a major bank’s approach to modernizing its legacy infrastructure.

The Challenge:

The bank needed to update over 400 legacy applications; an effort projected to cost more than $600 million and take multiple years. Despite first-gen AI tools, the work remained labor-intensive and difficult to coordinate across development teams.

The Agentic Solution:

Rather than adding more tools to the existing workflow, the bank reimagined the process around autonomous “digital factories.” In this new model, developers acted as supervisors, overseeing teams of agents that collaborated on documentation, code generation, review, and testing.

The Result:

Early adopter teams saw over a 50% reduction in time and effort required. Beyond efficiency, the shift allowed the organization to scale modernization efforts more predictably and with greater consistency across teams.

This illustrates that agentic AI is most powerful in rethinking how high-complexity work gets done, not in marginal productivity gains.

Why Agents Unlock Vertical Use Case Value

Agents address the key limitation that’s held back vertical AI use cases: the ability to automate full, multi-step workflows.

They enable:

• Process reinvention: Rather than optimizing legacy processes, agents allow organizations to redesign workflows with human-agent collaboration in mind.

• Autonomous orchestration: Agents coordinate across systems, adapt in real time, and collapse cycle times by handling tasks in parallel.

• Elastic operations: Agent teams can scale instantly, enabling companies to flex operational capacity without additional headcount.

What This Means for Investors and Operators

For private equity firms and operators, the implications are significant.

The risk:

Companies that stay in horizontal-only deployment or remain stuck in pilot mode may miss a critical wave of enterprise transformation.

The opportunity:

Portfolio companies that successfully implement agent-driven vertical use cases stand to benefit from:

• Reduced operational costs

• Accelerated time to market

• New AI-enabled revenue streams

• Improved customer experiences and retention

Just as importantly, agentic AI adoption opens up new dimensions for value creation, particularly in tech-enabled service and vertical SaaS businesses with complex internal workflows.

The CEO Commitment Required

McKinsey’s research finds that fewer than 30% of companies have CEOs directly sponsoring their AI agenda. But agent deployment isn’t a tools initiative—it’s an organizational shift. Companies that succeed in scaling agents invest at the leadership level and build cross-functional teams focused on transformation.

This shift includes:

• Moving from isolated use cases to workflow reimagination

• Building shared AI infrastructure to scale agents securely

• Transitioning from experimentation to scalable delivery

Final Thought

The experimentation phase of generative AI is winding down. The next phase focuses on scaling AI through agents embedded in business-critical workflows.

We believe agentic AI represents a clear opportunity to rewire how enterprise work gets done. For software-enabled businesses, the potential to reduce complexity, scale productivity, and unlock new value is substantial.

The question is no longer whether AI agents will become part of the enterprise fabric. It’s whether your portfolio will act early enough to lead.

Sources:

• McKinsey: Seizing the agentic AI advantage

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Adam Kaseff – Senior Associate – adam.kaseff@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

The Modern Playbook for Value Creation in PE

Distribution - The Only Moat Left?

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

PE Midyear Reality Check: Liquidity Pressure Is Creating Opportunity

Bain & Company’s Private Equity Midyear Report 2025 highlights an M&A market that’s recalibrating in real time. After a promising start to the year, deal activity slowed in Q2 as tariff-related uncertainty rippled through the global economy, pulling down valuations and freezing IPO plans. But beneath the volatility lies a clear message: disciplined, well-capitalized investors are going on offense while others sit out.

Here are the key trends we’re tracking and why we believe this environment is setting up strong vintages for long-term returns.

Deal Activity: A Temporary Pause, Not a Breakdown

Q1 2025 saw the strongest global buyout volume since mid-2022, driven by a steady pipeline of sponsor-to-sponsor and strategic transactions. But deal value declined 24% in Q2, with count down 22% from Q1 averages, as trade-related uncertainty and macro headwinds slowed execution. IPO markets remain stalled, with several high-profile companies delaying listings amid valuation resets. Notable examples include Klarna, which paused its US listing plan, 1Komma5 Grad, an AI-powered German clean‑energy startup, and Stada, the European healthcare company—each citing market volatility as the rationale.

Still, this isn’t a structural breakdown. Strategic acquirers continue to pursue critical assets, and GPs with conviction are leaning in—particularly in sectors like software, where recurring revenue, margin durability, and scalability offer downside protection.

Liquidity Pressure Is Redefining Exit Behavior

Perhaps the most consequential insight from Bain’s report is the deepening liquidity squeeze. For U.S. and Western European funds raised in 2018, distributions to paid-in capital (DPI) stand at just 0.6x—well below the long-term benchmark of 0.8x. With aging portfolios and limited realizations, LPs are pushing harder for full exits over partial liquidity options.

According to a recent ILPA survey, over 60% of LPs now prefer full exits—even at lower valuations—rather than dividend recaps or continuation vehicles. The secondary market is responding, with multi-billion-dollar LP portfolio sales accelerating in Q2 as institutions take liquidity into their own hands.

This is driving a rise in sponsor-to-sponsor transactions, where motivated sellers are increasingly willing to prioritize liquidity over pricing in order to return capital.

Fundraising Headwinds Are Widening the Supply-Demand Gap

Q1 2025 marked a sobering milestone: not a single buyout fund closed above $5B. Bain reports more than 18,000 funds competing for a shrinking pool of LP capital, with roughly $3 of demand for every $1 of supply. Traditional allocators are pivoting to private credit and infrastructure, drawn by more predictable income streams amid economic volatility.

Geographic preferences are shifting as well. Nearly a third of Canadian and European LPs are dialing back U.S. exposure in favor of Europe and other regions, a move tied to trade tensions and a desire for portfolio diversification.

Software Investors Are Well Positioned

For investors focused on enterprise software and technology, this environment presents a distinct advantage. Recurring revenue, flexible cost structures, and the absence of physical supply chains allow software businesses to weather volatility better than asset-heavy counterparts. The scalability of cloud-native platforms and accelerating adoption of generative AI create clear tailwinds for operational leverage and margin expansion.

Vertical SaaS, particularly in regulated or mission-critical sectors like healthcare and financial services, continues to benefit from strong switching costs and high customer retention, providing further resilience.

What We’re Watching in 2H 2025

• Operational Value Creation Over Multiple Expansion: With organic valuation growth unlikely, the focus is on margin improvement, cost optimization, and product-led expansion. EBITDA growth—not just top-line momentum—will drive exit premiums.

• Updated Value Creation Plans: Portfolio companies held longer than expected must develop credible new growth narratives supported by real financial progress. Outdated investment theses are unlikely to attract buyers in a selective M&A market.

• Strategic Buyer Alignment: With public markets less accessible, corporate acquirers remain the most reliable path to exit. GPs who build relationships early and understand strategic roadmaps will be better positioned to transact.

The Bottom Line

The current dislocation is not a reason to pause - it’s a call to act with precision. Liquidity constraints, shifting LP sentiment, and valuation resets are reshaping the market. For well-capitalized investors with sector focus and disciplined underwriting, this moment offers compelling opportunities to buy high-quality assets at more attractive prices.

Bain’s report confirms what we’ve observed firsthand: the next great buying opportunity is already here. The firms who lean in now will define the next chapter of private equity performance.

Sources:

• Bain & Company – Private Equity Midyear Report 2025

• Reuters - German tech startup 1Komma5 joins Klarna in shelving US IPO plans; Stada reschedules IPO due to market volatility, sources say

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Adam Kaseff – Senior Associate – adam.kaseff@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

M&A in 2025 w/ Art Levy

Q1 2025: Global Private Market Fundraising Report

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

The Shift from PLG to PLS: A Smarter Path to Enterprise-Scale Growth

Over the past decade, product-led growth (PLG) has become the default go-to-market motion for SaaS: users sign up, explore, and expand - all without ever talking to sales. Think freemium models, seamless onboarding, and viral team adoption. It’s fast, efficient, and loved by users.

But here’s the catch: PLG alone rarely gets you enterprise-scale revenue.

As SaaS companies grow, many are finding they need more than just a great product to originate and close complex deals. That’s where Product-Led Sales (PLS) comes in - using product usage data to guide smarter, more targeted sales efforts.

A recent McKinsey report, “From product-led growth to product-led sales: Beyond the PLG hype”, spotlights this shift: leading SaaS businesses are layering sales onto product-led foundations to accelerate revenue, reduce CAC, and win in competitive markets.

Why the shift is happening:

PLG can jumpstart growth, but PLS drives revenue expansion.

While PLG excels at adoption, self-serve alone often stalls when it’s time to upsell teams, land multi-year contracts, or expand across departments. That’s why over 60% of PLG companies add sales teams within two years.

Companies like Atlassian and Miro scaled rapidly with PLG, but both introduced sales-assisted motions as enterprise demand increased.

Take Atlassian, now valued at $46 billion. The company built its foundation on product-led growth, spending just 19% of revenue on sales and marketing at IPO, far below industry averages. But as President Jay Simons explained, pure PLG eventually hit natural limits:

“If we add 5,000 new customers a quarter and add that to the base of 120,000 existing customers, it would be very, very difficult to do that if we had to touch all of those customers along the way.”

Atlassian’s solution? A hybrid approach where the product drives most customer acquisition autonomously, but sales engages for high-value opportunities:

“If you're a large enterprise customer that has more complexity, or potentially more value to us, we have a team that can help steer you in the right direction... Most customers, if they wanted to go all the way through signup and straight into the product, they could. If they don't need us, that's great. We'll leave you alone. If you do need us, then we'll absolutely bend over backwards to help.”

This approach, letting the product do the heavy lifting while sales focuses on complex, high-value deals, exemplifies how PLS creates efficiency at scale.

Product usage data is the foundation of modern sales strategy.

Traditional marketing funnels rely on soft signals (like email opens or content downloads). PLS replaces these with Product Qualified Leads (PQLs) - users who activate key features, invite teammates, or hit usage thresholds.

PQLs convert at a much higher rate than traditional leads. Gainsight reported that findings from The Product-Led Growth Index 2022 indicate that free trials using PQLs result in a 2.8x higher conversion rate than those who don't use PQLs.

Platforms like Pocus and Endgame are helping teams identify which accounts are ready for outreach based on in-product behavior, not guesswork.

Take DigitalOcean's approach: instead of chasing cold leads, their sales team used Pocus to identify accounts where usage spiked significantly in recent months or users hit specific engagement thresholds. The platform automatically surfaces these high-intent accounts and sends alerts to sales reps when certain behavioral triggers are met, enabling the team to focus outreach on users already showing buying signals. The result? They scaled from zero to over 10 product-qualified leads actioned daily by the sales team, with significantly higher conversion rates than traditional lead sources. These operational improvements translate directly to metrics investors care about.

PLS makes growth more efficient—and investors are taking note

The efficiency gains are significant. Companies implementing product-led sales strategies report meaningful improvements across key metrics - from shorter sales cycles to lower customer acquisition costs and higher lifetime value ratios in their best-performing segments.

In today's funding environment, efficiency metrics matter more than ever. It's not just about top-of-funnel traction, investors are looking for signs of a scalable, insight-driven GTM engine.

Our Take: It’s not a pivot. It’s an evolution

The product is still your strongest seller, but it can’t close every deal on its own. As usage signals become more trackable and buyers increasingly expect both self-serve and sales-assisted paths, companies that embrace PLS are gaining a clear edge.

PLS doesn’t replace PLG, it builds on it. The product remains the entry point, but sales teams guide high-intent users across the finish line. The most effective companies treat usage data as a strategic asset, surface insights in real time, and foster tight collaboration between product and sales.

At Bloom, we’re seeing this hybrid model become the new standard in modern SaaS. As companies mature, Product-Led Sales isn’t just a tactical adjustment, it’s the next stage of go-to-market maturity.

References:

• McKinsey: From product-led growth to product-led sales: Beyond the PLG hype

• Gainsight: Benchmark: Product qualified lead (PQL) conversion rates

• Pocus: The Definitive PQL Guide Part 2

• Ortto: “Low touch does not mean no touch”: How to adopt a product-led sales model

Portfolio Spotlight

RightCrowd, a Bloom portfolio company, was recently highlighted by GrowthPoint Technology Partners for its strong position in the field service and physical security software landscape. As strategic acquisition activity heats up across vertical SaaS, we’re proud to back companies like RightCrowd that are leading in critical, high-growth categories.
Read more →

Join Our Portfolio Company: We're Hiring Account Executives

Bloom Equity Partners is rapidly scaling the Go to Market team for one of our portfolio investments in the Enterprise Data Management vertical. We're seeking our next two Account Executives to join this exciting company that sells into the Fortune 5000 with an incredible team, solution, and established customer list already in place. Remote positions available across the US. If you're a motivated sales professional looking to make an impact in a dynamic, high-growth environment, we want to hear from you.

See full job posting and apply here.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Adam Kaseff – Senior Associate – adam.kaseff@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

Math to Evaluate Sales Reps & GTM

A CEO’s High-Level Guide to GTM Troubleshooting

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share

We’re here again with The Bi-Weekly Bloom – one of the best resources for Private Equity, Enterprise Software, and Technology news. In each edition, we delve into:

• PE Interest in Technology

• Our team’s favorite articles and podcasts from last week 

• Insightful tweets from fellow investors and operators

Join nearly 10,000 readers for a summary of our favorite software insights, articles, podcasts, tweets, and news headlines, subscribe below:

Subscribe now

1Q25 SaaS M&A Report: Reaccelerating into the New Year

Software Equity Group’s Q1 2025 report points to an encouraging start to the year for SaaS M&A. Despite continued macro complexity, deal volume is up, valuations are holding, and buyer appetite remains strong—particularly for high-quality, vertical-specific solutions. Below, we’ve highlighted key takeaways from the report and shared our perspective on what’s driving momentum across the private SaaS market.

SaaS M&A Sees a Strong Start to 2025

SaaS M&A recorded 636 transactions in Q1, up 19% quarter-over-quarter and 31% year-over-year. This marks the strongest quarter for SaaS deal volume since 1Q22, signaling renewed buyer confidence after a relatively subdued 2023. SaaS accounted for 58% of total software M&A activity, consistent with recent quarters and a meaningful increase from the pre-COVID baseline (43% in 2020).

Private equity continued to lead the market, accounting for 61% of SaaS transactions. Notably, add-on acquisitions made up over half of PE deal activity, as sponsors continue to scale existing platforms with accretive bolt-ons and consolidation opportunities in fragmented areas of the industry. Public and private strategics remained active but selective, comprising 39% of total deals.

Valuations Hold Steady as Buyers Focus on Quality

SaaS M&A valuations remained stable. The median EV/TTM revenue multiple held at 4.2x, up slightly from 4.1x in Q4. The average multiple reached 6.0x, reflecting continued demand for premium assets, particularly in sectors where vertical depth and product expansion result in strong retention rates.

The spread between average and median valuations continues to widen, underscoring a bifurcated market. Top-performing assets—those with strong retention, efficient growth, and are deeply embedded into mission critical workflows—are commanding clear pricing premiums. Meanwhile, lower-growth or less differentiated businesses are trading closer to the median or below. Buyers remain disciplined but are increasingly willing to pay up for defensible market positions with clear visibility into profitability and long-term durability.

Vertical SaaS Continues to Lead

Vertical SaaS remains a focal point for acquirers, making up a significant portion of overall activity. Healthcare was once again the most active vertical in Q1, accounting for 21% of vertical SaaS transactions, as providers continue investing in digital infrastructure to modernize care delivery. Financial services and real estate followed at 15% and 10%, respectively, both sectors where regulatory complexity and operational workflows create high switching costs and attractive M&A profiles.

Retail, energy, and education also saw steady activity, particularly where software plays a critical role in compliance and business continuity. On the horizontal side, content and workflow management (96 deals), sales and marketing (86), and analytics and data management (72) were among the most active categories. ERP and financial applications continue to perform well, supported by their mission-critical role and customer entrenchment.

Macroeconomic Backdrop: Stabilizing, but Still Uncertain

The macro environment remains complex but more stable than it was six months ago. U.S. GDP grew 1.6% in Q1, missing expectations, while inflation moderated to 2.4% year-over-year—cooler than anticipated and a potential signal of future rate movement. While the timing of interest rate cuts remains uncertain, the broader outlook is more constructive than it was heading into 2024.

At the same time, global enterprise software spend remains a bright spot. The category surpassed $1 trillion in 2024 and is expected to grow by over 14% in 2025, driven by AI adoption, digital transformation mandates, and increasing reliance on cloud-native applications across nearly every industry.

What We’re Watching

As we look ahead, we’re focused on a few key dynamics:

• Interest rate cuts, which could further unlock deal flow and financing flexibility

• AI-driven deal activity, especially in analytics, data infrastructure, and enablement tools

• Strategic acquirer re-engagement, as public companies revisit M&A as a growth lever

• Continued consolidation in vertical SaaS, where buyer conviction remains strongest

With Q1 setting a high watermark for recent SaaS M&A activity, 2025 is off to a promising start. While macro headwinds haven’t fully cleared, the sustained demand for mission-critical, high-retention software platforms continues to drive meaningful outcomes across the private market.

Join Our Portfolio Company: We're Hiring Account Executives

Bloom Equity Partners is rapidly scaling the Go to Market team for one of our portfolio investments in the Enterprise Data Management vertical. We're seeking our next two Account Executives to join this exciting company that sells into the Fortune 5000 with an incredible team, solution, and established customer list already in place. Remote positions available across the US. If you're a motivated sales professional looking to make an impact in a dynamic, high-growth environment, we want to hear from you.

See full job posting and apply here.

About Bloom Equity Partners

We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below.  We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.  

Our Investment Criteria

• Industry: B2B Software and Technology-Enabled Companies

• Geography: North America, Europe, Australia and New Zealand

• Revenue: $5M - $50M

• Growth: No requirement

• Profitability: Negative - $10M EBITDA

• Investment Type: Operational control required

Business Development Team:

• Abe Borden – Principal – abe@bloomequitypartners.com​

• Adam Kaseff – Senior Associate – adam.kaseff@bloomequitypartners.com

If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.

What We’re Reading and Listening To…

PE Weekly: Sector-Focused Services Drive M&A

Favorites from the Ecosystem

Investors…

Operators…

Founders…

If you’re enjoying The Bi-Weekly Bloom, we’d appreciate it if you shared it with your network. 

Share