Hollie Haynes is the founder and managing partner of Luminate Capital Partners, a San Francisco-based private equity firm that invests in enterprise software companies. She founded Luminate in 2015, and today the firm has assets under management in excess of $2 billion, with a portfolio that includes Axonify, Conexiom, Compliance & Risks, Ease, MSI, StarCompliance, Suralink and Thought Industries. Prior to founding Luminate, Haynes was with Silver Lake for over 15 years, most recently as a managing director.
Haynes will be a featured speaker at PEI Group’s upcoming NEXUS 2025 summit.
PE Hub interviewed Haynes as part of our ongoing Outlook Q&As with PE thought leaders.
In the VC start-up ethos, the initial public offering has long been considered the holy grail of exits, but with the IPO market largely shut down in 2024, sales of tech companies to private equity firms have increased. In your view, what does the private equity model offer growing tech companies?
Luminate does growth buyouts. We started this firm 10 years ago because we saw that market need. We buy control of growth companies, providing liquidity to founders, management and shareholders, while also enabling them to maintain sizable equity positions. We don’t use structure. We don’t use much or any leverage. We focus on growth not cost cuts. This is a win for all parties. It’s liquidity much faster and easier than an IPO. It’s partnership with a growth investor. We have changed the private equity model. And we are nice and a lot of fun. PE has changed.
How do you respond to critics who say that PE firms are all about cost cutting and rollups?
Those critics aren’t wrong in that most PE firms do want cost cuts and rollups. Just not us. We started Luminate because we didn’t want to do that. We don’t do much M&A and we usually don’t use debt. We most often drive to a break-even P&L and invest everything we can in driving organic growth. We believe that product and market opportunity are the whole ball game and spend all of our time focused on those things.
What kinds of companies does Luminate invest in, and what were some of the dealmaking highlights of 2024 for your firm?
We invest in companies who focus on addressing tough operational and compliance struggles for enterprise customers on a recurring revenue basis. That has been called software or SaaS. Maybe that’ll be called Results as a Service (RaaS) soon. Whatever the name that’s what we want to do. We buy companies that are 5-25 years old, growing, with high customer retention and high gross margins. We pay strong prices for these metrics and market opportunities. We aren’t looking for bargains. We are looking for great assets that can grow, like our acquisition in September of AbsenceSoft, a SaaS platform for leave of absence and accommodations management. We acquired the company from Norwest and Bow River in partnership with management. This is a 10-year-old company that is hitting its stride with a huge market opportunity ahead.
What technologies and what kinds of software companies will be most attractive in 2025?
Building software has just gotten really easy. Building a sales force and calling prospects is also easy. Identifying customer struggle and delivering products that address this struggle and evolve over time to address it better and better – that’s hard. No one wants to type words into applications anymore. Products should get the job done for the customer. Companies have to pick a job and address it better than anyone else, and keep doing that. It’s crazy hard. Those companies will be the most successful. Tons of software companies will not be successful.
How do you expect the new administration to affect dealmaking in tech, especially key areas like AI?
More dealmaking is coming, if only because there hasn’t been much!
Editor’s Note: Haynes will be a featured speaker at PEI’s NEXUS 2025 conference coming up in March. For more of what to expect at NEXUS 2025, check out Mary Kathleen Flynn’s recent conversation with Thoma Bravo’s Orlando Bravo, in which they discussed everything affecting PE tech deals, from falling interest rates to rising cybersecurity threats. Also see Craig McGlashan’s conversation with Xavier Robert, partner and chief investment officer at Bridgepoint.
