Why Now is the Best Time to Buy Public Software Companies

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Summary based on the YouTube transcript and episode description.

Mitchell Green of Lead Edge Capital argues public software is the best risk-adjusted buy right now and calls AI capex a replay of the telecom bubble.

  • Green believes the AI capex buildout will end badly, comparing it directly to the telecom bubble and questioning whether model company valuations (OpenAI at $800B) are rational.
  • Lead Edge targets 2–2.25x net returns with 20% net IRR; funds hold ~20 positions, average hold 3.5–4 years, and have lost all capital in only one deal ever.
  • The firm deploys 70% of capital via special situations and secondaries rather than primary balance-sheet rounds, including derivative plays through LP fund stakes.
  • 800 executive LPs (95% by number) are used for deal sourcing, reference checks, back-channel calls to customers like Pfizer, and post-investment customer introductions.
  • 22 analysts cold-call ~9,000 companies per year; ~900 meet 5+ of 8 criteria, ~150 get diligenced, and 5–7 deals close annually.
  • The “Lead Edge 8” criteria include: $10M+ revenue, 25%+ growth, 70%+ gross margins, recurring revenue, capital efficiency (cumulative burn ≤ cumulative revenue), and no major customer concentration.
  • Green believes software competitive advantage is distribution and retention, not R&D — citing Workday’s 98–99% gross dollar retention as evidence incumbents are hard to displace.
  • Lead Edge just closed its seventh fund at $3.5B; gross dollar LP retention target is 95%, which Green treats as the firm’s primary KPI.

2026-03-24 · Watch on YouTube