Peter Fair | Source | Managing Director at Golub Capital

Recognizing the opportunity to acquire software companies with solid recurring revenues, private equity firms are offering multiples to rival the public markets and strategic buyers. Thoma Bravo’s $3 billion acquisition of Qlik Technologies in 2016 is one example, with the deal fetching a payout about 20 percent higher than where the software company’s shares had been trading.

Venture-backed software companies achieving growth between 30 and 40 percent — more moderate, albeit still attractive — should consider PE as an alternative liquidity source. The number of PE buyouts of venture-backed technology companies is growing. In the first half of 2017, 43 VC-backed technology companies exited to PE, according to Pitchbook data, which is more than those that IPO’d in H1 2016. This year’s total exits to PE are expected to surpass the 71 deals in 2016, with firms like Vista Equity Partners and Thoma Bravo raising sizable funds to focus on this space. (Thoma Bravo closed a $7.6 billion fund in September 2016 to pursue tech deals.)