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It’s been a chaotic February for investors in the software sector.
The first week of the month saw a steep sell-off in technology stocks, driven by fears that AI could disrupt the business models of SaaS companies, a very popular and profitable strategy for PE investors.
Dipanjan “DJ” Deb
Dipanjan “DJ” Deb co-founded Francisco Partners in 1999. Today, he leads a $45 billion private equity and credit investment firm focused on technology and technology-enabled service providers.
The San Francisco company is best known for its complex middle-market deals, including corporate divestitures and acquisitions.
In October, Jamf, a device management and security company focused on Apple products, delisted from the NYSE in a $2.2 billion deal.
Francisco closed his last flagship fund in 2022 with over $13.5 billion. It also manages a family of funds that invest in smaller companies.
The company ranks second in the HEC Paris-Dow Jones Annual Global Large Buyout Performance Ranking for 2026, the sixth consecutive time it has been in the top 3.
Deb spoke to PitchBook about the significance of the sell-off, the opportunities it has brought, and how Francisco Partners is dealing with the AI boom.
The conversation has been edited for brevity and clarity.
In retrospect, what is the significance of the sell-off of the “SaaS pocalypse”?
Deb: There is an old saying: “In the long run the stock market is a weighing machine, in the short run it is a voting machine.” That’s true. It happens on the way up, it happens on the way down. I think there are parts of software that AI can disrupt. There will be parts of the software that benefit from this and thrive, emerging at higher multiples as people realize they have even more lock-in (as a result of AI).
How do you feel about the threat of AI in relation to your portfolio?
We have been preparing our portfolio since ChatGPT came out. Just because the stock market reacted (three) weeks ago doesn’t mean anything has fundamentally changed.
People don’t like change because it requires effort. Customers want to use their existing supplier, but they want the supplier to do it better, give them more tools and provide more value.
With your phone you can deposit checks, use Zelle, transfer money… the banks still exist; they simply offer their customers much more functionality.
We have a whole scoring system for our portfolio. What are the areas of lock-in? What can we do to create more lock-in? What are the switching costs? What is the pricing model? We spent a lot of time on this, not based on the market crash. This was a year and a half ago.
Is software valuation reset an opportunity for your credit business?
I think it should be. Most of what we do is direct origination, but we often purchase loans that trade at a discount.
We certainly see opportunity to buy loans just because people are afraid. What you need to be able to do is you don’t have to worry about pricing at any given time. If you hold it until expiration, you almost unequivocally get par back.
What about on the equity side?
Software companies are trading at five times revenue, which we haven’t seen in over a decade. There are some who deserve to deal in it, and some who don’t. When you look at the history of private equity, vintage really matters. If you buy low, you tend to make more money. People tend to overinvest at the top and underinvest at the bottom. If you bet roughly the same amount everywhere, you’ll probably outperform your competitors, and that’s the strategy.
Sometimes it’s hard to get deals done when stocks have just fallen, especially in the public markets, because public boards are still focused on the prices of three or six months ago. But with founders and division spinoffs, they’re much more likely to make trades because they’re throwing a bet.
You describe Francisco as a second or third tier technology investor. How do you chart that course if AI is growing so rapidly?
They lose tons of money. I don’t know which of these LLM models will win, but history shows that not all of them can. Netscape was the first portal to the Web and Netscape no longer exists.
We need to figure out what the implications of this technology are for everything else in the ecosystem, and what is likely to become more powerful.
We are not in the Anthropics and OpenAIs, which can deliver huge returns. We are in a consistent, stable business.
What is the AI wave similar to?
I think it’s more serious than cloud computing. I think the analogy is internet or mobile. Those were profound things. And I think people forget that nowadays.
Your iPhone today is more powerful than a supercomputer from 50 years ago. You can do almost anything with it. I think AI can be so profound, but it takes time.
For my investors, I have drawn a sine wave going up and to the right. Along the way you will encounter local maximums and local minimums. We are currently high in the hype cycle.
What keeps you awake at night?
My favorite course in business school was taught by Andy Grove (former CEO of Intel). He said only the paranoid survive. I have hundreds of worries. Taking a step back doesn’t change human nature. That’s what you need to keep in mind.
This article originally appeared on PitchBook News
