How Private Equity Is Investing in Founder-Led Software Businesses

In this episode of The Private Equity Podcast, Alex Rawlings speaks with Bobby Ocampo and Sheldon Lewis, co-founders and managing partners of Blueprint Equity.

Following the successful close of Blueprint Equity’s $333 million third fund, Bobby and Sheldon explain how the firm identifies and supports high-growth B2B software companies. They discuss Blueprint’s early growth investment strategy, its direct sourcing infrastructure and the role its six-person operations team plays in supporting portfolio companies.

The conversation also explores the impact of artificial intelligence on software valuations, underwriting and value creation. Bobby and Sheldon explain how Blueprint has integrated multiple AI tools across sourcing, deal evaluation, portfolio operations and internal workflows.

They also share why vertical software businesses with deeply embedded customer workflows may be better positioned to withstand AI disruption than lightweight horizontal software products.

Key Topics

• Blueprint Equity’s early growth investment strategy
• Raising a $333 million third fund
• Investing in B2B vertical software businesses
• Building a large direct sourcing function
• Supporting founders with recruiting, go-to-market and RevOps
• Using AI to identify, prioritise and track investment opportunities
• Connecting multiple AI tools through an integrated technology stack
• Underwriting software businesses in an uncertain market
• Assessing founders in minority growth investments
• Moving quickly without creating employee burnout

Timestamps

00:00 Introduction
00:28 Blueprint Equity and the successful Fund III raise
00:53 The firm’s early growth equity investment thesis
01:43 Building the team and operations function
02:50 Common mistakes made by investment firms
04:21 Underwriting software businesses in the AI era
06:33 How Blueprint structures its value creation team
07:41 Recruiting and institutionalising portfolio companies
08:35 RevOps, reporting and financial visibility
09:53 How Blueprint uses AI internally
10:37 AI-driven sourcing and opportunity prioritisation
11:06 Using proprietary data in underwriting
12:32 Blueprint’s AI technology stack
14:01 Building a genuine direct sourcing strategy
15:24 The resources required for proprietary origination
16:46 Less obvious investment signals
17:14 Assessing the entrepreneur behind the business
18:13 Vertical software and the threat of AI disruption
20:25 Creating a fast-moving culture without burnout
22:09 Recommended private equity news and content
23:34 How to connect with Blueprint Equity

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🔗 Connect with Alex Rawlings on LinkedIn https://www.linkedin.com/in/alexrawlings/
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Transcript

00:00

Welcome back to the Raw Selection Private Equity Podcast. Joining us today are Bobby Ocampo and Sheldon Lewis, co-founders and managing partners of Blueprint Equity, a growth equity firm investing in the B2B software sector. What’s really interesting about this conversation is that they’re building infrastructure within their firm and delivering significant results within their portfolio.

00:28

Obviously, this comes on the back of a successful raise, but these guys are out there to set records. This is a really insightful podcast. Let’s dive in.

Firstly, congratulations on the successful raise of Fund 3. Could you kick us off by giving us a brief insight into yourselves and Blueprint Equity, please?

Yeah, I’ll kick things off. Thanks for having us, Alex. It’s great to be here.

00:53

Blueprint Equity was founded in 2018. Bobby and I have actually known each other since 2008. We did investment banking together at Piper Jaffray in their tech division, stayed very close, went our separate ways to different firms, but came back to the same thesis that we thought was completely underserved. That’s what we call early growth equity.

01:20

These are businesses doing, call it, $1 million to $7 million in ARR and growing north of 75% year over year. They’re bootstrapped or capital-light, and we’re usually leading the Series A, the first institutional round into these businesses. We really like B2B software, particularly vertical, niche operating systems of record.

01:43

It’s been a great run. As you said, we just raised Fund 3, which is a $333 million fund. We’re very fortunate that Fund 1 and Fund 2 have done well, and now we’re continuing to build out the team. We’re at 21 people now, so it’s a huge team for a fund our size, with a heavy focus on outbound sourcing. We try to find the entrepreneurs. Obviously, we welcome them coming to us, but we also like to track them down.

02:13

We’ve spent a lot of time and money building out our operations team, which is important to us. We have an operations team of six, all free of charge for entrepreneurs, to help them with things like AI, which I’m sure we’ll talk about on the podcast, recruiting, go-to-market, RevOps and all that good stuff. That’s the high-level overview.

What’s one mistake that you see private equity or growth equity firms, or their portfolio companies, making, and what would you suggest to correct it?

02:50

Oh man, that’s a tough question.

02:54

I don’t know. What do you think, Sheldon?

I think there’s probably a long list, and none of us are perfect, for sure. I would say we’re more anti-VC than anti-PE in a lot of ways. We don’t subscribe to the spray-and-pray approach of saying, “Two out of my 30 investments will be unicorns and the other 28 will be zeros.”

03:22

We don’t believe in only giving time and attention to the investments that are performing extremely well. We don’t really subscribe to that. From a PE standpoint, we probably identify more closely with the world where you’re investing in the actual business, not just the market or the entrepreneur.

03:52

You really look at the numbers and try to add operational value. That’s my take.

The software industry has seen some turbulence and challenges over the last couple of years, and continues to do so. How are you finding the market from an underwriting perspective?

04:21

What is separating the good software assets from the weaker ones?

Yeah, Sheldon, I’ll start. Alex, I’d say it’s pretty choppy right now. I think the retail investor is bucketing all of software into the idea that it’s going to be disrupted by AI and is therefore worth a lot less than we thought.

04:49

We’re obviously biased, but I tend to disagree. I think what’s happened is that some really good businesses are being placed into that bucket. You’ve seen a really nice rebound from a lot of those assets since the bottoming we saw earlier in the year. Clearly, there’s a lot of fervent excitement around AI.

05:15

AI-accelerated growth, or growth largely driven by AI, is attracting attention, but growth is still the number-one driver of multiple expansion, and vice versa. The question is: are you building or reaccelerating growth through AI?

05:42

If not, you’re getting dinged by the average investor, and that’s playing out. We’re seeing it even in the private markets. But I still think that, across the public and private markets, everyone is trying to find their footing. I think people would be lying if they said they knew what was going to happen and how products would or would not be disrupted.

06:09

I don’t think anyone knows. We’re still barely in inning one of this. Maybe going back to the earlier question, people are saying many of the same things, but what we’re seeing is still highly inconsistent. I think that’s giving everyone a lot of pause right now.

06:33

You mentioned that you have a large value creation team, which I always applaud. I think the most successful firms we see in private equity are building those teams and that structure. Firstly, how do you structure your value creation team? Do you have specialists such as a finance specialist or a go-to-market specialist? Secondly, in which areas do you see the value creation team operating most frequently?

07:01

Would that be pricing, talent, sales, marketing or something else?

07:11

That’s a great question. You’re right: they are more specialised. We have someone on the go-to-market side. Taking a step back, when you look at these businesses and where they are in their company lifecycle, they’re still fairly early. I’d put them in their teenage years, if they were human.

07:41

When you’re at, call it, $2 million, $3 million, $4 million or $5 million in ARR, no matter what industry you’re in, you’re often struggling with the same problems and have the same opportunities. All of these companies want help with recruiting. They’ve just received their first institutional round and want to put in place their first director- or C-level talent, which they haven’t previously had the capital to do.

08:05

They want help with go-to-market. They’re clearly doing something right if they’re growing at 100% or 200% year over year, albeit from a smaller base. But they want to institutionalise that go-to-market engine. Before, it may have just been founder-led sales, word of mouth or inbound.

08:35

From a RevOps and reporting standpoint, they usually don’t have much of that in place. Even having a financial model detailed enough to give them the visibility they need to navigate the waters is important. These are all things we help with.

08:57

We’ve completed 26 deals now, and we help with these areas in every deal. Those are the problems we identified and then hired for. We have someone focused on go-to-market, and all he has done for the last 14 years is go-to-market consulting. We have someone focused on AI. As you can imagine, especially in this day and age, many people want help building out their own internal AI and advice on which direction to take.

09:26

We have someone focused on recruiting, and so on. All of these services are free for the portfolio companies, which means they don’t think twice about using them. Even though we’re minority shareholders and obviously can’t force them to do anything, we experience a really strong pull because these are areas where they want help.

09:53

You mentioned AI, which is on everyone’s lips at the moment. I think there are two questions around this: one at the portfolio level and one at the firm level. Firstly, how are you currently leveraging AI at the firm level?

10:10

Anywhere you can imagine is the quick answer. We’ve been implementing AI internally for the last three years, so it wasn’t new to us. We really started on the sourcing side. Version one for us was using AI to find companies that were off the radar and not in the databases everybody uses. Step two was prioritising those companies.

10:37

We prioritised them based on what is important to us, using the public and private data we can gather. Step three is making sure nothing slips through the cracks on the sourcing side. If someone says to follow up in three months, we’re on it. We receive the right notifications, and our team is prepared to send the right messaging.

11:06

Internally, it now goes much further. It’s helping us evaluate deals. In AI, people talk a lot about being in the workflow and having proprietary data. We have a lot of proprietary data, probably hundreds of thousands of conversations at this stage.

11:33

We’re using all of that to our advantage and syncing our systems so they can communicate with each other. We’ve been making a strong push in that direction. It has helped significantly from an organisational, underwriting and portfolio operations standpoint.

Sorry to interrupt. Just a quick mention of our longstanding partnership with Grata. As you probably know, the private equity landscape is constantly evolving.

12:03

Deal flow is increasingly moving towards proprietary and data-driven processes. Grata provides data and information on more than seven million private companies. If you’re looking to improve your proprietary deal flow and access to data, reach out to Grata today.

Now, back to the podcast.

At the firm level, you mentioned notifications and similar features. Are you using particular software that helps with that?

12:32

Most private equity firms are renowned for using Excel spreadsheets for everything. I’m guessing that doesn’t give you the notifications you need to reach out to someone at the right time. What tools are you using to support deal sourcing and help you reach the right people at the right time, rather than simply sending them a cursory email every quarter asking, “Can we acquire your business?” That’s something I receive almost daily from businesses that have done absolutely no research.

13:03

That’s a good question. I wouldn’t think about our AI tech stack as a single tool. We’re not just using Claude for everything. Claude is our MCP layer, the tool we use to communicate with all the other tools. Over the years, we’ve layered in probably 10 different AI tools and stitched them together.

13:32

When I say we have our own AI, we’re not writing our own AI code. We’re coding to connect everything. It’s really about leveraging other AI solutions and stitching them together into something that works for Blueprint.

Talk to us a bit about your direct sourcing. I think every firm talks about it, but the question is whether they execute it well or simply have a direct sourcing element while realistically relying on investment bankers and others for introductions.

14:01

What are you doing proactively to bring in deals and connect with people?

Alex, I think it really comes down to the size of the business and the size of the private equity or growth equity fund. Generally, and I don’t know if you agree, Sheldon, but if you’re north of a $500 million or $750 million fund, I would say almost all your investments have to be banker-sourced.

14:29

At that size, at least in the US, Alex, you’re looking at businesses with north of $10 million in revenue. Typically, everything north of $10 million in revenue is banked.

14:56

I think it really comes down to that. At pretty much every multibillion-dollar fund, there’s no real reason to have a large sourcing army because almost every deal you’re looking at is represented by someone. That’s one element: how big is the fund? The other is the size of the team. We have more than 20 people at Blueprint. Compared with a multibillion-dollar fund, that isn’t big.

15:24

But for our fund size and target investment, it’s very big. We have, what, Sheldon, close to 15 full-time people sourcing and speaking with tens of thousands of businesses every year. That’s what it takes. It’s pounding the pavement through phone calls, emails and a lot of in-person visits.

15:51

That’s what you need to do because all our businesses are below $10 million in revenue. They may have between $1 million and $5 million in revenue, which isn’t big enough for a large fund to invest in or for a banker to represent. It falls into a nice sweet spot for us, but it’s up to us to uncover and unlock the opportunity, spend time with the entrepreneur and help him or her build the business.

16:20

That responsibility is really on us. Those are some of the key elements. It depends on size, and we still like to think we’re flying under the radar.

That makes sense. Beyond the standard financials and growth metrics, what less obvious signals do you look for before investing?

16:46

I don’t know whether it’s less obvious, but we do a lot of market work. Where do they fit? Are they the number-one, number-two or number-three player? How vulnerable are the number-one, number-two or number-three players if that isn’t them?

17:14

Something that can never be underrated for a minority investor, which we typically are and historically have been, is the entrepreneur. This person may have done a great job getting the business to two, three or four. Are they the right person to get it to 20, 30, 40 or beyond? That’s a big part of underwriting.

I don’t think many large buyout funds care as much about that because, if they’re buying a majority of the business, they can run their playbook and hire whoever they want if the current person isn’t right.

17:44

But we’re betting just as much on the jockey as the horse. Those are two things. I don’t know if I missed anything, Bobby.

I agree with that.

From an industry perspective, what sector or trend interests you most as investors, or do you think the market is potentially underestimating?

18:13

Especially given the prevailing narrative that software is going to be killed by artificial intelligence.

18:22

I think it’s changing every day, Alex. One common theme is that we don’t look for many horizontal businesses. We look at tightly knit verticals where, through our investment, we have the opportunity to own that large audience.

18:49

Take a company like DocuSign. It’s a great multibillion-dollar company, but it’s a lightweight solution addressing an unlimited number of verticals. That’s a tougher type of business for us to invest in and, frankly, lower-hanging fruit for AI disruption. We’re looking for businesses with deeply entrenched tools that support real operating workflows.

19:18

It should be a product that our portfolio companies’ customers use all day, every day—not just to do one small thing, but to do everything. I’d be lying if I told you there were certain sectors we were specifically looking for, because we’re generalists within tightly knit verticals. It’s probably easier to describe what we don’t do.

19:47

Again, as with the DocuSign example, horizontal businesses that are more lightweight are tougher for us.

19:56

Okay. You’re growing the firm at the moment, and you have a lot of fast-growing businesses underneath you. Given your successful fundraises, you’re obviously doing something right, to say the least. Private equity, at both the firm and portfolio level, demands speed. The same can be said of any business. We’re in a similar position at the moment, going through funding rounds and trying to scale and grow.

20:25

How are you building a culture that can move fast without burning out your large origination team, your value creation team and, of course, your portfolio executives who are chasing a major unicorn exit?

20:42

That’s a good question. To me, speed isn’t necessarily about always working faster. It’s about removing the friction that makes people work slowly, such as ambiguity, reworking things and certain bottlenecks. If you address those issues, I think pace takes care of itself without grinding people down.

21:10

From a culture perspective, we have someone internally who helps with culture, planning events and making sure everybody likes coming to work every day. Another thing that probably helps prevent burnout is that we’re in the office three days a week and remote two days a week.

21:39

People are still very much working on those two remote days, but I think it helps to have them. You can go for a walk or get some laundry done between calls. I think that helps quite a bit, and it’s probably unique for funds like ours.

22:09

What do you watch, read or listen to that you would recommend others check out?

22:17

Obviously, The Private Equity Podcast. I think both of us read Term Sheet every day. It’s an email. There’s also Axios Pro Rata, Insider and Buyouts—all of that.

22:40

Honestly, I don’t know what it is, but I feel the LinkedIn algorithm has become much better over the years. It has seen me consume similar content and follow the same people. Even though there’s still a lot of noise, the first five minutes of LinkedIn for me are filled with the topics we’re discussing: private equity fundraising, managers trying to raise funds and entrepreneurs talking about how software will or won’t interact with AI.

23:10

It has become much better for me. Aside from everything Sheldon mentioned, I think it does a nice job of curating content for me now, so I don’t have to search around as much.

23:34

If anybody wishes to do so, what’s the best way to get in touch with you after the podcast?

23:40

You can go to our website. We have an email link you can use to send anything over to us, as well as a form you can fill out. You can also find us on LinkedIn. Whether you’re an entrepreneur or another firm in our vertical, we’d love to speak with you.

24:09

Marvellous. Thank you both for coming on The Private Equity Podcast and giving us an insight into SaaS investments and the rapid growth of your firm. Thank you very much for joining us.

Thanks, Alex.

Thank you, Alex. We appreciate it.

As always, thank you very much to everyone listening and tuning in today. Until next time, keep smashing it.