2024 may see a return to ‘normal’ in technology private equity
In the years leading up to 2020, private equity investing in software was booming, impelled by widespread digitalization of the economy.
Then things hit a wall. The covid-19 pandemic created near-total demand destruction, though some software companies found opportunities – for example, in the advent of remote work.
Coming out of the pandemic, a new euphoria took hold as the red-hot deal market of 2021 channeled billions of dollars into software companies, many of them with a growth-at-any-cost mindset.
But for all its high spirits, 2021 was also challenging, Ryan Hinkle , managing director of Insight Partners , told Buyouts, as the bullish deployment obscured what was really going on. “We were measuring noise,” he said. “And now we know the signals were wrong.”
The next year brought a reckoning, known as the Great Tech Reset. Price pressures, high interest rates and supply-chain disruptions, together with plunging public technology stock valuations, put an end to the fast-paced activity and ushered in a correction.
In short, the period 2020-23 was something of a rollercoaster ride for software companies and their investors. Now, having absorbed the correction, Hinkle hopes 2024 will be the first “normal” year since 2019, with “an absence of downward pressure” and “nothing radically better or worse.”