Matt Reilly

I’ve spoken to over 2 dozen MDs at PE firms I can confidently say that the arb of figuring out how to implement Vertical AI at portfolio companies is very real right now It will fundamentally change underwriting for those who can do it predictably and unlock generational returns. Most are aware they need to act. Very few have.

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The SBA just implemented SOP 50 10 8 guideline changes... Here's what every buyer and investor needs to know: 1. 10% Equity Injection Now Mandatory Remember when you could count seller financing on 2-year standby as equity? That’s gone. Now you need hard equity for at least 10% of the purchase price, seller notes can still count for up to half of that required equity, but it has to be on full standby for the ENTIRE loan term, not just 2 years. Overall, I see this as a beneficial change, we see a lot of deals and 90-95%+ leverage deals break way more often than <80% leverage. The majority of deals we see getting done and set up for success are with ~20% of equity down. 2. Multi-Step Buyouts Are Dead This one hurts… The SBA now requires all ownership changes to happen in a single closing. Gone with the tiered buy-out approach. I was just talking with an HVAC owner last week who wanted to gradually transition his business to his service manager over 5 years. That elegant structure used to be pretty common with employee buyouts. Now it’s impossible with SBA financing. We're going to need entirely new capital strategies for employee transitions or partnerships – and that's a huge problem because gradual handoffs are perfect for many business owners who wanted to slowly phase into retirement and train the new owner. 3. Co-Borrower Requirements Will Kill Seller Equity Rolls This one is brutal. If a selling owner retains any ownership after closing (even less than 20%) they must personally guarantee the loan for two years post-sale. Layer in that all new equity holders even 1% passive investors will be classified as a co-borrower is the nail in the coffin for seller equity roll deals. This change will effectively eliminate seller equity rolls in SBA deals. Convincing a seller to personally guarantee millions of debt betting on the acquirer they just met a couple months ago, is not going to work. Overall, this is horrible for individual buyers reliant on the SBA. Big win for shops who have access to non SBA debt. 4. Expansion Exception to Equity Injection No equity injection is required if: - The buyer and seller entities share identical ownership - They operate under the same 6-digit NAICS code - And are geographically close. So, 0% down deals are simple and easy if you already have a platform and want to do a mini roll-up. Means less of a need for raising equity for follow-on acquisitions. — There’s a bit more to say, but those 4 changes I see are the most impactful to most of our acquirers. These changes take place June 1. The Mainshares team will continue monitoring SBA updates and providing further insights as new information becomes available.

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Samsara, ServiceTitan, and Procore Technologies have a combined valuation of $40B+ —and founders with wildly different industry experience. Yet VCs still debate whether it's needed to build great vertical software. As always, my stance is: It depends. The better question is: What type of founder are you, and what's your path to understanding your customers deeply? Some investors are adamant that you must have deep industry experience to build successful vertical software. Others claim outsiders have the advantage. Both camps love to cherry-pick examples that prove their point. But I've been advising and investing in vertical software companies for over two decades, and I think that's enough exposure to confidently conclude that founders of all backgrounds can be successful. Take these 3 examples (Samsara, ServiceTitan, Procore). They're some of the most successful vertical SaaS companies today. Some of the founders come from deep industry experience, but others have a background that would surprise you. → Procore's founders came from construction backgrounds and built a $10B+ company selling to their former industry. They'd lived the pain points they were solving for. → On the opposite end of the spectrum, Samsara's founders had zero experience in trucking or heavy industries. These MIT grads had just sold Meraki to Cisco for a billion dollars and were looking for their next challenge. They picked fleet management and transportation—two industries they knew nothing about. Today, Samsara is worth more than $20B. → Then there's Service Titan, which charted a middle path. The Stanford-educated founders didn't work in the trades themselves, but they grew up watching their parents run HVAC and painting businesses in Southern California. They bonded over their shared background and built a $10B+ company serving those same trades. So it's unreasonable to say that a founder's experience is the determining variable of success. Instead, what all 3 of these stories have in common is founders who deeply understood customer problems and built exceptional products to solve them. Industry outsiders often bring fresh perspectives and aren't constrained by "how things have always been done." Industry insiders have instant credibility and know which problems matter most. Those with adjacent experience can bridge both worlds. As an investor, I back founders regardless of their industry background. What matters most to me is their ability to build, learn rapidly, and maintain fanatical customer obsession. Where do you stand on the industry experience debate? I'd love to hear your thoughts.

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When most people hear "solid-state," they think storage. But in Santa Clara, xMEMS Labs just gave that term new resonance, literally. The company just raised $21M in Series D funding led by Boardman Bay Capital Management, with Cloudview Capital, CDIB-TEN Capital, Harbinger Ventures, Susquehanna Asia Venture Capital, and other strategic investors tuning in. This isn't another round of capital, it's an #amplifier for a company turning silicon into a new language of #sound and #cooling for the AI era. Founded in 2018 by Joseph Jiang and Jemm Liang, xMEMS spun out of piezoelectric R&D at TSMC and turned what was once wafer-level theory into commercial hardware. Joseph Jiang, a veteran of Knowles, Fortemedia, and InvenSense, leads with precision and swagger, while Jemm Liang, who built Ultrachip from the ground up, drives the engineering with surgical focus. Co-Founder & CLO Wei-Fu Hsu, the former MediaTek exec and IP expert, ensures xMEMS' innovation is as protected as it is disruptive. Their play? A monolithic MEMS platform that transforms voltage into vibration, silicon into sound. Unlike legacy coil speakers and fans, xMEMS tech doesn't move parts, it moves markets. Over 500K MEMS speakers shipped in 1H'24, backed by >250 global patents. The Cypress & Sycamore lines redefine what "small" can do: 1mm-thin, full-range, and capable of sub-bass response once thought impossible in earbuds. Their XMC-2400 µCooling chip, 1mm-thin, fan-on-a-chip, inaudible, moves 39cc/sec of air at just 30mW. That's not cooling, that's choreography at a molecular level. Dr. Chester Hwang, named CTO on Oct 15, 2025, joins to push that curve further. Alongside veterans Mike Housholder (VP Marketing & Biz Dev), Jim Wargnier (VP N.A. & EU Sales), James Lee (VP & Korea GM), Steven P. Bentley (VP Sales), and Martin Lim (VP MEMS Tech), xMEMS is scaling at semiconductor speed. They're already in BleeqUp's AI sports glasses and teamed with Dongguan Rayking Electronics for TWS modules. When OEMs talk "next-gen," they're talking xMEMS-level integration. For investors like Boardman Bay's Will Graves, this isn't just sound engineering, it's signal intelligence. With AI pushing devices thinner, faster, and hotter, xMEMS' piezoMEMS platform sits at the intersection of #acoustics and #thermals, where every millimeter matters. Backing them is a bet that the next wave of #sensorytech won't just compute, it'll feel alive. So what's next? Scaling production, expanding capacity, and embedding xMEMS' silicon pulse into everything from earbuds to AI #datacenters. In a world chasing speed, silence, and fidelity, xMEMS isn't following the beat, they're building the frequency the future will hum to. #Startups #StartupFunding #VentureCapital #SeriesD #AI #Sound #SoundEngineering #Semiconductors #Data #DataDriven #Technology #Innovation #TechEcosystem #StartupEcosystem #Hiring #TechHiring If software engineering peace of mind is what you crave, Vention is your zen.

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SF VC Takeaway #2: Pricing expectations, performance bars, and what’s actually getting funded. One theme that came up repeatedly in SF was how far pricing expectations and performance bars have shifted, even compared to just a few years ago. A few things investors kept anchoring to: 1️⃣ Median Series A valuations are higher than their 2021 peaks, but fewer of them are getting done. 2️⃣ Capital is being concentrated into fewer and fewer companies (and lots of capital!) 3️⃣ “Good” progress is no longer enough and the bar for standout performance has moved in an AI-native world So what does “top performance” mean right now? One investor told me that top quartile seed companies in their portfolio are going from $0 to $2M in ARR in <12 months. Outside of pure traction numbers, a few other themes that came up to describe "top performance": 📈 Explosive early revenue ramps (or a very credible path to them) 📊 Strong velocity and momentum for 2 quarters in a row, even if the baseline is small. 🚀 Clear signals of category leadership, not just product-market fit. Sometimes shown by either domain expertise, speed of product optimization, or by lack of competition in the category. This creates a counterintuitive dynamic where it can be easier to fund a company with strong pedigrees in a hot space and no traction yet than a company that went from 0 to $1M ARR at what used to be considered a rapid pace. Pricing today is driven by trajectories, not moments in time. We used to say investors invest in lines not points; I think that's more true than ever now because crossing certain milestones doesn't carry as much influence as it once did. Finally, investors still say that valuation matters, but many of them are acting differently. Pace and belief in category-defining companies really sets the price; while slower growth gets scrutinized rather than discounted. One silver lining in the camp of durable growth: Series A rounds are happening so fast that many companies don’t yet have meaningful history of retention data. Large bets are being made on velocity before the durability is proven. Several investors told me the same thing: we may soon swing back to a market where retention, not growth, becomes the defining metric. Let's hope so. I'll share my third SF VC takeaway tomorrow!

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🚧 Outbound isn’t broken — it’s just being rebuilt for the PE era Private equity firms aren’t just funding pipeline growth — they’re questioning the entire outbound motion. ❌ Hiring SDRs without strategy ❌ Measuring activity without conversion ❌ Throwing tech at the problem without solving the system At The Pipeline Group, we’re seeing leading firms shift their mindset: 🔁 From headcount to pipeline repeatability 📊 From surface metrics to real conversion signals 🔧 From tools to tightly integrated GTM systems It’s not about abandoning outbound. It’s about engineering it to perform under pressure. 👇 We unpack how top PE firms are doing just that: 🔗 How Private Equity Firms Are Rethinking Outbound GTM - https://lnkd.in/ezxp9Gc5

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I've been on both sides of M&A transactions, and the Wiz deal offers a masterclass in patience and leverage that applies whether you're running a micro-SaaS business or a larger venture. What fascinates me about Wiz isn't just the $32B price tag but how they orchestrated their own leverage. When they rejected Google's initial $23B offer last year, industry insiders thought they were crazy. But they understood something most founders might miss: sometimes your best move is patience. I see this in micro-SaaS all the time. Founders who build real, profitable businesses give themselves options. When you solve a painful problem for a niche audience, you create leverage. People need your product. And that gives you power when it’s time to talk deals. Real value beats a quick exit every time. Whether your market is $100M or $100B - building a sticky, useful product puts you in control. The best part of the Wiz story? It shows you don’t have to chase unicorn status or rush to sell. Slow, deliberate company-building works. And it can lead to life-changing outcomes. Takeaway for founders: → Build something people really need → Keep your options open → And remember... sometimes the best negotiation tactic is simply having the confidence to say "not yet." What's your acquisition strategy like? // P.S. I build in public on Substack >> https://t2m.io/4aDyNCpu For the love of the game 🏴‍☠️ ⚡️ image credit: CB Insights #wiz #acquisition #startups

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“PE Growth HEADWIND”: The Next Wave of PE Exits is Coming - And GTM Blind Spots May Be The Silent Killer of PE Returns With a huge backlog, PE exit activity is poised to rebound over the next several years - but are PE firms quietly sabotaging outcomes by overlooking GTM red flags at the portco level just prior to exit? In the PE world, we all know that acquisition multiples aren't just a function of EBITDA - they reflect how repeatable, scalable, and strategic your revenue engine looks to the buyer. And many business sellers seem to ignore the direct link between organic growth & acquisition multiples until it is too late - and they end up scrambling to improve GTM just prior to exit. BIG POINT: PE-backed businesses that demonstrate: ·  Consistent, repeatable revenue growth ·  A low cost of acquisition and high retention ·  A scalable GTM model …are more likely to command higher multiples. And improvements in Marketing, Sales & Customer Success directly contribute to this profile. And yet, GTM underperformance is one of the top reasons portcos exit at suboptimal valuations. Here are 5 common GTM challenges silently hurting acquisition multiples: ·  CAC is rising, but Marketing can't prove what’s working ·  Sales win rates are inconsistent and heavily rep-dependent ·  ICP definition is vague or misaligned across teams ·  Customer Success is reactive, not revenue-driving ·  NRR is flat or declining, with no structured expansion playbook But it doesn’t have to be this way. When a portco proves it can grow organically, predictably, and efficiently, strategic & financial buyers are willing to pay more - often significantly more. So, here are 5 top GTM-focused priorities for PE-backed businesses to unlock higher multiples: ·  Clearer Ideal Customer Profile (ICP) across Marketing, Sales & CS ·  Full-funnel GTM metrics to track CAC, payback, pipeline velocity & NRR ·  Systematized sales execution - deploy training, playbooks & buyer-aligned messaging ·  CS is enabled to drive expansion, retention & proactive churn mitigation ·  Own the growth narrative with a data-backed story positioning the portco as a category leader These aren’t just “Marketing & Sales improvements.” These are exit-valuation levers. And when they’re working together, they can unlock a 1-3x multiple uplift at exit. RECOMMENDATION: Consider a “GTM exit-readiness assessment” at least 12-18 months ahead of a planned exit to ensure your growth narrative matches actual growth results to avoid exit valuation disagreements. Don’t let GTM gaps drag down your next exit - learn how to fix them now. Let's talk - DM me. ------------------  👍 React to support  💬 Comment with your views  ♻️ Please repost this to also help others  ➕ Follow Brian Gustason💡for more PE growth tips #PrivateEquity #PortfolioGrowth #GTMStrategy #ValueCreation #ExitMultiples #B2BGrowth #CustomerSuccess #MarketingStrategy #SalesEnablement #RevenueGrowth #OperatingPartner

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At this year’s Thoma Bravo annual LP meeting, the futures of both SaaS and AI — and their interconnection — were naturally on the mind of our investors. And while history doesn’t always repeat, it does often rhyme — so to help clarify, I felt it would be valuable to review some lessons from the pace and process of some of history’s transformational technologies. In our view, the first-generation digital transformation journey still has immense, untapped opportunity based on our experience navigating the industry’s evolution from on-premise to cloud software. I shared a few slides showing that: SaaS revenue is only approximately 25% of total expected software revenue in 2025, with projected 19% annual growth from 2025 - 2028. Many large enterprises still maintain significant on-premise infrastructure — particularly financial systems. Companies, including some of our portfolio companies, have been managing enterprise cloud and SaaS transitions for over a decade, and there is still plenty of runway left in this transition. So what accounts for that runway? Yes, technology evolves quickly. But products, organizations, and business processes that use technology effectively take multiples of that time to adapt and utilize. And the large enterprises that embark on transformations don’t do so at the pace of technology itself; they take each step with measured intention. As they should, given the stakes. The same dynamics are currently at play in AI. It's important to note that what AI foundation models can do right now is laps ahead of what software products can deliver, which is itself far ahead of what most enterprises are ready to implement. Because of that deliberate nature, proprietary data, regulatory compliance, and seamless user experiences will likely become crucial to proving the case for accelerating value — and that’s where data is a company’s competitive moat. We believe that — when combined with the data that sits within them — AI will benefit enterprise software customers in at least two key ways: 1) Democratize access so that more users can make use of deep business insights built from massive data sets; and 2) Enable customers to make real-time operating decisions at scale, with greater speed, precision and less labor input. For investors, this perspective is important. Creating economic value means using technology, not just deploying it. As basketball coach John Wooden famously said, "Be quick, but don't hurry." In enterprise software’s evolution, we believe that's the key to creating enduring value.

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Micro PE + Venture Rollups = A Built-In Disruption Hedge When pure-play SaaS multiples slow down, profitable “boring” businesses continue to thrive. Rolling up pool-cleaning companies or HVAC contractors can help offset the volatility of high-risk tech investments. Why this cushion matters: • Cash-flow first - rollups compound earnings regardless of valuation cycles. • Automation-resistant services - human presence is still required on-site, even if AI handles the bookings. • Different beta - lower correlation to consumer apps or frontier tech, leading to smoother LP returns. Tired of watching SaaS valuations whipsaw your portfolio? Curious about how a service rollup could dampen the swings? Drop a 👍 if you're interested in a deeper dive on disruption hedging with Micro PE.

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The old SaaS pricing playbook doesn’t work for AI. Madhavan Ramanujam and I partnered with Emergence Capital and Jake Saper to write a new one—built for where AI is going, not just where it is today. We lay out what state-of-the-art AI pricing looks like now—and what it will look like: ✅ Hybrid pricing (seats + usage) is the current best practice 🎯 Outcome-based models are the future—pricing tied directly to impact 💰 The best AI companies already capture 25–50% of the value they create As autonomy and attribution improve, outcome pricing will go from rare to expected. Founders who move early will win. Full read here 👉 https://lnkd.in/gwp6tDtp

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