David Sacks Says Private Equity Is Now Software’s Third Exit Path

Benzinga reported Thursday that venture capitalist David Sacks now considers private equity buyouts a legitimate third major exit for software companies, ranking alongside IPOs and traditional M&A deals.

Sacks made the remarks on the All-In Podcast, published April 24. He argued that large private equity firms have opened a viable new route for founders and venture investors looking for liquidity in a constrained market.

A New Exit Lane Opens for Software

For decades, software founders could realistically aim for either a public listing or an acquisition by a larger tech firm. Sacks said PE shops have now added a third option, using debt-heavy deal structures to acquire mature software businesses.

The timing matters. Public equity markets have been largely hostile to software listings. Strategic acquirers are moving cautiously. Private equity has stepped in to absorb assets that might otherwise be stranded.

AI Is Quietly Dismantling the SaaS Playbook

Sacks tied the private equity surge to a deeper structural problem inside the software industry. He argued that AI agents have become capable enough, and cheap enough, that enterprise customers can now build internal alternatives to vertical SaaS tools rather than paying subscription fees.

That shift is undermining the predictable recurring revenue that defined the SaaS model and attracted premium valuations for years. Net revenue retention rates at some companies have reportedly slid from above 120% to around 80%, a deterioration that directly pressures the cash flows leveraged buyouts depend on.

The median enterprise-value-to-revenue multiple for software companies stood at roughly 3.4x as of March, down from peaks above 18x in 2021, according to data cited in Benzinga’s report.

Background: The PE Playbook Meets a Moving Target

Private equity buyouts in software have traditionally relied on a one-third equity, two-thirds debt structure. Stable, subscription-based cash flows made software businesses appealing collateral. That assumption held for years and drove firms like Thoma Bravo to build large software portfolios.

Now that thesis faces stress. AI disruption compresses the multi-year operational improvement window that PE firms typically need to generate returns and repay debt.

Also Read: Thoma Bravo Backs Enterprise Software Deals as Valuations Reset

A Lifeline With Strings Attached

Sacks acknowledged the opportunity in depressed valuations, noting that buyers can effectively acquire assets at a steep discount to intrinsic value. But he cautioned that deals will likely demand tighter operating assumptions and less reliance on financial engineering.

For founders, the private equity software exit represents a fallback, not a windfall. The terms are harder. The oversight is heavier. The runway, however, remains open.

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