Episode summary
Why Now is the Best Time to Buy Public Software Companies
Invest Like the Best
· · 1 hr 1 min · Hosts: Patrick O'Shaughnessy · Guests: Mitchell Green
Summary
Mitchell Green describes Lead Edge Capital as a deliberately built investment machine designed to deliver consistent outcomes, not home runs. The firm sources deals through roughly 9,000 cold calls a year, uses a network of about 800 executive and entrepreneur LPs to validate opportunities and help portfolio companies, and runs with a tight internal process modeled on software-style discipline. Green says the goal is to earn 2 to 2.25x net fund returns by making five to seven investments a year and avoiding big losses, rather than swinging for grand slams.
A major part of the strategy is what Lead Edge calls its eight buying criteria: at least $10 million of revenue, 25% growth, 70% plus gross margins, recurring revenue, capital efficiency, profitability, low customer concentration, and other filters that narrow the field. Green argues the criteria are less about prediction than focus: they help the team know where to swing and where to pass. He says the firm is often creative on structure, buying primary rounds, secondaries, employee stakes, or even derivatives when direct access is unavailable.
Green also argues that selling is a skill many firms underweight. Lead Edge routinely underwrites exits, sells into strength, and uses a disposition committee to decide when to trim or exit. On AI, he is enthusiastic about productivity gains but skeptical of current valuations, especially assumptions that exit multiples can stay near 20 to 25 times. He thinks software remains an incumbent’s game, with distribution and customer relationships mattering more than R&D.
Key takeaways
- Lead Edge targets 2 to 2.25x net fund returns by making five to seven investments a year and avoiding zeros, not by chasing grand slams.
- Green says the firm’s 800 LPs are part of the sourcing, diligence, and portfolio-support engine, not just passive capital providers.
- The eight buying criteria are a filtering framework, and Green says they are meant to create focus rather than predict outperformance by themselves.
- Green believes the best risk-adjusted public opportunities are in software names, where he says the market is too skeptical.
- He is bullish on AI’s productivity impact but thinks many investors are overpaying by assuming exit multiples will remain extremely high.
Notable quotes
“we run this place like it's a software company”
“our number one KPI that we run this place by is what is our gross dollar retention for LPS”
“We're trying to make a 2 to 5x in 3 to seven years”
“The fastest way to get fired at Lead Edge is have a company and not tell us when there's a liquidity opportunity”
“I think the best riskadjusted returns right now are in public software names”
How the episode opens
My guest today is Mitchell Green, the founder of Lead Edge Capital. When I think about Lead Edge, I sort of think about this giant money machine that Mitchell and his two partners have designed over the last 15 plus years to make remarkably consistent investment returns for their clients. They have all sorts of unique aspects to the machine that they built, whether that's their collection of LPS, their eight-point criteria for how they select companies, the way they do cold calls, the way they construct their portfolio.
This is just a totally different way of approaching markets. They're trying to hit singles and doubles and deliver very consistent returns. Mitchell says it's really important in life to be memorable.
That's just a great simple thing that you can do. I think you'll find listening to Mitchell today and him talk about his entire machine and the firm that he's built that he himself is extremely memorable. I hope you enjoy learning about his business.
So the first time that I heard about lead edge capital was was the very famous list of what companies report starting with cash profits and then if they don't have cash profits and you go down this very funny list
Hierarchy of — Yeah. And the the bottom one is the place that's voted the best place to work in New York City or something. — Absolutely.
Where did that list come from? Why did you put that together? We've always found that the best way to communicate with, you know, our audiences, which is entrepreneurs and also our investor letter about a different topic.
And I started my career cold calling companies and that's the way we source deals. But when you start your career talking to I think Brian and I probably spoke to like 10,000 companies and if you want to know it's a good company just, you know, call 10,000 of them.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- public software investing
- investment criteria
- capital efficiency
- ai valuation skepticism
- cold call deal sourcing
Companies and tickers mentioned
- Lead Edge Capital
- Positive Sum
Watch the episode
Watch “Why Now is the Best Time to Buy Public Software Companies” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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