Francisco Partners: “Software and services will drive the market”

Francisco Partners: “Software and services will drive the market”

What does your company do?

We at Francisco Partners focus solely on investing behind top firms and management teams in technology companies. We have invested more than $4 billion behind 50 companies in the past 10 years. We try to work with companies and markets that are at an inflection point and where our investment can help change the trajectory of the companies we invest behind. Each of our investments in the telematics segment has had record performance since our investment. Importantly though, this has not come from cost cuts but in conjunction with increased levels of investment in product development and sales and marketing efforts. We have a long-term perspective and, while our typical investment if for a three- to five-year duration, we view ourselves as patient investors, having have held companies for significantly longer periods. Francisco Partners itself manages private equity funds with approximately $7 billion in aggregate capital commitments. We have approximately 30 investment professionals in San Francisco and London dedicated solely to investing behind mid-market technology companies in subsectors ranging from software and services through to hardware, systems, and semiconductors. The investors at Francisco Partners have led some of the most successful technology investments to date, and we strive to continue that trend through strong industry expertise and partnering with great management teams.

How do you differentiate your offerings from your competitors?

We are in a people business. Our professionals have led some of the most successful technology investments around the globe over the past 15 years. We have had a specific effort dedicated to pursuing investments in the telematics segment for almost six years and have attended many conferences, invested in three telematics companies, and have six people internally focused on the segment. We believe that we have the deepest and largest experience base evaluating and investing behind telematics companies in the industry.

What partnerships are you currently forging?

We recently invested in Discrete Wireless in the US and Cybit in the UK. Both of these companies have made great progress throughout this year, and we are strongly investing behind them to accelerate their product development efforts, their go-to-market channels, and their overall business plans. In addition, we invested in Attenti (formerly dmatek), which tracks people using GPS, GPRS, and RF technologies on behalf of the criminal justice and elderly care industries.

Which trends will impact the industry the most in the coming years and why?

Two trends will greatly impact the industry in the coming years. Consolidation; the market will consolidate and, in the next three to five years, there will be only a handful of larger fleet management companies in each major geography, possibly worldwide. This will be driven by the fact that the larger players will be able to invest more into R&D and also have scale benefits, allowing them to provide better service for their customers. These will accrue to competitive advantages for the largest and best run players in the industry. Commoditization of hardware; hardware will become less and less of a competitive advantage and it will be the software and services that will drive the market forward. At one point in the future, the hardware could come standard from the OEM (as is starting to happen in the SVR market in Brazil) and this trend will continue as telematics companies develop OEM partnerships in the US and abroad. This trend will take three to five years to materialize fully, though. The conclusion of this trend will be a greater focus on the software and functionality of the offering.

You are an integral part of our upcoming Fleet and Asset Management USA 2010 event. What key topics will you be discussing with the industry at the show?

There has been a flurry of private equity investments into telematics and I know it is top of mind for many managers and company owners. I will be discussing what it is like to work with private equity, what it means for you as a manager and a shareholder. I’m also happy to share any of my views on the market and strategies from our investments and experience in the market.

Which apps, services, or cars are on your 2011 wish list?

I am a fan of anything that gives our customers a tangible ROI and drives them to purchase more units or more features. Currently, we are seeing strong traction in a number of advanced applications measuring driver performance as well as enhanced routing and scheduling capabilities. On the car side, I used to build and race off-road vehicles so I would personally look forward to doing some rally car or baja car races in the future.

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