Q&A: Francisco Partners on the software sell-off

Rod James

Fri, February 27, 2026 at 7:05 AM GMT+9 5 min read

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It’s been a chaotic February for investors in the software space.

The first week of the month saw a steep sell-off in tech stocks, driven by fears that AI could disrupt the business models of SaaS companies, a highly popular and profitable play for PE investors.

Dipanjan “DJ” Deb

Dipanjan “DJ” Deb co-founded Francisco Partners in 1999. Today, he leads a $45 billion private equity and credit investment firm focused on technology- and tech-enabled services companies.

The San Francisco firm is particularly known for doing complex middle-market deals, including corporate carveouts and take-privates.

In October, it took Jamf, a device management and security business focused on Apple products, off the NYSE in a $2.2 billion deal.

Francisco closed its last flagship fund in 2022 on over $13.5 billion. It also manages a family of funds that invest in smaller companies.

The firm ranked second in the HEC Paris-Dow Jones Annual Global Large Buyout Performance Ranking for 2026, the sixth straight time it has ranked among the top 3.

Deb talked to PitchBook about the significance of the sell-off, the opportunities it has brought about, and how Francisco Partners navigates the AI boom.

The conversation has been edited for brevity and clarity.

With the benefit of hindsight, what is the significance of the “SaaS-pocalypse” sell-off?

Deb: There’s the old adage: “In the long term, the stock market is a weighing machine, in the short term it’s a voting machine.” That’s true. It happens on the way up, it happens on the way down. I think there are parts of software that AI can disrupt. There will be parts of software that benefit and thrive, and emerge with higher multiples because people realize they have even more lock-in [as a result of AI].

How are you thinking about the threat of AI in relation to your portfolio?

We’ve been preparing our portfolio since ChatGPT came out. Just because the stock market reacted [three] weeks ago, it doesn’t mean anything has fundamentally changed.

People don’t like change because it requires effort. Customers want to use their incumbent vendor, but they want the vendor to do better, to give them more tools and provide more value.

Using your phone, you can deposit checks, use Zelle, wire money … the banks still exist; they just provide much more functionality to their customers.

We have a whole scoring system for our portfolio. What are the areas of lock-in? What can we do to create more lock-in? What’s the switching cost? What’s the pricing model? We’ve spent tons of time on this, not based on the market crash. This was a year and a half ago.

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Is the reset in software valuations an opportunity for your credit business?

I think there should be. Most of what we do is direct origination, but we often buy loans trading at a discount.

We’re definitely seeing opportunities to buy loans just because people are afraid. What you need to be able to do is not worry about the pricing at a moment in time. If you hold it to maturity, almost unequivocally, you’re going to get par back.

How about on the equity side?

Software companies are trading at 5x revenue, which we haven’t seen in over a decade. There are some that deserve to trade at that, and others that don’t. If you look at the history of private equity, vintage really matters. If you buy low, you tend to make more money. People tend to overinvest at the top and underinvest at the bottom. If you deploy the same amount roughly everywhere, you’ll likely outperform your peers, and that’s the strategy.

Sometimes it’s hard to get deals done when stocks have just gone down, especially in the public markets, because public boards are still focused on pricing from three or six months ago. But with founders and division carveouts, they are much more likely to transact because they are rolling a stake.

You describe Francisco as a second or third-order technology investor. How do you chart that course when AI is growing at such a furious pace?

They are losing tons of money. I don’t know which of these LLM models will win, but history suggests not all of them can. Netscape was the first portal to the web, and Netscape no longer exists.

We have to figure out the implications of this technology for everything else in the ecosystem, and what is likely to get stronger.

We’re not in the Anthropics and OpenAIs, which can have huge returns. We’re in a consistent, steady-as-she-goes business.

What is the AI wave comparable with?

I think it’s more serious than cloud computing. I think the analogy is the internet or mobile. Those were profound things. And I think people forget that today.

Your iPhone today is more powerful than a supercomputer from 50 years ago. You can do almost anything with it. I think AI could be that profound, but it takes time.

For my investors, I drew a sine wave going up and to the right. Along the way, you’ll have local maximums and local minimums. We’re high in the hype cycle right now.

**What keeps you awake at night? **

My favorite class in business school was taught by Andy Grove [former CEO of Intel]. He said only the paranoid survive. I have hundreds of worries. When you step back, human nature doesn’t change. That’s what you have to keep in mind.

This article originally appeared on PitchBook News

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