The start of a new year is a great moment for reviewing the lessons of the past twelve months and considering what lies ahead. And in private equity, one message is starting to stand out: growth is slowing.

While we’re natural optimists and back fast-growing, successful businesses, we’re also realists. From talking to people across the market and with European software companies, it’s clear sales cycles are dragging, budgets are tight, and CFOs are watching every penny - playing a closer role in software procurement decisions.

However, slow growth market conditions tend to favour the nimble and fleet-footed – precisely the sort of companies we’re investing in. I see a real opportunity for these companies to get strategic and build stronger foundations – such as hiring great talent or making product improvements – that will allow them to win market share as conditions start to improve.

Here are three predictions for how this will play out in the year ahead.

1. Nimble software companies will outperform the big players.

In a slow growth market, lean, well-run software businesses that pay close attention to their customers - and what they really want - will have the edge over larger incumbents where the focus is on serving the widest possible market. ‘Disruption’ is an overused term in the tech sector, but nimble providers can move in and win business by showing customers how and where they can deliver ROI.

2. The best private equity-backed businesses will be spoilt for choice on talent.

After several years of tech industry talent shortages, the changing market dynamics have meant that there is a lot of great talent out there in need of the right home. Senior sales leaders from VC-backed companies that didn’t hit their targets are now looking for quality roles that offer purpose and ambition.

It’s a brilliant chance for capital-efficient, private equity-backed businesses to step up their hiring in 2025. Across our portfolio we’re already seeing evidence that these sales leaders are attracted to the sustainable growth model favoured by private equity-backed companies, rather than the "growth at all costs" mentality they may have experienced in the past.

3. Less political uncertainty should create the conditions for growth.

With the US election and the UK budget now behind us, 2025 offers businesses the chance to refocus on growth without the distractions of political uncertainty. Politics is always noisy, but we should expect a more consistent day-to-day business environment than we’ve had over the past twelve months, creating conditions that will allow companies to stay focused on the fundamentals.

It will require hustle (it always does), but as we’re seeing across our portfolio, there are still growth opportunities out there for software companies with great products that solve real problems. Indeed, it’s our job as partners to bring our expertise to bear and help companies capitalise in the year ahead.

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