Insights
More Than Machines: Our Perspective on Industrial Tech Investing
If you’re an industrial technology business owner seeking to attract a private equity partner, we believe understanding the investment strategies and value-add approach of firms investing in this space is crucial. In this Q&A, we spoke with Adrian Guerra, Partner at Capstreet, to learn more about the firm’s approach to investing in industrial technology and driving growth in companies in that sector.
Q: How did Capstreet begin investing in industrial technology companies, and why did you choose this sector?
Our interest in industrial technology companies came about through the natural convergence of two Capstreet investment pillars—our history of investing in industrial end markets and our experience growing software and tech-enabled businesses. Industrial companies operate in essential, often behind-the-scenes parts of the economy—and a big part of that is how many of these businesses use technology to become more efficient, more scalable, and more resilient. To achieve these goals, we’ve increasingly seen companies adopt more advanced tech—things like automation, data collection and analytics. It wasn’t just about machines anymore; it was about the software and systems powering those machines. That shift has created opportunities for increased investment to help industrial companies grow through digital transformation. Due to our experience here, we believe we are well positioned to recognize and capitalize on these trends.
Q: How do industrial technology companies differ from the industrial products and services companies that Capstreet invests in? What makes this sector attractive?
We believe the main difference is where the value lives. In traditional industrial businesses, the value is tied up in physical products—like equipment, tools, or field services. But with industrial tech companies, the value increasingly comes from software, data, or automation that enhances those physical assets. So instead of just selling a pump, a tech-enabled company might provide monitoring software that tells you when the pump’s going to fail—or even automates maintenance scheduling. That shift is exciting because it can lead to recurring revenue models, higher margins, and a bigger role in a customer’s operations. Plus, many industrial tech companies often sit at the intersection of multiple trends: digital transformation, sustainability, and workforce shortages. We believe all of that creates a strong tailwind for growth and makes these companies really compelling from an investment standpoint.
Q: What has been the key to successful exits in your industrial technology investments?
In my opinion, successful exits in this space usually come down to a combination of growth, scalability, and clear value to the end customer. Buyers, whether strategic or financial, are looking for companies that can plug into a bigger ecosystem and deliver fast ROI. We’ve had the most success when we help our portfolio companies go from being niche solution providers to becoming what we believe are indispensable platforms. That means tightening up go-to-market strategy, expanding recurring revenue, and sometimes broadening the product suite through tuck-in acquisitions or partnerships. And timing matters, too—selling when a company is hitting its stride, with a strong team in place and a clear growth story, makes all the difference.
Q: What value-add strategies does Capstreet focus on implementing in its industrial technology companies?
One of the big things we focus on is helping companies professionalize and scale—especially when it comes to their tech stack, sales operations, and data strategy. A lot of these businesses are founder-led and have good products but haven’t had the time or resources to really optimize internal processes. We bring in tools for and experience in items ranging from CRM systems to digital marketing to customer success. Additionally, we work with companies to help evolve pricing and packaging to shift toward more attractive recurring revenue profiles. For instance, the industrial market has been slower to adopt subscription pricing, but we believe that is changing. We also lean in on talent—seeking to build out leadership teams, especially in product and tech. Increasingly, we are also identifying areas where artificial intelligence (AI) can help with automation and implementing it in appropriate places to maximize productivity. And because we’ve seen a lot of similar challenges across our portfolio, we can share best practices without companies having to reinvent the wheel.
Q: How do current market conditions influence your outlook on industrial technology investments?
Even with some broader market uncertainty, we’re still bullish on industrial tech. If anything, we believe current conditions are reinforcing the need for operational efficiency and visibility—which these companies are in a strong position to deliver. Labor shortages, supply chain issues, and energy costs all make digital tools more critical, not less. And while some companies are being more cautious with spending, they’re still prioritizing investments that have a clear and fast payback, especially those that help automate processes or reduce downtime. So, we’re seeing strong demand, particularly for solutions that are easy to deploy and offer real-time insights. Additionally, the current focus on increasing manufacturing in the U.S. may also provide additional tailwinds for investment in technology. The way we see it, industrial tech isn’t a “nice-to-have” anymore—it’s becoming mission-critical.
