November 7, 2022 – On today’s podcast we welcome special guest, AvePoint CEO TJ Jiang. AvePoint is the largest data management solutions provider for the Microsoft cloud.
On the show, TJ discusses:
- His journey from new immigrant, to Wall Street, to successful entrepreneur taking his company public
- How he made it through the adversity when founding the company
- Lessons learned from taking his company public
- His thoughts on the current recessionary economic environment
- And more
Welcome investors to The Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies, your hosts, Julian Klymochko, and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by Accelerate Financial Technologies. Accelerate because performance matters. Find out more at accelerateshares.com.
Julian Klymochko: Welcoming TJ to the show. All the way from Munich, Germany, doing some business travels. And appreciate the late-night podcast recording. TJ, how are you today? I mean, tonight, [laugh].
Tianyi Jiang: [Laugh]. Great. good afternoon to you, Julian, and Michael. It’s good to be here. Thank you for having me on show.
Julian Klymochko: Yeah. So, I find your story very compelling. You’re a first-generation immigrant. You came to the US when you’re just 11 years old. You didn’t know any English. Your family had very little money. And so, as you kind of pursued, you know, a new life in a completely new country, it seems like the deck was stacked against you, but you’re able to get into a great school, Cornell then have a fantastic start to your career as a programmer on Wall Street. What do you attribute that success to?
Tianyi Jiang: I have fantastic parents who are academics. They are biophysics researchers. They were first batch of exchange scientists that were fortunate enough to come to US in the mid-eighties. They always trust on academics, and I think actually growing up with nothing as first generation immigrant helped a lot. I had to work and earn my own key ever since I was 12 years old. And I think, you know what doesn’t kill you make you stronger. And, you know, people talk about developing grit. You know that’s part of the experience. And I love you know, being able to give the opportunity to grow. And I went to great public school in Bethesda of Maryland, Wal Whitman High School. So, I think we weren’t just blessed with opportunities and, you know, I think America remained to be the best country where if you work hard and seize the opportunity, you will be able to get ahead in life. So, yeah, it’s part of the American dream.
Julian Klymochko: And prior to becoming a founder and entrepreneur, you had stints at Lehman Brothers in Citadel. What was that experience like?
Tianyi Jiang: Yeah, I worked at Deutsche Bank and Lehman Brothers. Deutsche at the fixed income writing bond analytics software. And then Lehman Brother, I followed my MD to Lehman Brothers program training on equity does. And then 9/11 happened. My office is 40th floor of World Trade Center. Thankfully everyone on the 40th floor made it down that day. That was a life changing event, and I decided to go to grad school first in MBA at Stern and then switch over to doctor and machine learning data mining. After my first two years of master’s program and did my kind of qualifying exam and I decided to work at Citadel as a quant desk engineer. So yeah, those were interesting days. You know, you get to learn at a very fast pace and work at very fast pace. And it’s just makes you very, very focused on very niche problem sets. And after a while I realize that may not be my calling. You know, the money is fantastic to work on Wall Street. I work at Citadel. But it’s something that I wanted to broaden myself. I feel like I got really, really good at high frequency trading from a programming and analytics perspective, but that made me less and less interesting of a person [laugh]. Around the same time, my good friend Kai, who I met at my first job, Lucent [Inaudible 00:3:45] Cornell decided to start his own company called AvePoint, and he pulled me in. And that has been a life changing experience for me.
Michael Kesslering: I think it’s been pretty well discussed on why Wall Street would be a good training ground for entrepreneurship and a good starting point for a career. But can you explain why high frequency trading would be a really good opportunity as well as a training ground prior to entrepreneurship?
Tianyi Jiang: Yeah, it’s really the discipline of, in a B2B software environment. So, we are all coders and we’re all engineers. Prior to that point, I knew nothing about sales or marketing or business development, nor capital raises for that matter. So, everything is new as we grow AppPoint. But yeah, the discipline of Wall Street. The rigor of writing really robust high-quality, high-performance software platforms. And that’s something I have taken with me to starting AvePoint as an enterprise B2B software platform company. So, we think in platforms, we don’t think in point solutions that we think about robustness of governance and regulations and speed. So, all of that I think really builds this foundation for us as we started our own B2B software company.
Julian Klymochko: Now, from just a cursory view, people would see you co-founded a company, your CEO at AvePoint, which is now a publicly traded business. And that must have been an overnight success. However, you’ve described your entrepreneurial journey as a rollercoaster of a thrilling ride, and you stated that you struggled, AvePoint did not make a single dollar for three years, and it wasn’t for another decade that I could pay myself more than my Wall Street salary. So, a lot of adversity there. How did you make it through that?
Tianyi Jiang: Yeah, so, you know, it’s funny, Julian, through that entire time we were just having fun. You know, I think what was important is we didn’t really care about money. Money was just a byproduct. We were far more interested in growing a global enterprise footprint. And we started an enterprise content management space, which is Microsoft SharePoint. And because only large business used that, and for us to reach that audience, we have to be in person white glove service. And that’s why we actually expand into 18 different countries. So, part of the thrill of starting a company being so super scrappy and you know, being able to, you know, just do everything on our own, but being able to have that exposure globally, it’s just a fantastic experience. Yes, on one hand we were pretty cash strapped and, you know, never had that much to work with. On the other hand, the thrill of creating something new, of opening office in UK, in Japan, in Singapore. It’s that, you know, excitement of learning something new, creating something new, and creating a global business that really is the part of the thrill. So, the journey is what was important to us. We didn’t actually feel like it was hard work because we were truly enjoying ourselves and learning in real time to grow a real international business.
Julian Klymochko: And starting it out of a garage or whatever. Did you ever think, oh man, I made a big mistake here, wish I stayed on Wall Street, or were you always confident in the future?
Tianyi Jiang: Julian, that’s a great question. There’s funny story. I very seldomly told this so when I stand my qualifying exam and then, you know, usually a doctorate program, you do two years of class and do a qualifying exam, and after that you have, you know, three to four years to do your PhD thesis, and that’s when you have a lot of time. So, after that Kai really wanted me to get involved at AvePoint full time. So, but I want to still to try work at Citadel because I was following, again, my previous MD there, and he was truly disappointed [Laugh], you know, in me actually trying something else before trying AvePoint. But again, I didn’t find you know, my passion with Citadel and I decided to do a startup and I think you know, it was really trying different things and figure out, you know, where I really like where my passion led me to do is what would drove us. And yeah, we started in a public library in Somerset, New Jersey, [laugh], and then we grew this business. Yeah. So, it’s been a really, really good ride.
Julian Klymochko: And when you guys started it, you and your business partner Kai in this library, the founding of AvePoint, what problem were you looking to solve? What was the opportunity that you saw?
Tianyi Jiang: Yeah, that’s another thing I actually tell a lot of entrepreneurs. Most people think that, you know, the first product is a blockbuster product. That’s not true at all. In our case, we started in, first the exchange backup space in early two thousand is already a very crowded space. So again, back then people were selling CDs. This is B2B software, right? So, CDs and distribute that way, nobody will buy that kind of enterprise software from a guy in half in New Jersey. We like most things in life, you have to work hard, but you also have to get lucky. And our big break was Microsoft released this thing called Lake Tahoe Project. Later is called SharePoint. So, we actually supported that because the backup format was the same as exchange. It’s a web storage, a library format and even then, nobody bought from us [laugh].
Our big luck came in 2003 when second version of SharePoint came out. It was using completely different relation of database sequel backend, and we became the only provider in the world that supported the migration path and then later back up of that enterprise content management platform. And that got everyone’s attention, and that brought us recognition in the enterprise space as a company that focused on the tougher problems to solve. Things that usually are too tedious for other people to worry about. We just got in there and then got lucky and be able to start generating revenue and pick up really large customers. So oftentimes in life, I think it’s really work hard and be lucky, and when you get that opportunity go and cease, so it’s never like, also we have epiphany in the very beginning that we have a wonderful billion plus, you know market cap company. That’s never like that.
Julian Klymochko: And they say the harder you work, the luckier you get. So, it looks like you guys created this opportunity, you caught your lucky break, and you went from basically zero users and now more than 9 million cloud users rely on AvePoint solutions. Can you talk about some of your products and how they have developed over time?
Tianyi Jiang: Yeah, today are the largest third-party SaaS data management and data governance solution provider in the Microsoft cloud space. So, we help enterprises migrate, manage, and protect their cloud data in Office 365, also Azure, as well as Dynamic 365. We have since expanding to Salesforce as well as Google. How we started is in the enterprise content management space, as I mentioned earlier, migration and backup, and even in the OnPrem world, because this company’s been around for more than 20 years. The first 10 years is on-prem, and that was really focused around the infrastructure supports of data backup, data governance as well as compliance and record management. So, information life cycle on top of ECM. And then we made another big pivot early in 2010 into cloud where Microsoft just started to, what it’s called BPOS, business productivity online type of thing.
Basically, precursor to share online, precursor to office, 365. We recognize very early on that cloud is the future. It allows us to expand our total adjustable market from just ECM, which is SharePoint, to include the entirety of Office 365, because today, if you use teams to do collaboration of sharing documents and co co-authoring in the Microsoft world, you have to go through SharePoint. SharePoint as an ECM platform becomes almost a foundation and piping, if you will, for Microsoft Office. So, we were able to recognize that early on, recognize that allow us to expand our total address of the market to include all of office 365, so not just a niche space, that’s the ECM SharePoint. So that’s our big break. So today our customers leverage our SaaS solution assisting Azure to be able to do the whole end to end business data, life cycle management, data back as a service, record management as a service. And increasingly we’re also going to vertical solutions, so such as our ed tech platform of training management, learning management, digital assessment, fully integrated with Microsoft Cloud, fully with integrated with teams, so to reduce change management and adoption management or large enterprises when it comes to commercial learning and development. So, we are looking to expand our footprint to build more vertical solutions, leveraging our competitive energy data management space on top of Microsoft products.
Michael Kesslering: And from a financial perspective, could you talk a little bit about the unit economics of your business?
Tianyi Jiang: Yeah, so this is all public information since we are a public company. So, in term of overall this year we will be well over 200 million recurring businesses. A recurring side is growing 31% constant currency year over year. We are cash positive on annualized basis, so that means we’re not burning cash to grow at that rate. Rest of our business that’s non-recurring, what we call service business. We do deployment services and some of the governance setup services, and that’s going to go from 18% of our business down to 10% of our business in the next few years as we continue scale and invest into channel, invest in service partners. So, we give the services to partners. So, we just focus on the recurring piece of our business, the SaaS business. We see a clear line path to a billion-dollar recurring revenue very quickly because the Microsoft market is massive. Julian earlier cited that we have over 9 million active users, cloud users on our platform. The entire office is [Inaudible 00:14:56] is over 280 million users.
Julian Klymochko: Wow.
Tianyi Jiang: So we’re just scratching the surface to go after the market. The market itself is growing and we are growing. We are the only SaaS provider that’s doing the whole end to end data life cycle, business data management, migration integration work. So that perspective, we don’t have a singularly focused competitor either. We have [Inaudible 00:15:19] competitors. So, from a unit economic perspective, Michael, it’s easier to think of us. It’s like $2-3 per user per month type of situation. Depends on what product and what bundle that you buy from us. Of course, we’re very aggressively working to enlarge that [Inaudible 00:15:35] pool. So, revenue per user per month footprint as we invest in our products, as we also acquire new IP. This year we have done and announced four acquisitions. So, we will continue to work to enlarge our unit economics.
Julian Klymochko: Now a major milestone in AvePoint history just occurred. You took the company public, so now a publicly traded stock, what was that experience like, and any lessons learned for other founders, CEO looking to take their company public?
Tianyi Jiang: Yeah, Julian. So, we started going down this path in the late summer of 2020, and we actually started in the traditional IPO route. We put together syndicate Goldman City, Evercore. And of course, during that time, as you recall the election as anybody’s guess and also, we still did not have covid vaccines, so it felt like very much like how we feel today, right? There’s a lot of volatility, uncertainty, and nobody really know what the next six months to nine months will bring. So of course, at that point, the stock market is still hot and 75% of IPOs were done via the SPAC route. So, we actually checked out the option and within a matter of four weeks, we were able to secure our 2 billion valuation, secure capital. We had zero redemptions, and that was the best way to become public, and we did it that way.
Of course, fast forward to today, as you know, we are now in year 2022 is the worst IPO year in two decades, right? It’s absolutely winter right now.
Julian Klymochko: Yep.
Tianyi Jiang: There’s no deals for bankers and it’s very hard to do public deals and even private deals with interest rates so high. So, it’s a very different world, right? We don’t know what next six months and next twelve months will be, but for us because we are public company, we’re very well capitalized and we have no debt and we’re cash generating, we’re obviously working very aggressively towards getting gap profitable as well. The difference is stock based comp allocation.
Julian Klymochko: Yep.
Tianyi Jiang: So, we are now in a situation where we have many options to grow. So that’s a good thing. Now, my advice to entrepreneurs and companies that want to contemplate going public is that it’s a very different thing from going private to public. You obviously have the massive mega, you know, kind of attention and detail analysis being a public company, every quarter you have to talk to analysts. They have their own models and at your company, what that does is actually it forces you to be much, much more disciplined in your business. You have to have predictability, you have to have growth, and you have to have discipline to make sure you execute to what you forecast that you would do. Also, it creates this sharper focus around how to scale your business without incurring too much cost. I take it now that more than a year after we have gone public as good things, good forces, that makes us a much better business.
I often share with my senior management that my regret is that we didn’t go public 10 years ago. We would’ve been even much bigger company today because that forced discipline. As a private company, you kind of have a bit of a, you know, a relaxed attitude. So, whereas public company as a market in real time evaluates your quarterly performance. The entire organization from me all the way to field staff and customer facing staff to feel that impact on a quarterly basis in real time by the market. And that kind of unifying force is something that’s really, really good by being a public company.
Julian Klymochko: Yeah, that’s a really interesting insight as you transition from private to public. Now, you did mention a lot of volatility, uncertainty out there in the stock market, many talking about recession. I was wondering, you’re on the front lines of business. What’s the current market environment from your perspective? Are you saying recessionary conditions or is your customer base still looking to grow?
Tianyi Jiang: The overall macro climate is very volatile. And I think the recently Goldman Sachs released a banker survey that 90 plus percent of the bankers are expecting a recession in the next 12 months. So that’s the overall condition. For AvePoint, however, we are extremely fortunate to be in the space of digital transformation and in the space of cloud data management and governance and security. Where I’m here in Munich, I’ve been talking to customers here in Europe. Our partners, our employees, everyone remain to be very bullish because if you actually listen to Microsoft Justin, the head of global commercial business recently spoke in San Francisco. I was there at the Goldman conference, gave a speech as well. From Microsoft perspective, the industry is only 2% of the way there in term of digital transformation. And when we talk about digital transformation, it’s not just about uplifting your mail servers, your files to cloud and call that a day.
It’s actually leveraging big data, leveraging cognitive services, leveraging cloud services to reinvent and enhance and innovate your business. Every business has to be a tech business going forward. It’s still a very, very competitive global environment. So, in that regard, we actually seen continued massive demand to do digital transformation, to do uplift. And we’re only 2% the way there. So, from our perspective, because we also focus a lot on regulated industry, government, very highly resilient industries. So, we continue to see very, very strong demand across all 18 markets that we play in. And these are all tier one B2B software markets. Our biggest markets is USA our second biggest, Japan, our third biggest is Germany from a global distribution, 45%. Our distribution of revenue is in North America, and rest of even split between Western Europe and Asia and Asia being Japan, Austral, New Zealand, Singapore, and we recently expanded South Korea. So, it’s actually continued to be very good opportunity for us, and we’re extremely fortunate to be in that space.
Julian Klymochko: Yeah, certainly certain sectors are more recession resistant than others. Now looking back at your entrepreneurial journey. Started long time ago from zero now up to 200 million in annual recurring revenue, you guys have a target to grow to 1 billion in arr. Now, looking back, if you had a chance to start that entrepreneurial journey again, anything you do differently?
Tianyi Jiang: Yeah, I think Julia, as I mentioned earlier, I would’ve really pushed our senior management team to go public 10 years earlier. So, in 2006 we raised our series A with Summit Partners with just under 6 million funding, and we were growing double and triple every year for nine straight years. That’s when we could have gone public as well. So, at that point, I think a 70 million revenue business. We could have gone public and that would’ve given us access to capital markets so we can grow faster. What we have done instead is we’ve done a series B with Goldman Merchant Banking, and we did a subscription conversion on our own without borrowing money. So, we actually were always very tight on capital because when you do a subscription conversion, there’s a cash crunch, right? Go from perpetual to maintenance model to a subscription model where you get the cash more distributed out in year two and three, there’s a cash crunch situation. So, we couldn’t grow as fast as we would have because we didn’t want to go into debt. So, we were never taken on debt, and we built this business with just 60 million primary capital where just that fiscally conservative.
Julian Klymochko: Okay, TJ running into some technical issues with the Wi-Fi at the hotel in Munich, but we got him back on the show. Now. Before we wrap things up, just one last fun question was wondering, as a business leader, CEO, what is your favorite productivity hack?
Julian Klymochko: My productivity hack. So, I like to do long runs. I’m a marathon runner and you know, I have this monkey brain that makes it difficult for me to, and I try many times to do meditation. So, what I ended up doing is to do long runs and that allow me to actually calm my nerves and think clearly. And my life hack is to listen to podcasts while I do my long runs, and I actually listen to them at 1.6 x speed. So, I actually get a lot of knowledge intake during my long runs. Not only does it actually help me and reset my mind, but also, I get to learn about, you know, current events. I learn about, you know, what NASA’s doing. So, I have a quite eclectic selection of podcasts that I catch up on.
Julian Klymochko: Great. Some practical advice for our listeners. Thank you so much, TJ, for coming on the show. Wish you the best of success at AvePoint.
Tianyi Jiang: Thank you, Julian. Thank you, Michael.
Julian Klymochko: All right. Thank you. Bye everybody.
Thanks for tuning in to the Absolute Return Podcast. This episode was brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.AccelerateShares.com. The views expressed in this podcast to the personal views of the participants and do not reflect the views of Accelerate. No aspect of this podcast constitutes investment legal or tax advice. Opinions expressed in this podcast should not be viewed as a recommendation or solicitation of an offer to buy or sell any securities or investment strategies. The information and opinions in this podcast are based on current market conditions and may fluctuate and change in the future. No representation or warranty expressed or implied is made on behalf of Accelerate as to the accuracy or completeness of the information contained in this podcast. Accelerate does not accept any liability for any direct indirect or consequential loss or damage suffered by any person as a result relying on all or any part of this podcast and any liability is expressly disclaimed.