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AvePoint enters $2B initial public merger with Apex SPAC

AvePoint wants to use funds to invest in MSPs and push into the SMB market, and CEO Tianyi Jiang said a merger with Apex would be faster and easier than a regular IPO.

(This story has been updated with details on the merger.)

AvePoint decided to go public via SPAC (special purpose acquisition company) rather than IPO, merging with Apex Technology Acquisition Corporation.

AvePoint, provider of SaaS products for migrating, managing and protecting Microsoft 365 data, made its deal with Apex on Monday. The combined company will be named AvePoint and will be listed on Nasdaq as "AVPT." It is valued at approximately $2 billion, and the deal is expected to close in the first quarter of 2021. Current AvePoint shareholders are expected to own about 72% of the combined company once the transaction is complete.

Since its founding in 2001, AvePoint has raised $60 million in primary capital with no debt. It has gained a total of approximately $294 million in private equity funding over three series of funding rounds: Series A in November 2006, Series B in April 2014 and Series C in January 2020. AvePoint CEO and co-founder Tianyi Jiang said AvePoint has been consistently profitable throughout its 19-year history and expected the company's total generated revenue for 2020 to be about $148 million. This represents a 26% increase over 2019's revenue.

Jiang said 2020's revenue far exceeded his projections. COVID-19 played a large role in this, as organizations everywhere are now living in a "remote-everything world." Microsoft 365 adoption and Microsoft Teams usage have gone up significantly, opening up AvePoint's addressable market. Jiang said taking AvePoint public would allow it to address this market faster.

Jiang will continue to lead the new company, and fellow AvePoint co-founder Kai Gong will serve as executive chairman.

AvePoint didn't initially focus on small and midsize businesses (SMBs), and its customers are mostly large enterprises such as T-Mobile and Thermo Fisher Scientific. However, according to Jiang, SMBs started seeking out AvePoint's products about two years ago. He said he intends to use the funds from this merger to increase AvePoint's headcount and increase its SMB footprint, because businesses with 25 or 30 employees are saying they need Microsoft 365 data management, too.

"Just because you're smaller doesn't mean your data is worth less," Jiang said.

AvePoint's competitors include established traditional backup vendors such as Commvault and Veritas as well as cloud- and SaaS-based startups such as Rubrik and Druva. This has been a busy year for acquisitions and IPOs in the data protection market, including Insight Partners buying Veeam at a $5 billion valuation in January, VMware acquiring Datrium in July and Datto filing its IPO in October.

SPACs such as Apex are publicly traded companies that acquire or merge with existing companies as an alternative to a traditional IPO. The SPAC raises money through an IPO so its acquisition or merger target doesn't have to. Jiang took this route because he felt AvePoint can grow faster with a SPAC than through an IPO. He said most of AvePoint's senior leadership are developers, programmers and technologists -- "just geeks who want to code." Merging with Apex was a much faster route to public trading and less of a distraction to his team.

Krista Macomber, senior analyst at Evaluator Group, said investors are paying close attention to data protection vendors, especially if they are SaaS-based. COVID-19 accelerated cloud adoption for many organizations, even companies that weren't necessarily amenable to the cloud before the pandemic. She said most companies considered backup and recovery important, but not something that pushes the business forward. Therefore, they want to streamline its operation and take it out of IT's hands where possible, freeing up IT resources for projects that directly make money.

"This year especially, we've seen there's a percentage of customers looking to refocus their IT staff on roles and responsibilities that are more strategic to the business," Macomber said.

Investors are also interested in longevity, and Macomber said there's little danger that AvePoint or any other SaaS-based data protection vendor will experience a large drop in subscriptions when a vaccine for COVID-19 becomes available. Even though the pandemic made the journey to the cloud more urgent, most companies weren't blindly scrambling to move their entire infrastructure to the cloud without any thought. Customers were mindful of ripple effects on cost, complexity and compliance, and so many cloud-related infrastructure changes will likely be permanent.

"We have to keep in mind that the decision to migrate to the cloud wasn't taken lightly. A lot of workloads that migrate to the cloud tend to stay there," Macomber said.

Macomber added that AvePoint's future is directly tied to Microsoft 365's continued success, which she called a "safe bet" from a long-term investment standpoint.

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