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In today’s dynamic M&A environment, understanding the nuances of investor relations and capital management is essential to achieve long-term success. This is particularly true for tech-driven companies with a constant eye on growth. In this article, Tianyi Jiang, CEO at AvePoint, discusses how to navigate investor relations and best practices in capital raising discipline for sustainable growth in an increasingly competitive market.
“As an entrepreneur, focus on the fundamentals because that's what really lasts. Trends come and go, but as a business, you need to focus on running a cash-generating, growing company year after year. That resilience is what makes a business strong, no matter what’s happening in the macro environment.” – Dr. Tianyi Jiang
Build with Discipline
Effective M&A starts with an engineering-driven discipline. Rather than acquiring assets for short-term gain, top-performing companies build a seamless, efficient platform that is ready to meet market needs. This means integrating acquired assets fully and avoiding the “patchwork” approach that can weaken operational effectiveness. Companies that consistently prioritize well-researched fundamentals are more resilient to market hype and better positioned to provide meaningful value to customers. This careful integration helps build a solid foundation for sustainable growth, not just a collection of loosely related assets.
Control Capital Raises
One of the most critical aspects of capital raising is to avoid unnecessary dilution of ownership and ensure that investors share the company’s growth vision. Raising capital too early often means giving up more control than necessary, which can shift strategic decision-making power away from founders. It’s wise for companies to bootstrap for as long as possible, only raising capital when it’s essential to further their growth strategy.
By retaining majority ownership, founders can protect the core vision of the business, ensuring that all decisions align with sustainable growth. This approach not only protects founder control but also cultivates a disciplined, growth-oriented culture within the company.
Balance Primary and Secondary Capital Wisely
Managing capital raises with a blend of primary and secondary capital is key to sustaining both growth and founder motivation. By directing a larger share to primary capital, companies can use funds for operational expansion, while a portion of secondary capital allows founders to realize gains, creating a personal safety net.
For instance, a two-thirds primary to one-third secondary ratio provides essential growth funds and ensures that founders have enough financial security to stay committed to the company’s success. This balanced approach lets companies make capital allocation decisions that prioritize both immediate growth and long-term financial stability.
Strategically Scale through Channels
Shifting to a tech-driven model allows many companies to use distribution channels to expand reach and drive revenue. Instead of relying solely on direct sales, companies can access broader markets and reduce operational costs by building strategic partnerships. Channels not only allow companies to reach untapped markets more quickly but also improve cost-efficiency, particularly in SaaS models where cloud operations eliminate on-premise installation requirements.
Leading companies like Microsoft demonstrate the power of channels to lower costs and increase market presence, showing how companies can effectively multiply revenue and reduce sales costs by harnessing channels to their full potential.
Align Acquisition Structures with Founder Interests
Successful acquisitions depend on deal structures that incentivize founders and ensure alignment of goals. Structuring deals with earn-outs, which tie incremental payments to the product’s performance post-acquisition, creates vested interest for founders to stay and actively drive success. This collaboration maximizes the potential of the acquired company, blending founder expertise with the acquiring company’s resources.
The earn-out model offers downside protection and shared risk, giving both parties the potential for future rewards if performance meets or exceeds expectations. A well-aligned deal structure fosters smoother integration and better post-acquisition performance, ultimately enhancing long-term value.
Prepare for Public Market Demands
For companies aiming to go public, it’s crucial to view this step as a financing event rather than an endpoint. Going public brings visibility and access to talent, but it also imposes quarterly performance pressures that require sharp operational discipline. As public companies attract attention from investors and analysts, founders must consistently meet market expectations to retain investor confidence.
This environment demands transparency and focus on the metrics that matter most to the company’s success, setting the stage for long-term growth and positioning the company for strategic opportunities. Public companies have a powerful opportunity to attract capital and talent, but their success hinges on balancing short-term pressures with their broader strategic goals.
Engage in Transparent, Long-Term Investor Relations
Building strong, transparent investor relations allows companies to align with long-term objectives, creating trust that fosters sustainable growth. Managing relationships with investors and boards effectively helps maintain a clear focus on growth without succumbing to short-term gains that may undermine long-term success.
This approach not only strengthens investor confidence but also facilitates a balanced environment for raising capital and reinvesting in the company’s core mission. Clear, proactive communication is central to navigating investor relations, ensuring that growth plans resonate with investors and supporting a resilient, sustainable business model.