7 Ways Avant Will Use Private Equity Investment
"While [acquisition] is still an option for sure, Pamlico really loved our organic growth strategy and the way we've been doing things."
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Channel Futures: How excited are you feeling right now?
Avant’s Ian Kieninger: We’re really excited. It means a lot when all these incredible firms – these smart people with money – are now looking to our channel, and seeing the value of what we’ve been building for decades and starting to place a value on that hard work. And it’s a reflection of the great opportunity we have in front of us in terms of our growth as a channel, our growth as individuals and our growth as individual firm. I’m excited about the next decade of growth and opportunity for everybody. I’m really excited that Avant’s now got a really great partner to help us go do some incredible things to help position not only ourselves, but more importantly, our trusted advisers for a ton of success in this next wave of growth that we’re all participating in.
CF: What did you know about Pamlico coming into this relationship? What should we know about them and their leadership?
IK: What was kind of cool and interesting is, they’re not the firm that you would expect coming at you from New York or Silicon Valley. They’re a Charlotte-based firm, which is kind of unique and different. We’ve met a lot of different partners throughout the years. Last year we started to … focus on what next steps should look like for Avant. We really wanted to figure out who would invest into entrepreneurs, who would invest into growth, and who wanted to invest it to a management team – where they’re going to keep it in place, and just support our growth and be an enabler. Not someone that wants to run the business. And ultimately someone who fit our culture and our values.
And all those things clicked immediately when we met this team. We joke that we felt like this team could literally be working at Avant, in terms of energy. They’re really nice people. They want to win; they want to grow extremely smart. And they’ve had some experience in our industry, because they’ve invested in suppliers who have leveraged the channel. So they had appreciation of that market and where it’s going. And then ultimately, they saw that one of … the biggest avenues to capture the end-user share market was through our platform.
IK: We spent some time to educate them clearly over the last year on what this space looks like and how it’s growing and how we ultimately need to together bolster the trusted adviser to support them. And they totally bought off on that. And they really wanted to be a part of this success, and they wanted to get in early and pick a winner and help us really grow to take things to the next level. What was interesting too is, a lot of times private equity really pushes a roll-up basis or says, “Hey, if we do this, we’d better buy a lot of firms to be successful and just be bigger.” And that was not the thesis we landed on. While M&A is still an option for sure, Pamlico really loved our organic growth strategy and the way we’ve been doing things.
So they’re ultimately going to enable us to continue to do what we do, just faster and better than we have in the past and not push us to the areas that we don’t want to go into or may not be creative to the business. Getting bigger doesn’t necessarily mean getting better too. Getting better means getting better. Our goal is to become ourselves and help our trusted advisers to become that Navy SEAL level of talent. We’re really good at what we do, and we have our trusted advisers be amazing at what they do. You’ve heard me say a million times that larger companies are willing to buy from smaller firms like the trusted adviser more than ever before. That trusted adviser needs to continue to get the support and resources to be able to execute at that level. And that’s our role at Avant. Pamlico aligned with that vision clearly and wants to support that vision.
CF: You said they want to be hands-off and let you do your own thing. And the news release said you, president Drew Lydecker and leadership team are going to maintain “significant ownership.” Was that a deal breaker in conversations, that you needed to retain control over Avant?
IK: The dealmaker was that one of their non-negotiables working with us was to keep this incredible management team together. They said it’s one of the strongest management teams they’ve seen in years. And that means a lot coming from a firm that’s been involved in hundreds of great companies. It actually was the most flattering thing Drew and I had heard in a long, long time, and we were super proud that a bunch of smart people from outside the company really loved our leadership team that we’ve assembled and wanted to invest in keeping that team together. That was their agenda, and that was going to be one of those non-negotiables. But they kind of moved first and said, “This is what we want.” So there’s really great alignment there. They want to trust us, especially Drew and I, to do what we’ve been doing, and how we’ve been growing and how we’ve been creating value. And just arm us with more, whether that’s incredibly smart people that can help us come up with new ideas or execute on current ideas, or funding if we need to make a big investment into something strategic and long term.
But they’re not in the business of operating within businesses. They want to partner with great firms and just enable them more. Essentially, in layman’s terms they said, “We want you to reach out to us when you want help and support, and we want to be an advocate for you and a resource for you, versus being in your business trying to make decisions for you.” That was a big part of this deal. We didn’t want to disrupt the momentum. We didn’t want to change the culture. We didn’t want to change anybody here at Avant at all. We just wanted to actually create a better platform, attract even more talent over time and create more value for our trusted advisers.
CF: You used the phrase “the next 10 years of growth.” Was there a timeline that you and Pamlico talked about?
IK: In these deals there’s some reality where an investor wants a return. But what’s good about these guys is, they’re not overly concerned about giving a timetable to us, which is nice. Others did. They’ve got to be very patient in terms of helping our initiatives grow. Now I say that because Drew and I have no intention of putting a timeline on our desire to drive Avant. Whether it’s 10 years or 20 years or longer, we’re positioning ourselves to stay more or less making the decisions here and continuing to drive forward. And if down the road there’s a new partner involved that takes us to the next level so be it, but we’re really happy to see where this journey takes us. We don’t know how long the journey will be, but no company ever does. But we don’t want to make our decisions earlier than we want to make them. And that was also part of the deal we structured. We’re going to grow at the pace that we believe creates successful growth, not disruptive growth that can create problems. And we want to do it the right way, and follow the lead and take counsel from our customers.
The pieces that you’re bringing up made this relationship make the most sense to pretty much everyone we spoke to. And of course, we did our diligence and called former CEOs and executives of portfolio companies under Pamlico who’ve had nothing but great things to say. They really love to see the entrepreneur just go a little bit bigger and broader and more sophisticated and help them do that in positive ways, and we’ve seen every instance has been the case. That’s what gets us excited. We feel like we got [new] family members on board, and they’re going to really back us.
CF: You said it was a lengthy process of conversations with Pamlico. And this year we’ve seen a lot of a lot of private equity come into the channel, especially with a couple of your peers. What were some of the lessons you took from seeing some of that news earlier this year? How did that shape your ideals for this new partnership?
IK: It’s a really good question. This industry has been so boutique and so closely held and so relationship-based that sometimes when there’s things from the outside that enter, it can be disruptive in a negative way. So we were paying close attention to see how the community would react based on its maturity level. Clearly when five-plus years ago ScanSource bought Intelisys, that started a little bit of the fray and started to pique the interest. And then a year ago Telarus did their deal; that kind of spun up more energy in this space. And we watched how people were making these partnerships and what their objectives were. And we realized at some point these industries are going to get really, really big. What was very clear to us is that the revenue opportunity of our channel is tremendous. But we’ve got to widen the straw. It was like we were trying to drink the glass of water through a straw, and the only thing holding us back was the size of the straw. Because the end user community is massive, right? How do we how do we widen the straw – the aperture, if you will – and help these trusted advisers access more customers of their own?
And we saw that some of this outside investment was coming in two different arrangements: money coming in to help people do more or money coming in to buy other firms and create value by size. Now, like I said earlier, sometimes size can matter, especially when you’re trying to negotiate with the vendors and create more strength and power with the vendors, which is very important in our space, or potentially bring new technologies and vendors into the channel as well. But I think less about size and more about value. How do we gain and create new concepts, whether it’s investigating the research and data to help people look better in front of their clients and bring new types of information that they can’t get anywhere else, or new technology to help them be more successful in front of a client (like our Pathfinder app). In order to go faster, (I’m using the word “faster” over “bigger”), we think additional capital at this moment in time is the smart idea.
IK: As we watched people do that we also realized we were the last of the top three largest [solution brokerage] companies in our industry. Out of our peer group, we were the last founder-funded company left. We’ve pushed this thing really fast and hard for 12 years. And we wanted to open up the floodgates and pour more oil on the fire, as they say, and be able to move faster in our development of these strategies and some additional expansion. I think we learned a little bit how that these this channel reacted positively and favorably, because [outside investors] are also now for the first time ever looking at the value of trusted adviser firms. A sales sales rep now in our space is now valued at a level of a Cisco rep. That was not the case a decade ago. Business owners of trusted advisers now look at incredible business owners in other industries, and people are paying for those. So everybody’s starting to get the same alignment.
There are clearly probably some old-school partners who like the old ways, but I think the new age trusted advisers who are really being progressive are going to be attracted to places that help them grow. Because at some point they’ll want funding themselves or exit option themselves. I think interests are aligning and peaking, and I think the timing of our partnership is perfect with all of that. I think our trusted advisers are now saying, “I’m expecting more from my [technology solutions brokerage]. I want them to help me go faster, I want more innovative ideas, I want them to offer me more value so I can look better to my customer. What are you going to do for me there?” And for us to be able to keep with that, we thought this was the right time to bring in a capital partner to do so.
CF: I want to get into this topic of helping out the trusted advisers. What’s that going to look like?
IK: We love when we have our advisory board or talk to our top partners. [We hear things like], “This would be great; that would be great. Could you do that? Can you build that? Can you bring this to market?” Typically we can only execute on a handful, either purely because they’re expensive and take time or you need more resources to pull them off. There’s only so much capacity that we have to innovate at any given moment in time. What I want to do is be able to say yes to all these ideas faster. We’re getting back to that pace of change that I was talking about. How do we keep up with it? A really great example is security. It’s pretty clear that everybody believes the next greatest wave of growth is the security category. Cloud security, if you will. And in order to bring that to market, you have to reach out way ahead and invest. In some cases you’re not getting the return with these types of investments for three years or maybe longer. That’s a lot of exposure when you’re a recurring revenue-based company. You have to have competence to make that forward investment. So with the capital partner we can now spin up resources and time and energy to aggregate a very fragmented vendor ecosystem. To bring a security practice to market is a ton of work vetting and curating the supplier portfolio. Because there are thousands of them, and who’s any good, and what does what? Then you have to figure out how to organize them. And then you have to figure how to educate yourself and then your trusted advisers on what they do. And then how to have a conversation with the customer, because they’re afraid to do it because they don’t know what they’re talking about to talk; this is really tough subject matter. You’ve got to go hire some smart engineers that provide support in the field, and they’re very expensive and hard to find. On our own we’re going to figure it out. Maybe it takes a few years, but we have a partner requiring this thing up next year. We want to get ahead of that. We want our trusted advisers to get ahead and capture this wave of growth. How many more of those are going to be right after security – AI, RPA and things like this – which take time and energy to bring to market?
An example of what’s happening in today’s world is, our current suppliers are continuing to invest in us, so we need to make them successful. UCaaS is exploding, and even some of the wireline stuff like cable growing. So how do you create a better customer support mechanism around that? Shane [McNamara], our executive vice president of operations, is trying to bring the Ritz Carlton feel to more of a traditional product set, because that needs enhancement. It needs to go faster, it needs to be easier to manage, you need your trusted advisers to spend less time with events, changes and billing errors. We can create scale and efficiency there.
IK: A third example is the creative ideas and progressive stuff. As you know, we’re really big on market research and data. Well those investments don’t pay off sometimes at all. They’re just branding pieces. But we need to figure out how we can create stronger data structured in a way that can be consumed by our trusted advisers and make them look incredibly good in front of a customer. Our market research needs to be the next version of Gartner, Forrester or a supplement to what they’re doing, so that we all look amazing in front of decision makers. Our data needs to be used and monetize in different ways, or as a defensive mechanism. When other people enter our space, how do we ward them off? We work them off by controlling the information. That’s my pure belief on the whole thing. My challenge myself is to look a decade out and say, “Who could disrupt all of us? If Amazon enters this space, how do Avant and its trusted advisers (and even my peers quite honestly) put up a fight?”
IK: We need to be a tech-led company every like everybody does in some sense. Relationships win, and they can create revenue and growth. But I think this new mature progressive, trusted adviser is thinking scale too, and scale doesn’t have to be based on how many employees you have. That’s probably not the best way to scale this tech-generation scale. How do you scale through technology? We’re continuing to invest heavily into things that may not like play out for a few years but could add an advantage to a trusted adviser as they’re in the market. We’re unveiling Pathfinder 2, which is going to continue to make our trusted advisers look like heroes and help them scale to levels they haven’t met. Because again, I think that’s our role: Help to do the things that they don’t want to do, can’t do or don’t want to invest into, and make them better. We have a series of all these concepts that we’re going to push more chips on the table to. As founder and owners, there are only so many chips you’ve got.
IK: My sixth example is pushing deeper internationally. We have a lot of partners who are selling deals internationally, and they need some help, some feet on the street sometimes. We’ve got resources in the U.K. right now, but we know there are other markets. And as our industry grows globally, so does the opportunity for the trusted adviser, because we can help them expand their sales reach in different markets if they want to expand or even grow there. I think it’s really healthy for our community as we become stronger. Some of this is a little bit about being bigger too. We can deliver a global value proposition. Now we’re all in a better situation across the board, which would is really exciting. We’re going to do that. We’re heading there now. We see others doing that too. There’s a laundry list of macro concepts we’re planning to invest in and supersize, because we think the market wants it. That’s what they’re asking us for, and that’s our pledge to them.
CF: Will there be opportunities for financial support for partners?
IK: Going back to my point, we want to say yes to these things that the trusted advisers ask us for to help them grow. Whether it’s taking out loans or upfront commissions or bridge loans, we’re going to bring those financial products to market. We have been doing that in more of a one-off basis. But as demand picks up for these things, we want to be able to execute on Avant financial products, if you will, in a way Avant trusted advisers want to consume. Everybody’s a little different in how they want to do these things, so we’re continuing to try to create more of a product-oriented strategy so it’s scalable and has controls around them. But if a partner wants to raise their hand and say, “Hey, I want to open up a new market. I have customers there; revenue is possible. Can you help me fund something?” we’re going to create mechanisms to help them do that. Because some of these partners are ready to rock and ready to go faster, and some are ready to start their companies tomorrow. We also want to help those guys. We want to help people jump into this space. We think that space is still a fraction of what we should be getting in terms of the share. So we want to help bolster this community across the board and help them grow.
CF: Is there anything else you want to add?
IK: I feel good that our private equity partner sees the value of the channel the way we see it. And this is not a predatory financial partner that’s coming in with its own agenda. It’s one that wants to up-level this community with us. I’m just very excited that this whole channel is going to be going to another level together. And that is great for everyone. I think it’s going to be great for the vendor ecosystem, because they’re going to get more revenue and volume from us. It’s great for the trusted advisers, because they’re going to be taken more seriously and more valuable in the market. And the business model is going to get more respect than it’s ever gotten. And I just think there’s hundreds of billions of dollars for us over the next decade or two decades or three decades to go capture.
Drew and I and my management team are excited to do that. We’re going to be here doing that with them. There’s no clock. There’s no burnout. There are none of these things that we’ve experienced and seen in the past that have created some concern. We’re just doubling down. And we’re excited for our partner community meet to meet Pamlico team too. They’re ready to get involved whenever we want them to. And I think you’re going to see a new version of us in the coming year or two. That’s going to be pretty exciting and exciting for everybody, including channel partners, as the space just keeps expanding and healthy way.
CF: Is there anything else you want to add?
IK: I feel good that our private equity partner sees the value of the channel the way we see it. And this is not a predatory financial partner that’s coming in with its own agenda. It’s one that wants to up-level this community with us. I’m just very excited that this whole channel is going to be going to another level together. And that is great for everyone. I think it’s going to be great for the vendor ecosystem, because they’re going to get more revenue and volume from us. It’s great for the trusted advisers, because they’re going to be taken more seriously and more valuable in the market. And the business model is going to get more respect than it’s ever gotten. And I just think there’s hundreds of billions of dollars for us over the next decade or two decades or three decades to go capture.
Drew and I and my management team are excited to do that. We’re going to be here doing that with them. There’s no clock. There’s no burnout. There are none of these things that we’ve experienced and seen in the past that have created some concern. We’re just doubling down. And we’re excited for our partner community meet to meet Pamlico team too. They’re ready to get involved whenever we want them to. And I think you’re going to see a new version of us in the coming year or two. That’s going to be pretty exciting and exciting for everybody, including channel partners, as the space just keeps expanding and healthy way.
Avant will use its recent funding from Pamlico Capital to tackle a “laundry list” of requests from partners.
The Chicago-based technology solutions brokerage announced an investment from Pamlico on Friday. Avant co-founder and CEO Ian Kieninger will focus primarily on its organic growth strategy, using the funds to speed up its projects.
Avant’s Ian Kieninger
“Getting bigger doesn’t necessarily mean getting better too,” Kieninger told Channel Futures. “Getting better means getting better.”
Partners have been looking for answers about how the investment will impact them. Namely, do Avant leaders plan to exit the business soon? And how much control over the company have they retained? Kieninger fielded those questions and more in an exclusive Q&A.
Scroll through the 13 images above to see the conversation about Avant-Pamlico and private equity.
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