It’s happening slowly but surely. With every passing week, more venture firms are beginning to announce SPACs. The veritable blitz of SPACs formed by investor Chamath Palihapitiya notwithstanding, we’ve now seen a SPAC (or plans for a SPAC) revealed by Ribbit Capital, Lux Capital, the travel-focused venture firm Thayer Ventures, Tusk Ventures’s founder Bradley Tusk, the SoftBank Vision Fund, and FirstMark Capital, among others. Indeed, while many firms say they’re still in the information-gathering phase of what could become a sweeping new trend, others are diving in headfirst.
To better understand what’s happening out there, we talked on Friday with Amish Jani, the cofounder of FirstMark Capital in New York and the president of a new $360 million tech-focused blank-check company organized by Jani and his partner, Rick Heitzmann. We wanted to know why a venture firm that has historically focused on early-stage, privately held companies would be interested in public market investing, how Jani and Heitzmann will manage the regulatory requirements, and whether the firm may encounter conflicts of interest, among other things.
If you’re curious about starting a SPAC or investing in one or just want to understand how they relate to venture firms, we hope it’s useful reading. Our chat has been edited for length and clarity.
TC: Why SPACs right now? Is it fair to say it’s a shortcut to a hot public market, in a time when no one quite knows when the markets could shift?
AJ: There are a couple of different threads that are coming together. I think the first one is the the possibility that [SPACs] work and really well. [Our portfolio company] DraftKings [reverse-merged into a SPAC] and did a [private investment in public equity deal]; it was a fairly complicated transaction and they used this to go public, and the
If you’ve been following the SPAC boom, you may have noticed something about these blank-check vehicles that are springing up left and right in order to take public privately held companies. They are being organized mostly by men.
It’s not surprising, given the relative dearth of women in senior financial positions in banking and the venture industry. But it also begs the question of whether women, already hustling to overcome a wealth gap, could be left behind if the trend gains momentum.
Consider that studies have shown women investors are are twice as likely to invest in startups with at least one female founder, and more than three times as likely to invest in startups with female CEOs. It’s not a huge leap to imagine that women-led SPACs might also be more inclined to identify women-led companies with which to merge and take public.
More, the SPAC sponsors themselves are reaping financial rewards. In return for sponsoring a SPAC in its pre-IPO stage, sponsors typically receive 25% of the SPACs founder shares, which can mean a lot of money in a short amount of time, given that SPACs typically aim to merge with a target company in two years or less. In fact, even if the SPAC performs terribly — say the company with which it merges is later accused of fraud — those sponsors get paid.
Eventbrite cofounder Kevin Hartz, who is overseeing a $200 million SPAC, explained it to us in August this way: “On a $200 million SPAC, there’s a $50 million ‘promote’ that is earned.” But “if that company doesn’t perform and, say, drops in half over a year or 18-month period, then the shares are still worth $25 million. (Hartz himself called this guaranteed payout “egregious,” though he and his partner in the SPAC, Troy