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Innnovation Advice

SPAC Hype and Reality

Updated: Jul 7, 2021

As a Cube insider, you'll get access to interesting new trends, what we think about them and how you can benefit. Autonomous vehicles are trying to learn how to drive by instruction while they could be learning by data with Process Mining.

New Trend: SPACs Trending to a New Level

Air-taxi startup Archer Aviation is set to go public through a SPAC merger, following a similar deal by rival Wheels Up and reports that Joby Aviation is also in talks with blank-check companies. A SPAC, Special Purpose Acquisition Company, is formed to raise money through an initial public offering for the purpose to buy another company. A SPAC has no business operation on its own and is also known as a "blank check" organization. SPACs have 2 years from the time of filing to the time of acquisition, or funds must be returned to investors.

  • The number of SPACs is dramatically increasing. There have been 189 deals in the first 2 months of 2021, compared to 250 in 2020 and 59 in 2019.

  • Large VCs are starting SPACs as a speedy alternative to an IPO and cutting out the investment bank. Note that there has only been 1 IPO in 2021.

New Insight: Startups Benefiting from SPACs

Startups are the beneficiaries of the new pace of SPAC acquisitions. Deals offer a faster path to the public market than a traditional IPO, exit-seeking startups are paying attention.

  • Startups, like mobility companies, with large capital needs and longer time to become profitable are going the SPAC route earlier than they would be able to IPO. Last year, 26 mobility tech companies announced or completed SPAC mergers.

  • SPACs are acquiring an increasing number of startups, a welcome alternative to typical IPOs and late-stage fundraising.

New Action: Corporations Monitor the SPAC Trends

N³ Innovation is working with corporate clients who are engaged with startups at many stages of funding. Strategic priorities and valuable partnerships are unchanged by the SPAC activity. However, corporations engaged with startups that are acquired by a SPAC will be required to evaluate the business impact and commercial contracts with the new entity.

  • Corporations investing in startups could see timelines change with earlier exits at lower valuations when a startup is acquired by a SPAC.

  • Corporations considering investment in or acquisition of a startup will face additional competition from SPAC investors.

  • Corporations could consider the SPAC route for themselves to support longer term strategies that are capital intensive.

N3 Innovation can help you Invent Future Growth. To learn more about SPACs, contact us today!

Now is the time to Invent the Future!

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