Draper Oakwood SPACs to provide a pathway to much-needed liquidity
The end of this week will mark a beginning of sorts. On Friday at Nasdaq’s MarketSite in Times Square, DOTA will celebrate going public.
DOTA stands for Draper Oakwood Technology Acquisition, which is a “blank check” company formed to acquire a growing company — a once-common method of IPO’ing that is known by another four-letter acronym, SPAC (Special Purpose Acquisition Company). Thus will commence DOTA’s search for a company to acquire. The target company would be a growing venture-backed tech company that is well-suited to go public, not the over-hyped unicorns we’ve seen of late. It should be a reasonably-valued company with ample room to grow so that new public investors can actually benefit from a tech company’s prime stages of growth and existing investors can finally secure a road to liquidity. Once said company is found, DOTA will merge with it to create a listed company where existing shareholders will retain ownership and equity upside, and new public investors will get access to a best-in-class tech deal, which have often been limited to venture capital firms and other private investors.
At $57.5 Million, DOTA is relatively small for a SPAC (see Social Capital’s recent $600M SPAC). But that’s purposely so, say the founders of Draper Oakwood who formed DOTA. They want to do a series of smaller SPACs, where they own 20–30% of companies listed at a modest valuation. Similar to tech IPOs of the 1990s, which were smaller in size and offered public investors true upside potential. As Aamer Sarfraz, Draper Oakwood’s CEO, says:
“It is our belief that very few venture-backed companies choose to go public, or are able to go public, for a number of reasons, including: the financial costs of going public, the ongoing regulatory requirements for public companies, and a perception that a company needs to be very large before getting sufficient interest from investment banks and analysts,”
Draper Oakwood has recruited an All-Star team of SPAC-experienced professionals who will be critical in helping a company transition from private to public status. Their alliance with renowned investor Tim Draper and their membership in the independent VC alliance Draper Venture Network will allow them to tap into a massive portfolio of hundreds of growing technology companies around the globe. Deal flow should not be an issue, but picking the right company will be key.
“We believe that there are certain types of venture-backed businesses that can benefit greatly from earlier access to public markets. It is our belief that our combined team has the experience and relationships to identify such venture-backed companies.”
We’re with you, Aamer. Now go light the path towards liquidity.
