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Valley of Death: SPACs and The Future of Deeptech Financing

From Nada to Bonanza

Source: Dealogic, SPAC Research

Been There, Done That

Source: Dealogic, SPAC Research

Bridging the Valley of Death

Source: Dealogic, SPAC Research

Not all SPACs are created equal

  1. Who is behind the SPAC, what is their track record, domain expertise, and access to institutional money? As the SPAC market matures, not all SPACs are created equal and track record is critical.
  2. What expectations am I creating? are they realistic and can I deliver on these? is my valuation sustainable? Most Deeptech SPACs are sold on the back of a medium-term plan (2024–2025 revenue and EBITDA). As we all know it is very difficult to predict the future in fast-evolving markets so it is important that companies think through what it is they can actually deliver within that timeframe and what valuation is realistic today so that SPAC investors will not be left holding the bag.
  3. What long-term shareholder base am I looking to build? This one has proven a bit more difficult particularly given the recent frenzy and short-term trading activity in and out of SPAC stocks. It is important for companies to understand the value of building a blue-chip, long-term shareholder base. A good place to start is via a PIPE (private investment in public equity) which a number of SPACs have been doing alongside the merger. PIPEs are useful in that beyond the capital injection, they enable price discovery as well as getting large institutions on board.
  4. Is my organization ready to operate as a public company? Being a public company requires a certain level of maturity in areas such as financial reporting and communications and corporate governance to name a few. Most start-ups do not have this infrastructure in place and need to build it in short order as they go through the SPAC process. This can present real challenges as the company could end up struggling with the short-term demands of being public.

To 2021 and beyond



Musings on Startups and VCs from Promus Ventures Team

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Pierre Festal

Partner at Promus Ventures, supporting early stage deeptech entrepreneurs