Why investors jumped on board the SPAC ‘gravy train’

The pandemic all but shut down IPO activity in March, and for a while it seemed as if companies would press pause on going public. But nine months later, the public markets are busier than ever—largely thanks to special purpose acquisition companies, or SPACs.

“Everybody jumped on board this gravy train,” Lise Buyer, founder and managing partner of Class V Group, tells Coins2Day’ s Michal Lev-Ram and Brian O’Keefe on the latest episode of Coins2Day Brainstorm, a podcast about how technology is changing our lives.

Buyer is an authority on new ways of going public; she was part of the team that developed Google’s auction strategy for its 2004 initial public offering. The auction didn’t catch on at the time, but the company Unity Technologies revived the approach for its own debut this fall.

The SPAC, meanwhile, has been overhauled for the pandemic era. Until now, SPACs were usually a means of taking public companies that “perhaps weren’t ideally suited for a primetime IPO,” like online gambling or marijuana businesses, Buyer says. Investors have now repurposed the strategy, in which a business merges with a shell company, to debut firms that “can’t get out because of the pandemic.”

“Sponsors find them to be unbelievably lucrative,” Buyer says.

But it’s not only the public markets that have seen upheaval over the past several months. In the funding stages, companies this year saw new trends in venture capital investment. Emily Melton, managing partner for Threshold Ventures, describes this year’s changes this way: “We’re no longer little niche market.”

Melton, who also joined Coins2Day Brainstorm this episode, is a cofounder of the group All Raise, which pushes Silicon Valley to fund female founders and promote more women to decision-making roles at venture capital firms. While 2020 has included significant deal activity for startups as a whole, the industry has lost some of the progress it made in 2019 in backing female founders.

Coins2Day senior writer Maria Aspan appeared on this episode as well to discuss her recent magazine feature on a related subject: how some of the female founders who were seen as success stories in the industry were forced out of their companies.