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Or a company is raising a normal round of funding and this is suddenly a much better option - 1) funding, 2) liquidity in public markets, 3) backing of SC and w
by probe 9y ago
Or a company is raising a normal round of funding and this is suddenly a much better option - 1) funding, 2) liquidity in public markets, 3) backing of SC and whatever help they may offer. If I was raising 600M anyways, these added benefits seem like a good deal to me.
- danielahn 9y agoWhy not just ask Social Capital to invest out of their VC fund? The only difference is liquidity in public markets, and if that's all you want, why are you giving up 20% of the upside from your current valuation when it would cost you less than 1% of your current to IPO yourself?
- probe 9y agoI'm not sure where you're getting the 20% number...? The ownership stake is dependent on how the negotiations go and how much the company is looking to raise at what valuation/terms. Social Capital will argue a liquidity premium should be applied, and I'm sure the company will say what you're saying (they can IPO <1%). However, they could both stand to benefit, so I see a deal happening with this SPAC
- danielahn 9y agoSPACs issue units to their founders that will convert into approximately 20% ownership upon the successful completion of a deal
- probe 9y agoNo it's the founders of the SPAC (Chamath et. al) get 20% of the SPAC, which will then be diluted once they merge with the target startup. I do think you do raise a fair question of what stake Chamath et. al should get for sourcing a deal. 20% is definitely high, and I think a typical SPAC is something like 5% sourcing stake for the owners.
- danielahn 9y agoSorry for late reply! 20% is standard SPAC comp. Also yes, I apologize, you are right - they get 20% of the value of the SPAC, so if they buy 10% of a company, they are only getting 20% promote on that 10%.