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Ask HN: Will SPACs Replace VCs?
For anyone who follows the markets, there’s been an explosion in “blank check” companies called Special Purpose Acquisition Companies (SPACs) that go public with the primary purpose of acquiring a company, which allows emerging companies to go public at a much earlier stage than with multiple private rounds led by VCs followed by a public listing or IPO.
Ironically I’ve seen very little chatter about SPACs on VC Twitter but I suspect the reasoning is that they are quite the existential threat to traditional VC model. If an investor can simply raise $XYZ and go public as a “blank check” company then it completely side steps a VC’s role in bringing companies public. And as the acquired company it means you can achieve liquidity much faster than is typical going the traditional IPO path.
For those in the industry, is this an accurate assessment of the state of the industry? Are SPACs a massive threat to VCs? Or as founders, are SPACs something you’ve looked into over VC?
- oneelectron 6y agoSPACs are 30 years old. See the history section here: https://en.wikipedia.org/wiki/Special-purpose_acquisition_company#History https://en.wikipedia.org/wiki/Special-purpose_acquisition_co... They also have a poor reputation, and for what seems like a good reason. It's a risky proposal that generally attracts a get-rich-quick kind of community. Examine the Nikola company and tell me how comfortable you'd be investing a sizeable chunk of your net worth in that. I can't predict the future, but I can bet $10k I will die before SPACs get to even half of VC funding. Side pot of $1k that 50% of them fail their investors, and another side pot that one in the next decade will be a historically spectacular failure.
- tempsy 6y agoI’m aware that it’s not new but Virgin Galactic’s SPAC ushered in a new era of blank check companies being spun up, which is why I’m bringing it up. Look at the recent S-1 filings...there are already 64 “acquisiton” firms that have filed in August alone https://sec.report/Form/S-1 https://sec.report/Form/S-1 Is this a short term SPAC bubble? Very possible. But SPAC investors and founders are much wiser now, and if done right it’s entirely possible to completely side step traditional VC if the “good ones” prove to be successful.
- oneelectron 6y agoI see that it could displace VC somewhat in dollar amount, but there are some serious bottlenecks around filing with the SEC and getting listed to where it'd be prohibitive for a large number of companies to start that way. It's definitely a lot harder, more all-or-nothing, and more time consuming than getting a million-dollar SAFE and building a prototype. And SPACs are also dependent on consuming those "traditional" companies to fulfill their empty promise. What feels most intuitive though is the propagation/decline of SPACs will simply be based on the successes/failures of the SPACs we're watching now. Tech and finance seem to have few mechanisms outside of pattern matching what got their predecessors rich.
- tempsy 6y agoyeah I’m not suggesting that SPACs are appropriate for pre-product startups. I see them replacing VCs in what would otherwise be a growth stage round eg post Series A/B. So we will still have angel and seed/early stage investors, but I see SPACs easily competing with what would otherwise be large late stage or growth rounds that the big VC firms are most active in.
- sushshshsh 6y agoIs this kind of like what Long Island Iced Tea company did with their bitcoin pivot? Theoretically they could acquire a private company doing blockchain and become a publicly traded bitcoin company overnight right?
- tempsy 6y agoI guess but I’m not really familiar with that specific situation.