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SPAC attack: Southeast Asian unicorns ditch conventional IPOs

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A frenzy of SPAC mergers took place in 2020. In the coming year, blank check companies may give Southeast Asian tech companies a route to new investors.

As China’s digital economy matures, tech companies have provided a steady source of initial public offerings (IPOs) on US exchanges and domestic bourses in Hong Kong, Shanghai, and Shenzhen.

In Southeast Asia, Sea Group’s 2017 IPO on the New York Stock Exchange set an example for tech companies in the region that aspire to become publicly traded enterprises, including high-value unicorns like Indonesian travel app Traveloka, e-commerce platforms Bukalapak, and Tokopedia, along with Singapore-based digital services giant Grab.

However, as these firms come of age and consider a public offering, the conventional IPO has lost its glean. Now, special purpose acquisition companies, or SPACs, are in favor. Also known as blank check companies, SPACs are shell companies that raise funds via public offerings to acquire unspecified enterprises. This type of company doesn’t have a business model of its own beyond these financial transactions.

Because of this nature, US Securities and Exchange Commission chair Jay Clayton has advised investors to gauge the motivations of SPAC sponsors. These are often notable private equity (PE) firms that use SPACs to bypass investment banks and their underwriting fees to bring a private company to the public market.

Conventional IPO processes are cumbersome, expensive, and time-consuming. For tech startups in Asia, SPACs are a cheaper and more efficient fundraising option.

SPACs have gained huge momentum in the US in 2020. More than 200 SPACs raised around USD 70 billion, giving Asian markets a reference for 2021.

Southeast Asian tech unicorns eye SPACs

Tokopedia was a subject of interest for Bridgetown Holdings, which is backed by Peter Thiel and Richard Li, for a blank check merger in December 2020. If the deal moves forward, it could be a trendsetter in the region.

Grab, which counts SoftBank, Uber, and Didi Chuxing as its investors is valued at around USD 14 billion. Photo source: Shutterstock.com.

“To put things in perspective, SPACs have been around for decades. They were particularly popular in the mid to late nineties, but fell out of fashion when investors lost money,” Joel Shen, a corporate lawyer at global law firm Withers said to KrASIA. He believes that SPAC’s resurgence in popularity can be attributed to low interest rates, abundant liquidity in the market due to stimulus from the US’s central banking system, and an increasing number of acquisition targets, especially in the tech space.

SoftBank, one of Tokopedia’s investors, filed for a SPAC IPO in December with the aim to raise USD 525 million. SoftBank has invested in more than 100 growth stage companies worldwide, and some of them may be attractive targets for its SPAC, SVF Investment Corp.

With SoftBank—a whale in tech investments—entering the SPAC space, its portfolio companies like Grab may find speedy routes to New York’s ticker symbols. “SPACs allow their targets to list without first going through an expensive and time-consuming IPO process, and could potentially offer the shareholders of the targets, including institutional investors such as VCs, a quicker road to exit than a traditional IPO,” Shen said.

If Indonesian unicorns go through with this model, it could be a good barometer for whether Southeast Asian companies with local market focus will be accepted on a foreign stock exchange.

Nevertheless, SPACs have their downsides. As they are blank check companies, investors are betting on the sponsors of the SPACs, rather than assessing the quality of the business that is to be listed, Shen said.

Additionally, SPAC mergers must take place within a certain time frame—usually between 18 and 24 months. If no acquisitions are made before the end of the term, the sponsors may compromise on asset quality and bargaining power.

While China’s capital markets in Shanghai and Shenzhen offer alternative routes to domestic tech enterprises for significant fundraising, Southeast Asian tech startups lack a similarly viable option at home, nudging them toward SPAC mergers on a foreign exchange.

According to an analyst familiar with the subject, the SPAC boom in 2020 marked the beginning of a new era where top institutional investors, usually preeminent private PE firms, become a much stronger market force in IPO pricing. “Traditionally, IPO prices are determined by investment bankers building books through a series of closed-door, back-to-back talks with these PE firms. With SPACs in hand, however, PE managers simply dump these bankers and strike the deal directly with asset owners,” the analyst said.

Chinese tech’s track record of IPOs

In China, tech companies have a strong record of navigating the conventional IPO process. Bastions of the country’s digital economy—Alibaba, Tencent, JD.com, Baidu, and Pinduoduo—have raised significant funds via public markets in New York and Hong Kong.

As a result, the SPAC route is less likely to catch on in a big way in China. In 2020, two of China’s leading electric vehicle companies, Xpeng Motors and Li Auto, completed successful IPOs in New York. They joined industry rival Nio, which went public in 2018. And Chinese online property brokerage Beike Holdings debuted on the New York Stock Exchange in August, raising over 2 billion.

But SPACs may still have a role to play for Chinese companies. Notably, Beijing-based CITIC Capital raised around USD 276 million for a blank check company in February last year. The first Asian-sponsored SPAC of 2020 aims to purchase an unspecified target in the clean technology or energy sectors.

The investment vehicle’s pre-determined valuation protects investors in the downside market. During a SPAC listing, investors’ money is immediately placed in an escrow, earning marginal interest. If SPAC sponsors are unable to acquire a suitable target, investments are refunded.

Will Hong Kong be the second SPAC hot spot after the US?

It hasn’t been smooth sailing in public markets for Chinese tech companies following Luckin Coffee’s fraud. There have also been significant short attacks levied against Baidu’s iQiyi, GSX Techedu, and Joyy Inc.

This prompted the SEC to draft a set of harsh regulations, which could require foreign listed companies to adhere to US accounting standards, prompting a spree of homecoming IPOs on the Hong Kong Stock Exchange (HKEX).

JD.com and NetEase both listed in Hong Kong in 2020, while domestic semiconductor champion SMIC raised USD 7.5 billion via an IPO on Shanghai’s Star Market last July.

The Hong Kong Stock Exchange faces some obstacles in accommodating the SPAC listing boom but has inherent regional advantages. Photo by Simon Zhu on Unsplash.

Hong Kong’s status as Asia’s preeminent financial hub is set to benefit from SPAC adoption throughout the region, as the HKEX is consolidating its position as the world’s second-largest SPAC market after the US. While Chinese companies may not be the primary source of SPAC listings on the Hong Kong Stock Exchange, the city’s bourse is increasingly attracting Southeast Asian unicorns for listings, bolstered by the MSCI options cooperation it signed in May last year.

However, the Hong Kong Stock Exchange doesn’t yet support SPAC listings. In fact, unlike the registration-based IPO system in the US, HKEX has higher due diligence standards for IPOs. Hong Kong’s exchange treats investment banks as sponsors whereas US regulators classify them as underwriters with less responsibility and accountability.

For HKEX to fully embrace the SPAC wave, it will have to amend regulations to allow blank check companies to list, which may prove difficult as the investment vehicle resembles an empty shell company, a structure used in reverse takeovers that plagued the exchange before they were clamped down in 2018.

Hong Kong’s stock market is not as sophisticated as the US financial markets. HKEX also has a sizeable tranche of retail investors in its IPO allocation structure who are less knowledgeable than institutional investors, and are subject to great risk if they pour money into SPACs with weak fundamentals.

For now, the US remains the hub of SPAC action, but the wave of activity has not gone unnoticed in Asia and could begin to manifest this year, as many highly valued tech unicorns in the region mature, spurred by growth in the digital economy brought on by the COVID-19 pandemic.

Source: KrAsia – SPAC attack: Southeast Asian unicorns ditch conventional IPOs

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Affinity Gaming’s SPAC Gaming & Hospitality Acquisition files for a $150 million IPO

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Gaming & Hospitality Acquisition, a blank check company formed by Affinity Gaming targeting the gaming and hospitality sectors, filed on Friday with the SEC to raise up to $150 million in an initial public offering.

The Las Vegas, NV-based company plans to raise $150 million by offering 15 million units at $10. Each unit will consist of one share of common stock and one-third of a warrant, exercisable at $11.50. At the proposed deal size, Gaming & Hospitality Acquisition will command a market value of $194 million.

The company is led by Chairman James Zenni Jr., the founder, CEO, and Chairman of Z Capital Group and Chairman of Affinity Gaming. He is joined by CEO and Director Mary Higgins, who is currently the CEO of Affinity Gaming, and CFO Andrei Scrivens, who serves in the same role with Affinity Gaming. Gaming & Hospitality Acquisition currently plans to merge with Affinity Gaming, a diversified casino gaming company headquartered in Las Vegas, Nevada, as well as other businesses in the gaming and hospitality sectors. However, it will not complete an initial business combination with only Affinity Gaming.

Gaming & Hospitality Acquisition was founded in 2020 and plans to list on the Nasdaq under the symbol GHACU. It filed confidentially on July 31, 2020. Deutsche Bank is the sole bookrunner on the deal.

Source: Renaissance Capital – Affinity Gaming’s SPAC Gaming & Hospitality Acquisition files for a $150 million IPO

Source: https://spacfeed.com/affinity-gamings-spac-gaming-hospitality-acquisition-files-for-a-150-million-ipo?utm_source=rss&utm_medium=rss&utm_campaign=affinity-gamings-spac-gaming-hospitality-acquisition-files-for-a-150-million-ipo

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Subversive Capital Acquisition Corp. Closes The Largest Cannabis SPAC In History

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  • The Parent Company, Formerly Subversive Capital Acquisition Corp., has Completed its Qualifying Transaction and is Now the Largest Vertically Integrated Cannabis Operation in California
  • Shawn “JAY-Z” Carter, Chief Visionary Officer of The Parent Company, Leads Brand Strategy and The Parent Company Social Equity Ventures, a Corporate Venture Fund Investing in Black and Minority-owned Cannabis Businesses
  • The Parent Company is the Most Well-Capitalized Cannabis Company in the U.S. and is Positioned to Consolidate and Reshape the Market in California and Beyond
  • Investors Include Entertainment Powerhouse Roc Nation and Artists Rihanna, Meek Mill, Yo Gotti, and DJ Khaled
  • Common Shares are now Trading on the NEO Exchange Under the Symbol “GRAM.U” and OTCQX Under the Symbol “SBVCF”; Starting January 19, 2021 the OTCQX Symbol Will Change to “GRAMF”

SAN JOSE, Calif. and NEW YORK, Jan. 15, 2021 /PRNewswire/ — TPCO Holding Corp. (“The Parent Company”) (NEO Exchange: GRAM.U, GRAM.WT.U,OTCQX: SBVCF, SBVQF), formerly known as Subversive Capital Acquisition Corp. (“SCAC”) (NEO: SVC.A.U, SVC.WT.U;OTCQX: SBVCF, SBVQF), today announced the completion of its qualifying transaction (the “Transaction”) to acquire CMG Partners Inc. (“Caliva”), and Left Coast Ventures, Inc. (“Left Coast Ventures” or “LCV”) with global icon, entrepreneur and MONOGRAM founder, Shawn “JAY-Z” Carter and entertainment powerhouse Roc Nation.

Common Shares and Warrants are now trading on the NEO Exchange under the symbols “GRAM.U” and “GRAM.WT.U”, respectively, and remain trading on the OTCQX under the symbols “SBVCF” and “SBVQF,” respectively. Beginning January 19, 2021, the OTCQX symbol “SBVCF” will change to “GRAMF.”

Shawn “JAY-Z” Carter, The Parent Company’s Chief Visionary Officer, said, “This is an incredible time for this industry. The end of cannabis prohibition is here, and The Parent Company will lead the charge to a more expansive and inclusive cannabis industry. We are paving a path forward for a legacy rooted in dignity, justice, care, and consistency. The brands we build will redefine growth, social impact, and social equity. This is our time. I’m proud and excited to lead the vision of The Parent Company.”

Michael Auerbach, Chairman of SCAC and The Parent Company, added, “This is an industry defining moment. With its experienced management team, advanced infrastructure, industry leading operational efficiencies, proven strategy of brands, and cultural influence, The Parent Company will help shape the future of cannabis in the U.S. and beyond as well as begin to repair and rectify the wrongs of prohibition.”

Steve Allan, The Parent Company’s CEO, said, “With both the most comprehensive vertically integrated platform and brand portfolio in California, and the healthiest balance sheet in cannabis, we will reshape the industry in the world’s largest cannabis economy.”

For transaction details, investors and security holders may obtain a copy of the final prospectus (the “Prospectus”) associated with the Transaction on SEDAR at www.sedar.com and SCAC’s website at www.subversivecapital.com/s/Prospectus.

Effective on closing, the senior management team and board of directors were reconstituted as follows:

  • Steve Allan as Chief Executive Officer
  • Brett Cummings as Chief Financial Officer and President of Left Coast Ventures
  • Dennis O’Malley as Chief Operating Officer and President of Caliva
  • Shawn “JAY-Z” Carter as Chief Visionary Officer
  • Desiree Perez as Chief Social Equity Officer
  • Drew Kornreich as Chief M&A Officer
  • Colin Brown as Chief Legal Officer
  • John Figueiredo as President of SISU

Board of Directors:

  • Carol Bartz, former CEO of Yahoo! and Autodesk
  • Al Foreman, Partner of Tuatara Capital
  • Daniel Neukomm, CEO of La Jolla Group
  • Jeffry Allen, Director of Barracuda and former Director of NetApp
  • Leland Hensch, CEO of SCAC
  • Michael Auerbach, Founder and Chairman of SCAC

The Parent Company Investment Highlights

  • Proven Business Model – The Parent Company (TPCO) is a fully vertically integrated platform with cultivation, manufacturing, distribution, brands, retail and delivery to support further brand development and an aggressive M&A strategy. TPCO expects pro forma revenues of $334 million in 2021.
  • Progressive Operational Platform – TPCO owns its supply chain, enabling the company to leverage scale and profitably produce and distribute a broad portfolio of cannabis products for every consumer segment. The vertically integrated, omnichannel strategy maximizes gross profit and EBITDA margins, scales consumer reach, generates proprietary consumer data, and beats the illicit market on price, quality, and convenience.
  • Omnichannel Platform – TPCO’s scalable omnichannel business offers customers convenient express or scheduled delivery, and in-store or curbside pick-up, all through a single user-centric e-commerce platform, Caliva.com. This omnichannel e-commerce platform, offering both a robust portfolio of high-margin owned brands as well as third-party brands, allows The Parent Company to rapidly scale its direct-to-consumer reach to all Californians. Coupled with its powerful sourcing and low-cost manufacturing capabilities, this omnichannel platform offers consumers across California compelling pricing and convenience while remaining profitable.
  • Exclusive Brand Partnerships and Leading Cultural Influence – Brand strategy and marketing playbook led by Shawn “JAY-Z” Carter and Roc Nation, leveraging unparalleled cultural influence of leading artists and entertainers to build the most valuable and scalable brand portfolio in cannabis. JAY-Z officially launched the first his flagship cannabis line, MONOGRAM, on December 10, 2020.
  • Unrivaled Consumer Reach  TPCO currently reaches over 50% of consumers in California through Caliva.com, its existing direct-to-consumer platform. The Parent Company will have the greatest consumer reach of any cannabis company in California, reaching 75% of consumers in the state by the end of 2021 and almost 90% by the end of 2022 through scaling of its omnichannel platform.
  • Strong Balance Sheet –The Parent Company is the most well-capitalized cannabis company in the United States and will pursue an aggressive M&A strategy to accelerate growth, market share gains, and profitability.
  • Industry-Defining Social Impact  Led by Shawn “JAY-Z” Carter, The Parent Company will fund The Parent Company Social Equity Ventures with an initial target of $10 million and an annual contribution of at least 2% of its net income to invest in minority-owned and Black-owned cannabis businesses and contribute to the effort to rectify the wrongs of prohibition through diversifying both the business leadership and workforce of the cannabis industry. Beyond investing, the fund will also support organizations and programs focused on diversifying the cannabis workforce through job fairs and placement, industry training and education, as well as Social Equity application support.

Advisors
Canaccord Genuity Corp. served as financial advisor to SCAC. Blake, Cassels & Graydon LLP and Paul Hastings LLP acted as legal counsel to SCAC. Benesch Friedlander Coplan & Aronoff LLP served as U.S. legal advisor and lead transaction counsel, Boies Schiller Flexner LLP as U.S. transaction counsel, and Bennett Jones LLP as Canadian counsel to Caliva. Cooley LLP and Cassels Brock & Blackwell LLP acted as legal counsel to Left Coast Ventures. Cummings & Lockwood LLC, Reed Smith LLP, and Aird & Berlis LLP acted as legal counsel to Shawn “JAY-Z” Carter and his affiliate entities. Stikeman Elliot LLP acted as legal counsel to Canaccord Genuity Corp.

About The Parent Company          
The Parent Company (TPCO Holding Corp.) (NEO: GRAM.U, GRAM.WT.U,OTCQX: SBVCF, SBVQF) is California’s leading vertically integrated cannabis company combining best-in-class operations with leading voices in popular culture and social impact. The Parent Company brings together global icon and entrepreneur Shawn “JAY-Z” Carter, entertainment powerhouse ROC NATION, California’s leading direct-to-consumer platform CALIVA, and leading cannabis and hemp manufacturer, LEFT COAST VENTURES, to form a cannabis industry leader for the post-prohibition era. Chief Visionary Officer Shawn “JAY-Z” Carter, one of the most recognized and celebrated entrepreneurs of our time, will guide The Parent Company’s brand strategy in partnership with Roc Nation, the world’s preeminent entertainment company with a roster of culture-making artists, athletes and influencers. The brands we build together will pave a new path forward for a legacy rooted in equity, access, and justice.

About Roc Nation

Roc Nation, founded in 2008 by JAY-Z, has grown into the world’s preeminent entertainment company. Roc Nation works in every aspect of modern entertainment, with recording artists, producers, songwriters, and more. Roc Nation’s client list includes some of the world’s most recognizable names in entertainment, from Rihanna and Rapsody to Buju Banton and Snoh Aalegra. Roc Nation is a full-service organization, supporting a diverse roster of talent via artist management, music publishing, touring, production, strategic brand development, and beyond. Roc Nation Sports was founded in 2013, bringing the organization’s full-service touch to athletes across the NFL, NBA, MLB, and global soccer. For further information, visit rocnation.com.

Forward Looking Statements

This press release may contain forward-looking information within the meaning of applicable securities legislation which reflects The Parent Company’s current expectations regarding future events. The words “will”, “expects”, “intends” and similar expressions are often intended to identify forward looking information, although not all forward-looking information contains these identifying words.

Specific forward-looking information contained in this press release includes, but is not limited to, statements concerning the ability of The Parent Company to execute on its growth strategy and the future state of cannabis regulation in the United States. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond The Parent Company’s control, which could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to: inability to obtain requisite regulatory or shareholder approvals, changes in general economic, business and political conditions, changes in applicable laws, the U.S. and Canadian regulatory landscapes and enforcement related to cannabis, changes in public opinion and perception of the cannabis industry, reliance on the expertise and judgment of senior management, as well as the factors discussed under the heading “Risk Factors” in the Prospectus which is available on SEDAR at www.sedar.com. The Parent Company undertakes no obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.

Contacts:
The Parent Company
Media
press@theparent.co
Investor Relations
investor@theparent.co

Subversive Capital 
Media
Berrin Noorata, media@subversivecapital.com
Investor Relations
Investor@subversivecapital.com

Source: PR Newswire – Subversive Capital Acquisition Corp. Closes The Largest Cannabis SPAC In History

Source: https://spacfeed.com/subversive-capital-acquisition-corp-closes-the-largest-cannabis-spac-in-history?utm_source=rss&utm_medium=rss&utm_campaign=subversive-capital-acquisition-corp-closes-the-largest-cannabis-spac-in-history

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Colonnade: Under The Radar Lidar SPAC

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While other lidar stocks have zoomed higher following SPAC deals, Colonnade Acquisition (CLA) still trades around $13. Back on December 22, the SPAC agreed to a business combination with lidar sensor developer Ouster which will trade under “OUST” on the NYSE. The stock appears attractively valued compared to competitors that already have doubled following the closing of SPACs.

Ouster logo

Image Source: Ouster website

Digital Lidar

Ouster is a leader in four digital lidar target markets: 1) Industrial automation, 2) smart infrastructure, 3) robotics, and 4) automotive. The company appears most like Velodyne Lidar (VLDR) with a major focus outside of automotive.

As with the other lidar companies like Velodyne Lidar and Luminar Tech (LAZR), Ouster tells a very promising story of ramping projects leading to substantial revenue growth. The company promotes 2030 market estimates of over 100 million lidar units sold in the above target markets with 68 million assigned to smart infrastructure. The company is only forecasting the sales of 2,000 units this year on sales of just $19 million.

The company already lists a large customer base of more than 450 with non-automotive customers accounting for less than 15% of projected revenues. The business is very much focused on the high performance, but low-cost solutions needed to proliferate unit sales outside of automotive. The company has a goal of $100 lidar units by 2030. Though, the company does project an ASP of $7,752 this year to dip to only $1,703 by 2025.

Ouster forecasts a 2025 TAM to reach nearly $10 billion while other industry estimates don’t approach anywhere near these levels. Yole has a $3.8 billion total market opportunity in 2025 led by ADAS vehicles. While most analyst estimates expect a big uptake in automotive demand, the estimates don’t forecast smart infrastructure to top automotive while Ouster has numbers at $2.5 billion and industrial at $2.1 billion. All of the sectors are expected to reach major inflection points around 2024 so investors owning the stocks here are betting on the long term.

Source: Ouster presentation

Based on the market growth scenarios, Outster is forecasting rather bleak revenues turn into massive amounts by 2024. The stock is indeed cheap, if the digital lidar company can reach 2025 sales of ~$1.6 billion.

Source: Ouster presentation

The company projects nearly 60% gross margins leading to 36% EBITDA margins by 2025. The risk in the sector remains that these aggressive growth targets aren’t reached highlighted by the recent Velodyne Lidar warning. The competitive nature of the business could lead to pricing pressure amongst a large group of public companies now. Otherwise, Ouster is a great deal here with EBITDA jumping to $569 million in 2025.

Cheap Deal

With several other major lidar SPACs already closing deals, the market appears to have forgotten about this business combination following the initial pop. The ironic part is that Ouster trades at similar valuation multiples with where Luminar and Velodyne Lidar initially traded.

The Ouster deal had an initial equity value of $1.9 billion and an enterprise value of $1.6 billion with $300 million in net cash. The Colonnade Acquisition IPO will provide $200 million in proceeds while a $100 million PIPE will add the additional cash. With 185 million shares outstanding, Ouster has a current EV of $2.1 billion based on the stock at $13.

Source: Ouster presentation

As per the company benchmarks, Ouster has an EV of 1.5x ’25 sales targets while the other stocks such as Velodyne Lidar trades at 4.4x and Luminar is insanely valued at 16.0x. The market appears far more focused on the lidar company more focused on automotive and running into issues on whether a key contract with Mobileye, owned by Intel (INTC), remains intact by 2025. A lot of AV manufacturers are building their own lidar technologies such as Cruise Automotive (GM) and Waymo (GOOG(NASDAQ:GOOGL).

A lot of questions exist on which of these companies will win the technology race over the next decade. Not to mention, a lot is yet unknown in which markets will develop the fastest.

Takeaway

The key investor takeaway is that Ouster now appears the best deal in the lidar sector. The stock hasn’t rallied following the SPAC deal announcement while Velodyne has doubled and Luminar has tripled. The sector isn’t without risk due to possibly aggressive financial projections, but the Colonnade Acquisition SPAC appears a good bet of a stock headed higher.

Source: https://spacfeed.com/colonnade-under-the-radar-lidar-spac?utm_source=rss&utm_medium=rss&utm_campaign=colonnade-under-the-radar-lidar-spac

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Steve Jurvetson and Maryanna Saenko on their new fund, SPACs and the great tech exodus

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Future Ventures — cofounded by venture capitalist Steve Jurvetson and Maryanna Saenko, a colleague of Jurvetson at his last firm, DFJ, as well as an investor previously with Airbus Ventures and Khosla Ventures — has closed its second fund with $200 million in capital commitments, say the pair.

In a wide-ranging conversation yesterday afternoon, Jurvetson characterized the fund as “dramatically oversubscribed in a fairly short period of time,” adding that roughly one-third of its investors are venture capitalists or other investors, that the “second largest bucket [comprises] tech executives, CEOs, and former CEOs of enormous companies of relevance to our ecosystem” and that the last third of the firm’s capital is coming from institutions, including one university endowment. (He didn’t specify which.)

As with Future’s $200 million debut fund, which closed two years ago, the outfit’s newest vehicle has a 15-year time horizon, giving it more leeway to make longer-term bets. Jurvetson also confirmed that as with that debut fund, Future features fairly standard economics, including charging 2.5% in management fees and 25% in so-called carried interest (meaning the share of the profits that Future keeps from its investments).

“We tell our LPs, ‘Look, this is a long game, these companies take longer than five to seven years to come to full maturity,’” said Jurvetson, who has been on the board of SpaceX since 2009 and, along with three other directors, left the board of Tesla in September, following a 13-year run as a director. “They may go public in that timeframe. But as you can see with Tesla and SpaceX and some of the greatest tech stories of our day, you really would regret having feel pressured to punch out early when they’re really in the greatest phases of torrid growth.”

Undoubtedly, Future’s new fund could have been bigger. Jurvetson has been doing business with Elon Musk for more than 20 years, and beyond his early involvement with SpaceX and Tesla, Future participated in the first round of Musk’s tunnel-based transportation system, Boring Company.

The firm also wrote the first check to Musk’s neurotechnology startup, Neuralink, which last summer unveiled its progress toward developing implantable brain-computer interfaces that include thousands of electrodes that Musk helps will eventually help to cure conditions like Alzheimer’s and dementia, among other things.

Though SpaceX is now an 18-year-old company, Future has a stake in that business, too. In fact, Future’s first check went to Space X, and the firm last year raised a $100 million SpaceX SPV (special purpose vehicle) in just five days — capital that Saenko said came from most of the fund’s investors, who were given the option of participating if they wanted.

These pop-up type funds won’t happen routinely, according to Jurvetson. “We communicated in our fundraising that a special situation, maybe two, would occur where we do a later-stage, large check, single investment in a company we have immense conviction in, and we didn’t anticipate that to happen right away, but the opportunity to reopen the prior year’s round [in SpaceX] and join an extension of that close made it very tempting to do on behalf of the fund.”

The broader plan is to continue committing smaller amounts to startups — $3.8 million on average — and for that funding to be the first that the teams raise. Future intends to invest in roughly 20 companies altogether from the new fund — as with the last — and to take a more relaxed view on board seats than might other firms.

Part of that owes to necessity, suggests Saenko, noting that she and Jurvetson only have so much bandwidth. But she also said she could “not think of a single situation where we’re not fully in the information flow of the company” even without a director role, which is often why VCs insist on one.

In the meantime, well beyond its Musk-related bets, Future has been assembling a portfolio that’s wide-ranging, with investments tied to cellular manufacturing, longevity, and edge AI, among other things.

It just led a follow-on round in Sensei Biotherapeutics, a 21-year-old, Boston-based developer of personalized cancer drugs that’s planning a public offering this year and which uses bacteriophage to induce an adaptive immune response.

Future — which is also investor in the lab-grown meat producer Memphis Meats — is also very focused right now on regenerative agriculture and permaculture, which is an approach to land management that adopts arrangements observed in flourishing natural ecosystems.

Said Saenko, “I think it would behoove all of us to look at our food industry and ask what are the ways in which we are currently feeding our global population that are unsustainable in the future, given the number of people that we have and are going to continue having on this planet.”

What doesn’t interest the pair remotely are other trends sweeping the venture industry right now, from space investing to moving from California.

On space investing, Jurvetson — who led DFJ’s investment in both SpaceX and the satellite company Planet — said it’s far too crowded now (“though I’m going to be a space tourist one day for sure”).

As for moving — as Musk did recently to Austin — Saenko isn’t going anywhere, she said. Neither is Jurvetson, who spent 12 years in Texas, including in high school, and has no interest in returning.

“Sadly,” he said yesterday, “many of my friends have punched out and gone to Texas or Florida.” He berates them for it, too, he said, explaining: “If you become wealthy enough as an investor or an entrepreneur such that you could choose to live anywhere you want in your life, why in the world would you pick up and go to some godforsaken place now? Just to avoid capital gains tax? How about, for example, donate to charity instead and avoid that capital gains tax?”

There is a “different way to look at the world rather than just trying to do wealth transfer and preservation across generations,” he said. “That just feels so short-sighted to me.”

And don’t even get them started on the blank-check companies that have come into vogue as a path for more automotive companies in particular to become publicly traded. For example, Lucid Motors, the California EV startup that gave up majority ownership to Saudi Arabia’s sovereign wealth fund last year in exchange for $1.3 billion, is reportedly in talks to go public through a merger with one of the special purpose acquisition vehicles of Wall Street veteran Michael Klein.

Faraday Future, another electric vehicle startup, is reportedly looking to go public via a merger with a separate SPAC sponsor.

Asked what Future Ventures makes of the trend, Jurvetson — who experienced a high-profile split from DFJ in 2017 (DFJ has continued on as DFJ Growth) — did not mince words about the electric vehicle category especially. “It would be really refreshing if a decent company was included in the mix, but it is just a rogue’s gallery of horrific companies.”

Mostly, he continued, “these are companies that are unable to raise a penny from any other source” at this point in their trajectory.

Saenko was more diplomatic if no more optimistic about some of the related deals being struck right now.

“We’re not saying that every SPAC company is a terrible company,” she said. “I think what we’re saying is that everyone should be very wary of these companies because of Steve’s point that they’re early-stage companies and the SPAC is solely a fundraising system.”

Public market investors “expect a particular level of maturity and progress and meaningful forecasting from the companies that are on the public markets,” she added, “and that’s just not going to be true of the vast majority of the companies that have gone through SPACs. And that could have a potentially terrible blowback on the entire tech industry.”

Source: TechCrunch – Steve Jurvetson and Maryanna Saenko on their new fund, SPACs and the great tech exodus

Source: https://spacfeed.com/steve-jurvetson-and-maryanna-saenko-on-their-new-fund-spacs-and-the-great-tech-exodus?utm_source=rss&utm_medium=rss&utm_campaign=steve-jurvetson-and-maryanna-saenko-on-their-new-fund-spacs-and-the-great-tech-exodus

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