Rotem helps companies identify and mitigate manipulation and reputation attacks in advance. CEO of dolos and ARX, a business consulting firm and VC.
Finding the right path to your initial public offering (IPO) can be challenging, and much can be gained or even lost. Smart companies look for signals from the market and monitor long-term profitability and success.
Special Purpose Acquisition Companies (SPACs) have lost their appeal for many entrepreneurs in recent years. SPACs are essentially publicly traded shell companies created for the purpose of buying and merging private companies and jump-starting their IPOs. They have been a powerful tool for IPOs for decades, especially in the technology and biotech industries.
But now we see SPACs being overvalued or abused by malicious venture capitalist (VC) players who have it in their best interest to go slow while inflating the market. However, these delayed IPOs do not serve the long-term interests of the companies, but only the VCs.
This new attitude towards SPACs is unfortunate, as they are still a useful resource for companies looking to go public quickly while also avoiding the typical IPO bureaucracy. But it’s an art to find honest investors who don’t redeem their short-term gains and walk away. It’s also rare to find investment bankers willing to pop the startup valuation bubble and expose the sometimes-hidden problems behind their shiny PR machine.
Going public has several benefits for startups. Even if prices fall, an IPO creates exposure and increases its public profile, creating a brand awareness that staying private wouldn’t provide. It also rewards shareholders and employees who have been loyal since the company was founded and gives them the opportunity to profit from a share of their shares. Finally, IPOs are an excellent opportunity for startups to raise the capital they need to fund their desired growth.
Some companies may see the bear market and consider taking a more conservative approach to IPO by trying to build a larger company before going public. This is in line with what many VCs recommend, but again, this option only has the importance of VCs at heart.
Time proves that the market for venture capitalists and private finance more fleeting than the public market. In private financing, the flow of capital is not consistent. There are documented long periods of time when the availability of capital is scarce, but with no rhyme or reason and far fewer alternative options than an IPO creates.
I believe a more aggressive and profitable direction for tech startups is to go public earlier. A strategically timed IPO can enable entrepreneurs to capture the true valuation of their companies, which will better compensate founders and put them in a safe position knowing they can find financing in the form of private investment in public shares. (PIPEs). ) at the end of the road.
The bottom line is that SPACs can be a great tool to cut red tape. Find honest investors who won’t pay back everything and flee. Consult with VCs and investment banks that have a fiduciary commitment not only for the next round, but also for the next five years.