June 26, 2020
Image: Agne Alesiute
This week: why SPACs are in vogue, what the India-China conflict means for tech, and Twilio's CFO has some financial advice for you. Want Index in your inbox each week? Subscribe here.
Bill Ackman made waves this week when his investment firm, Pershing Square, filed for the largest-ever special purpose acquisition company, or SPAC, listing. He's looking to raise $3 billion, with at least a further $1 billion coming from his funds, to take a "mature unicorn" public.
For startups, SPACs offer some big advantages. "When you go through the traditional IPO process," Nasdaq's head of capital markets Jay Heller told me, "there's a lot of work."
SPACs are a particularly good fit for growth equity companies. For one, they're sponsor and VC-friendly. "Existing owners of private companies oftentimes want near-term liquidity," Paul Abrahimzadeh, co-head of North America equity capital markets at Citigroup, told me. SPACs facilitate primary and secondary sales of stock, letting investors sell without a lockup period.
There's one other big difference. SPAC sponsors can often act as "strategic partners," Heller said, offering the type of management expertise companies get from a private equity buyout while still retaining the benefits of being publicly listed.
All eyes are now on what Ackman's SPAC might acquire. People I spoke to said to expect a large unicorn in the $10 billion to $20 billion range. It might be a while before we hear anything, though: SPACs typically take at least six months to announce their deals.
Relations between India and China aren't exactly great right now. After recent fatal clashes on their border, anti-China sentiment is on the rise in India — and the tech industry is increasingly caught in the crossfire.
These tensions have been brewing for a while, even before the border skirmish. Back in April, India introduced a new rule that required the government to approve all investments from India's neighboring countries. "The sole aim was to curb Chinese investment," GlobalData lead analyst Aurojyoti Bose told me.
Overall, "a lot of it is posturing," said Everest Vice President Yugal Joshi of the Indian government's moves. Others I spoke to echoed the same idea: that India is trying to put pressure on China to change its practices, but that these are just temporary measures.
From the conversations I've had, it seems like a full-on trade war, akin to the U.S.-China one, is unlikely. But if recent months have taught us anything, it's that you shouldn't rule anything out.
What was the most overlooked or overhyped deal of the last 12 months?
I think Visa's acquisition of Plaid at the beginning of this year was overlooked. The billion-dollar price tag on that deal was a clear signal of the strength of the API economy.
What's your favorite Excel trick?
My FP&A team!
What's one thing people didn't pay enough attention to this week?
The launch of email subscription service Hey. People think email is dead, but our data says Gen Z actually cares more about the inbox than baby boomers, so I think that will change.
Has COVID-19 been net good or bad for the tech industry?
Obviously, we would never have wanted this to be the case as a result of a global pandemic, but net good. Businesses have been forced to innovate overnight. The solutions built to address the many challenges of this crisis will be the foundation of our new 6-foot world.
What tech stock do you have your eye on?
Shopify. They've struck major deals with both Facebook and Walmart in the last month.
What piece of financial advice should a founder ignore?
Growth at all costs. Founders should focus less on raising huge amounts of funding and more on building a product that really serves customers.
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