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How to take your unicorn public, the easy way

Protocol Index

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.


  • "There are high valuations at the market … it does not reflect the reality of the macro situation." — Mubadala's Khaldoon Al Mubarak said the fund will still "deploy significant capital" in tech, though.
  • "Investors are congregating not just around the same types of tech, but often the same deals." — Entrepreneur First's Matt Clifford says that a "flight to quality" is driving up some companies' valuations.
  • "Over 90% of third-party U.S. web targeting (Chrome + Safari + Firefox) will be eliminated inside the next 18 months." — Rosenblatt's Mark Zgutowicz thinks that Apple's new ad-targeting restrictions could hit The Trade Desk.
  • "Everyone in China is trying to invest in something related to semiconductors." — Jin-biao Huang says his company, Nuvolta, is an example of how U.S.-China tensions are leading to a boom in valuations for chip companies.
  • "Singapore has become much more important than Hong Kong from a location and population perspective." — Gartner's Tao Wu says cloud providers are increasingly focused on Southeast Asia.

The Big Story

Ackman's got a SPAC, man

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.

  • SPACs are increasingly popular among investors, funds and startups. They work like this: A "sponsor" (Pershing Square, in this case) raises a bunch of money from investors by listing a blank-check investment vehicle. That vehicle then goes out and looks for a private company to buy. Once it's found one, it uses the investors' funds to buy it, taking the company public through a reverse-merger. If the investors don't like the deal, though, they can usually ask for their money back.
  • In recent months, Nikola Motors, DraftKings and Virgin Galactic have listed this way, and Shift is reportedly considering it, too.
  • Pershing doesn't explicitly say it's looking for a tech company … but it does say it's looking at "private, large capitalization, high-quality, growth companies" — so, it's probably going to be a tech company.

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."

  • Executives have to spend ages touting the benefits of their company to a whole bunch of different investors — whereas with SPACs, there's just one team to negotiate with, making the whole process quicker and easier.
  • SPACs also offer some certainty: A price is agreed before the listing, rather than leaving fortunes up to chance. As Bloomberg's Matt Levine explains, Ackman's SPAC has some extra features to encourage that certainty further. For companies that might otherwise struggle to list (ahem), SPACs can be a better bet.
  • "In the earlier part of this year when the market did slow down and we saw heavier volatility," Heller said, SPACs provided "a very attractive alternative." Pershing's SPAC filing describes that as part of its strategy: It thinks a weak IPO market could help it find a good deal.

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.

  • And unlike IPOs, SPACs allow companies to file forecasts. That gives "the market more clarity on growth," Abrahimzadeh said, with the added confidence that a SPAC sponsor is underwriting those forecasts.
  • For companies with "hockey stick growth," he said, "the SPAC is great because people buy into your growth profile day one."

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.

  • As SPAC sponsors become increasingly high-profile, that benefit only increases. And that relationship offers some fun for the investor, too: PitchBook's Cameron Stanfill told me it was a way for them to "drive the direction of the business going forward," activist-style.

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.

  • As for that other IPO alternative, direct listings? Heller says that "conversations are not as robust as they were last year, but … are definitely percolating again."

Up To Speed

  • Monday: Apple announced its Mac Arm transition. Microsoft shut down Mixer, its Twitch competitor. Canva raised at a $6 billion valuation. Checkout.com raised at a $5.5 billion valuation, and said it was considering a U.S. IPO.
  • Tuesday: The WSJ reported that Dell is considering spinning off its $50 billion VMware stake. Mastercard bought Fincity, a financial data provider. Shopify competitor BigCommerce reportedly filed for an IPO. Gojek laid off 9% of its staff. Brazil's central bank suspended WhatsApp payments. Trump suspended new H1-B visas.
  • Wednesday: Tencent bought Iflix. Apple acquired Fleetsmith. India approved Facebook's Jio investment. The U.K. provisionally approved Amazon's Deliveroo investment. The U.S. government said Huawei and Hikvision were tied to the Chinese military. Beike filed for a $2 billion IPO. Tokopedia reportedly raised $500 million from Temasek.
  • Thursday: Wirecard filed for insolvency. The Volcker Rule was amended, allowing banks to invest in venture capital funds. Amazon bought Zoox, reportedly for over $1.2 billion. Verizon boycotted Facebook ads. Tanium raised from Salesforce at a $9 billion valuation. Uber deprioritized its finance projects. France, Italy, Spain and the U.K. reportedly said they'd limit their digital tax plans. The U.K. government will reportedly invest around $630 million in OneWeb.
  • Today: Alphabet is reportedly close to buying North, the AR glasses company. Amazon launched "Smart Stores" in India, which lets people shop at physical stores with Amazon Pay. The U.K. told Wirecard's U.K. subsidiary to cease activities, throwing fintechs such as Curve into chaos.

Diving Deeper

Tech x geopolitics: Asian Edition

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.

  • A few weeks ago, an app called Remove China Apps shot up the Play Store charts, offering an easy way for Indians to … remove Chinese apps. (Google then banned the app.) And a "Boycott China" campaign has gained steam, leading Chinese companies such as Xiaomi to emphasize their ties to India.
  • Meanwhile, tech shipments from China have reportedly been held up at Indian ports, including Apple, Cisco and Dell products.

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.

  • Curbing Chinese investment could have big ramifications. A Gateway House report earlier this year found that out of 30 Indian unicorns, 18 had a Chinese investor. Amit Bhandari, co-author of the report, told me that the new rules "will cause a problem" for large startups in the short term, and Bose said that "there will be some downward pressure" on valuations.
  • It's too soon to tell how the new rules will be applied, but it's unlikely that a total block on Chinese investment would happen. And even if it did, financiers are creative — they'd likely just funnel cash through Singapore or Hong Kong instead.

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.

  • Larger-scale boycotts seem to be out of the question, because India is too reliant on Chinese imports and doesn't have the capabilities to make things itself. "We may want to produce televisions, or mobile phones in India," said Greyhound Research's Sanchit Vir Gogia. "The fact is, we can't — we do not have the silicon fabs."
  • "We've got to be more practical," Jawaharlal Nehru University professor Biswajit Dhar said. Instead, he thinks the country should focus on building out its own manufacturing capabilities while maintaining trade ties with China.
  • Gogia thinks that's what will actually happen, calling it "a process of calibration." He expects Chinese companies to invest more in Indian manufacturing (something Foxconn recently hinted at), to appease the Indian government, which just wants a fairer trading relationship.

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.

Money Talks

Khozema Shipchandler, Twilio CFO

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.

If you know anyone I should speak to for this section, let me know: shakeel@protocol.com

Up Next

  • Lemonade is expected to IPO next week, after the company announced a pricing range Thursday that values it below its last private valuation.
  • Next Thursday's jobs report is the week's big economic release, though we'll also get a bunch of PMIs from the U.S. and China.
  • Micron reports earnings on Monday, and Deutsche Bank's Sidney Ho has warned about pricing risks.

Thoughts/feedback/tips? Email me — shakeel@protocol.com — or tips@protocol.com. And subscribe to get Index in your inbox every week. Thanks for reading — have a great weekend, and see you next week.

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