
Ask HN: Will SPACs Replace VCs? - tempsy
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.<p>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.<p>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?
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oneelectron
SPACs are 30 years old. See the history section here:
[https://en.wikipedia.org/wiki/Special-
purpose_acquisition_co...](https://en.wikipedia.org/wiki/Special-
purpose_acquisition_company#History)

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.

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tempsy
I’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.

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oneelectron
I 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.

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tempsy
yeah 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.

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sushshshsh
Is 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?

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tempsy
I guess but I’m not really familiar with that specific situation.

