Special Purpose Acquisition Company (SPAC) IPOs have generated a lot of buzz recently, and for good reason: 242 SPACs were launched in 2020 alone. SPACs aren’t anything new; they’ve been around since at least the 90s. You may even remember that Burger King was reintroduced to the public markets via SPAC merger way back in 2012.
So why the sudden explosion of interest? How could a relatively arcane financial instrument vault to the forefront of the public imagination and account for nearly half of all money raised via public offerings in 2020? As it turns out, there are quite a few reasons, but the real paradigm-shifting variable that refocused and revolutionized the SPAC landscape boils down to a single word: quality.
Ultimately, venture-backed businesses are expected to generate real returns for their investors by way of a liquidity event. Before the SPAC boom, this was most often achieved via acquisition, a private equity buyout, or an IPO.
In the mid-2010s, a new cohort of tech companies who had cut their teeth disrupting industries (or creating their own) had reached the stage in their corporate lifecycles where a traditional IPO became feasible. But management teams who spent their professional careers tearing down the status quo sought alternative approaches, such as direct listings.
This precipitated a broader awakening; suddenly, our eyes were opened to a more diverse set of pathways to liquidity. High caliber, venture-backed companies that would never have previously considered it began exploring SPAC mergers. A new generation of SPACs emerged to reap this newly fertile ground.
As a vehicle for liquidity, a SPAC merger is an attractive alternative to an IPO. Management teams receive the capital they need to fully fund their business plans at valuations that give credit for anticipated growth, without subjecting themselves to the complexities of an IPO process. Because SPAC managers and investors account for future performance, companies that may have been 6-18 months away from IPO readiness have begun to explore SPAC mergers as an alternative to late stage financing rounds.
We’ve also begun to see companies that had planned to IPO, or have even begun the process, pause to examine the relative benefits and efficiencies of a SPAC, where teams have more visibility and control over their valuation and investor base. Whatever the motivation, SPAC mergers provides them with the capital necessary to focus on what they do best: execute.
While the universe of potential targets has evolved, the structure of most SPACs hasn’t. Management teams and boards remain mostly homogenous, and sponsors are typically investment funds that are unable to bring value beyond capital to a target.
Queen’s Gambit Growth Capital is a fundamentally different kind of SPAC, founded on the principles of diversity and partnership. Our 100% female-led management team and board are seasoned senior executives, thought leaders and operators; our sponsor, Agility Logistics, is committed both to providing commercial opportunities and to lending its operational resources to our target.
Our investable universe spans Healthcare, Fintech, Frontier Technologies and Logistics with a particular focus on broad ESG themes. The ideal target will have already retired its technical risk, have a clear pathway to profitability, be prepared to immediately capitalize on a significant capital injection to stimulate explosive growth and have a public markets ready, stellar management team. This last point is especially crucial as we are looking to partner with a driven, aligned and ambitious existing group. We will measure our success by ensuring that a resilient, sustainable public enterprise is created as a result of partnering with Queen’s Gambit.
By leveraging our diverse view and far-reaching network as an asset and accelerant, our target company can expect the Queen’s Gambit board and advisers to facilitate revenue generating partnerships and provide access to blue chip, high-quality long-term capital. As experienced business leaders with decades of cumulative experience as public company directors, our shareholders and our target company can have confidence in our ability to perform thorough diligence of the target company’s past financial performance, strategic thinking competencies, risk management capabilities, as well as in our commitment to establish sound audit, compensation and governance oversight.
We believe that our value proposition is as appealing as it is differentiated. We couldn’t be more excited to engage with today’s most promising companies.
P.S. Our name is in keeping with our CEO’s history of naming her funds after chess moves and is a statement of our mandate for diversity. Any allusion to a certain Netflix show should be considered purely coincidental.
About the authors:
Victoria Grace is the CEO of Queen’s Gambit Growth Capital and founding partner of Colle Capital Partners LP, an opportunistic early stage technology venture fund. She previously served as Partner at Wall Street Technology Partners LP and Director of the Dresdner Kleinwort Wasserstein Private Equity Group. She co-founded Work It, Mom! and co-managed the company for five years until its merger. Victoria serves on the board of Vostok New Ventures, an investment company with presence in Sweden.
Betsy Atkins is a member of the Queen’s Gambit Advisory Board and the CEO / Owner of Baja Corporation. She is a globally recognized corporate governance thought leader having served on over 34 public boards and currently serving on the board of Volvo Cars, Wynn Resorts, and is the Chair of the Google Cloud Advisory Board.