If you’ve been following the SPAC boom, you may have noticed something about these blank-check vehicles that are springing up left and right in order to take public privately held companies. They are being organized mostly by men.
It’s not surprising, given the relative dearth of women in senior financial positions in banking and the venture industry. But it also begs the question of whether women, already hustling to overcome a wealth gap, could be left behind if the trend gains momentum.
Consider that studies have shown women investors are are twice as likely to invest in startups with at least one female founder, and more than three times as likely to invest in startups with female CEOs. It’s not a huge leap to imagine that women-led SPACs might also be more inclined to identify women-led companies with which to merge and take public.
More, the SPAC sponsors themselves are reaping financial rewards. In return for sponsoring a SPAC in its pre-IPO stage, sponsors typically receive 25% of the SPACs founder shares, which can mean a lot of money in a short amount of time, given that SPACs typically aim to merge with a target company in two years or less. In fact, even if the SPAC performs terribly — say the company with which it merges is later accused of fraud — those sponsors get paid.
Eventbrite cofounder Kevin Hartz, who raised a $200 million SPAC this summer, explained it to us in August this way: “On a $200 million SPAC, there’s a $50 million ‘promote’ that is earned.” But “if that company doesn’t perform and, say, drops in half over a year or 18-month period, then the shares are still worth $25 million. (Hartz himself called this guaranteed payout “egregious,” though he and his partner in the SPAC, Troy Steckenrider, didn’t structure their SPAC any differently, saying that as a first-time SPAC sponsor, they wanted to make sure that the investment community understood their offering.)
Women aren’t entirely unaccounted for in the current SPAC craze.
Thanks to a state law passed in California in 2018 that mandates that all publicly traded companies with headquarters in the state include at least one woman on their boards of directors, nearly all SPACs based in California have a female director, as reported earlier by Axios.
In the last week, too, at least three SPACs to register with the SEC have been launched exclusively or in part by sponsors who are women. Hope Taiz, a New York-based investor who began her investment banking career first as a M&A analyst and then as an associate at Drexel Burnham Lambert, registered plans this week with the SEC to raise a $300 million blank-check company called Aequi Acquisition.
Northern Star Acquisition, a consumer-focused SPAC led by magazine vet Joanna Coles and New York Islanders co-owner Jonathan Ledecky, meanwhile filed for a $300 million IPO last week, and Climate Change Crisis Real Impact I Acquisition, a SPAC focused on climate technology, raised $200 million in an IPO. The blank check company is led by Mary Powell, the former CEO of Green Mountain Power, and David Crane, a former CEO of the competitive energy supplier NRG Energy.
Betsy Cohen, a founder and former CEO of the financial services company Bancorp has established four fintech-related shell firms, in fact, taking public the newest of these vehicles, a $750 million SPAC, just last month.
As an interesting aside, the SPAC programs of both Goldman Sachs and Jefferies are led by women (Olympia McNerney and Tina Pappas, respectively).
In fact, some might wonder — reasonably — if it isn’t a little early to worry about women missing out on this apparent gold rush. After all, while 133 SPACs have raised more than $50 billion in proceeds this year at last count, the number of tech investors who’ve organized them remains very small, if exclusively male. Among the only investors to jump into the pool to date are renowned investor Chamath Palihapitiya (who has dozens of SPACs in mind); Hartz and Steckenrider; entrepreneur-investors Reid Hoffman and Mark Pincus, Ribbit Capital’s Mickey Malka; former Uber executive Emil Michael; and the founders of FirstMark Capital.
Still, with the apparent blessing of well-regarded investors, including Benchmark’s Bill Gurley, SPACs seemed poised to explode in popularity. If they do, it will be interesting to see if more women, including in venture capital, take advantage of them to get more privately held companies into the public market.
A number of top women VCs with whom we’ve talked say they’re following the action and weighing how to participate. One such prominent investor told us she’s been researching under what circumstances it makes sense for VC firms to engage in a SPAC’s origination.
Others may well gain exposure first to SPACs through their portfolio companies. Dana Grayson of Construct Capital, for example, led an early investment in the 3D printing company Desktop Metal — which is going public through a SPAC-led deal — while a partner the firm NEA. At TechCrunch’s recent Disrupt event, Grayson, speaking about Desktop Metal, called SPACs a “great new viable alternative for companies.”
With “most banking things, SPACs skew heavily male,” observes Kristi Marvin, a former investment banker who now runs the data site SPACInsider. It’s not time to panic yet, however, she suggests. For one thing, the SPAC market is on the verge of overheating. “You have 10 deals trying to price in the same day, and investors are tapped out.”
SPACs also require a learning curve that some underestimate. “It’s why you see hedge funds and PE firms more involved in SPACs; they have infrastructure to do them versus three guys who are facing a ton of work just to do the administrative side of things,” notes Marvin.
As with other financial products, Marvin expects to see more women embrace SPACs over time. That said, she adds, “If in a year or two, it’s still only male VCs who’ve dipped their toe into SPACs, it may be a problem.”
