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Kevin Hartz, the start-up founder and tech investor who backed Airbnb and Uber, joined the boom in blank check companies with his own vehicle, comparing their rise to the early days of venture capital.
Hartz’s special-purpose acquisition company “one” was listed on the New York Stock Exchange on Tuesday after raising $ 200 million to acquire and float a tech start-up. Mr Hartz has said the Spac will be the first in a franchise as he tries to improve the reputation of cash shells, which have suffered historically poorly.
“Just as we saw in the ’70s and’ 80s venture capital started to grow and in the ’90s to really take off, we are seeing the same thing with Spacs,” Hartz told the Financial Times. “This is the time and place for Spacs.
Mr Hartz said he ultimately wants his Spacs to be delivered without stock warrants, which can be lucrative for investors but costly for companies, and to reduce the cut received by his sponsoring company, A-star.
“The promotion is just huge right now,” Hartz said, referring to the part of Spacs owned by their founders, typically 20%. “He tracks down upholsterers and unsavory figures.”
Although Spac is “several times oversubscribed,” Hartz said he chose not to increase its size so it could target companies as small as $ 1 billion.
The announcement comes as other Silicon Valley investors look to launch Spacs or merge their businesses with vehicles, as venture capitalists observe a growing list of investments that wait years to go public or be acquired.
Spacs raised a total of $ 27.5 billion in public offerings in the United States this year, according to data from Refinitiv, more than double their total from last year.
That includes more than $ 1 billion raised by former Facebook executive Chamath Palihapitiya for two Spacs after its first version went public with space tourism company Virgin Galactic in 2019.
Ribbit Capital, a fintech investor who has backed the Coinbase cryptocurrency exchange and Robinhood trading app, also plans to raise more than $ 600 million for a Spac, people briefed on its plans have said.
” We saw [staying private] go horribly wrong with overcapitalization, with poor governance practice, so we see this as a critical move, ”Hartz said.
But Spacs still has a reputation for targeting underperforming companies, providing a backdoor to public procurement for companies that would struggle to complete a traditional public offering.
Mr Hartz, who co-founded the Eventbrite ticketing company with his wife Julia, said he would use his connections in Silicon Valley to promote the new vehicle. Mr. Hartz is also known as a prolific early-stage investor in start-ups personally and through his company, Y Ventures.
Mr. Hartz’s Spac is chaired by venture capitalist Pierre Lamond, a former partner of Sequoia Capital, known for having supported several large semiconductor companies. Goldman Sachs advised the offer.
“Our reception and the inbound calls we have received indicate that [venture capitalists] all of them have a lot of portfolio companies asking about it, ”Hartz said.