The Deep Tech Founder’s Guide to Going Public Through a SPAC

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China controls 95% of supply and refining.
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The US needs to support some of these critical enterprises.
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I still see a massive asymmetry of companies that want to go public versus the Mana Spax out there that traded up 70% from$10 a share to over$17 a share.
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Many years ago, I took a company called Hostess Public.
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They make Twinkies.
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That's the story that American ran.
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Welcome to the Lab to Market Leadership Podcast.
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Too many advanced science and engineering companies failed to deliver their innovations from the lab to the market.
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We're on a mission to change that.
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My name is Chris Reichhelm, and I'm the founder and CEO of Deep Tech Leaders.
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Each week we speak with some of the world's leading entrepreneurs, investors, corporates, and policymakers about what it takes to succeed on the lab-to-market journey.
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Join us.
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How do you finance a moonshot company?
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Deep Tech is a broad church, and we've said that many, many times on this podcast.
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And within that church, a large part of the congregation would qualify as moonshot.
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Okay.
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We're talking about things like fusion.
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We're talking about space.
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We're talking about some parts of the advanced materials universe.
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We're talking about quantum computing.
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And in the early years of these companies' development, there are answers to financing them, seed stage, equity investment, grant funding.
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We've got solutions there.
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But as they scale and as they mature, their capital requirements increase significantly, getting into the hundreds of millions of dollars required in order to properly scale.
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What are the answers then?
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That is the main question of today's lab to market leadership episode.
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Now, you may already know this, but a large number of deep tech companies are choosing to go public.
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Okay, but not via the traditional IPO, via something known as a SPAC, Rocket Lab, Quantumscape, Ocklo, just last month, general fusion.
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And in quantum computing, it's almost become the default route.
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INQ, Reggetti, D-Wave a few years ago, just this past year alone, Inflection, Xanadu, IQM out of Europe.
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That is a clear pattern.
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SPACs are becoming more popular for moonshot deep tech companies.
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Now, to help me understand why, I'm going to be joined by probably the best person I could hope to get.
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He's one of the world's leading bankers for SPAC IPOs.
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His name is Brandon Sun.
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He is head of SPAC Investment Banking at Conan Company Capital Markets out of New York.
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He's probably the longest-serving SPAC banker on Wall Street.
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And he's done well over a hundred SPAC IPOs and more D SPAC transactions than pretty much any banker alive.
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If you are a board member or a CEO considering late-stage deep tech financing, you're going to want to listen to this.
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Let's get into it.
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Brandon Sun, thank you so much for joining me.
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Chris, thank you so much for the opportunity.
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I'm super excited to have this stage to share my views.
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I do need to kind of preface up front that because of legal requirements, I do want to say, look, this isn't merely my own views and does not constitute any investment advice.
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I love it.
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Of the 62 episodes we've done, this is the first one to start out with a disclaimer.
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So you've heard it, everyone.
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This is not investment advice.
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Brandon's just merely going to outline some of his views and share some of his experience with us.
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Deep tech financing, particularly for moonshots, Brandon.
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And particularly at the later stage.
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So seed stage, we've got answers for.
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Even Series A, we have answers for.
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But increasingly, Series B investors are expecting much, much more now.
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And rather than go through the pain of that journey, a number of deep tech companies are considering going public, but not via the traditional route.
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They're considering going public via SPAC.
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I'm a deep tech founder.
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I've heard of SPACs, but I know absolutely nothing about them.
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Take me through it.
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Help me understand what these are.
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Yeah, no, I'd be happy to.
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So SPACs are these publicly traded vehicles on either the NASDAQ or NYSC listed in the US, right?
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There's 280 publicly listed SPACs with the express purpose of taking a great private company, one great private company, and taking them public, where it could accelerate its trajectory in the public markets.
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The SPAC, there's a couple of benefits.
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One is it's usually raised by a very blue chip premier founder who brings validation, who brings experience expertise, and on top of that, they're capital connections.
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The SPAC itself typically has cash in the trust, anywhere from$100 to$300 million of cash.
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Okay.
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So if I stop you there for a second, so the first feature of it is it's got this individual, a founder of the SPAC itself, who, as I understand it, is that the sponsor?
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That's the sponsor of the SPAC, yes.
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Okay.
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I think Chamath Papalaya, the ex-Facebook ex meta executive, is a well-known.
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Well, he was at one point.
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And there are many others who fit that brief too.
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But these are generally industrially experienced individuals with really good capital connections.
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Is that broadly right?
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Exactly.
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It's usually a premier founder with either financial or operational experience who has respect, who had the admiration of the public markets.
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So if they were to lender support credibility to a private company, it makes it all the easier for that company to go public.
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Because you're right at the outset, right?
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Some of these companies are a little earlier stage.
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Perhaps your business model is somewhat less proven, you do need an extra veneer of credibility, right?
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So think of that SPAC sponsor lending their reputation and adding a halo effect in your go public process.
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I got it.
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So you're kind of leveraging their credibility in order to get you attention, in order to get you your financing at that point.
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And so when they decide, okay, I want to put together a SPAC, you said they set up a trust.
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Yeah.
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So they set up a trust.
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So they raise typically a couple hundred million dollars of capital.
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It's in a lockbox, it's in a trust, right?
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That enables and also empowers public IPO investors to invest in a SPAC.
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That's why in the last two years, a SPAC market in the US has been white hot.
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There's been over 300 new IPOs of SPACs formed.
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And all these SPACs, once formed, they typically have two years.
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Two years to go find a great private company and take that company public.
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Okay.
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Okay, I get it.
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So they set aside this money.
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So they decide they're going to do the SPAC.
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They set aside the money in the trust.
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And that seems to be a fixed amount, just between 100 and 300 million.
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And then the clock starts, and they've got to find a company to do that transaction with, to partner with.
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Exactly.
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Just out of interest.
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If they don't find it, then what happens?
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If they don't find a target, the SPAC liquidates, right?
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All the money gets returned to the original IPO investors.
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And the nice feature is that original IPO investors get a hundred percent of money back, right?
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So for the IPO investors, it's a risk-free way of kind of betting on a great team to see if they can bring home a great target.
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If there's no target then in two years, they get their money back.
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Okay.
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And the IPO investors, are these going to be like the institutions?
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These are institutions.
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I would say it's probably 60% large multi-strategy US hedge funds, right?
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Hedge funds that manage five to sometimes$50 billion of assets under management.
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So they usually have a capital markets or cash bucket, right?
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They allocate towards SPACs.
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On top of hedge funds, you have some Canadian pension funds that ends, some family offices, right?
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It's a way to differentiate and diversify their holdings.
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And it's honestly like a pretty good investment because it's risk-free.
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As long as investors choose to redeem, they can actually get their money back.
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But for very exciting companies, the hope is that instead of redeeming, they keep the money in and they're supporting the next great American or international venture.
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But the institution is buying into the reputation of the sponsor in the early days.
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Is that right?
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And so does the sponsor give any indication as to what type of businesses they're going to go and find?
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Good question.
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And I would say half the SPACs out there are industry agnostic.
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They're going to look for targets in pretty much any sector, any geography.
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Some other SPACs will be geared towards a certain industry, sometimes energy, sometimes technology, sometimes healthcare.
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Just depends on who the sponsor is and the extent or his or her background.
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Okay.
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Gotcha.
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So what happens then?
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So the sponsor sets up the trust.
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They let institutions know.
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Are the institutions, by the way, are they putting the money into that trust as well?
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They are.
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They are.
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So they're actually investing anywhere from 10 to 20 million dollar checks to form the spAC trust.
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So the spAC trust is$200 million or$300 million.
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Cash is actually locked up in that trust.
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So the institution is actually fund and the money's there.
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Okay.
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Gotcha.
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And then the sponsor has to go and find the actual deal, has to find the target.
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And so what happens then?
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Let's say they zero in, they narrow on a target.
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What happens then?
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So then it's really MA negotiation, right?
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If the SPAC sponsor finds a great target, they start negotiating contours of a deal, right?
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If I were to take this great company X public, what valuation?
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What's the envisioned capital raise, right?
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And think of it really more as an MA process than an IPO, right?
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You construction really creative things.
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You can get the founder management team and earnout.
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You can do dual class voting control.
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It's really, really interesting the type of flexibility you have.
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I think the problem with a traditional IPO process is one, like the company needs to be a lot more proven, a lot larger in size and scale and scope.
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And two, like the company also loses a lot of control because you have certain gatekeepers, right?
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The IPO book owners, the Coleman Sachs, Morgan Stanley, the JP Morgan's of the world, right?
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A small fraternity of banks oftentimes determine who's good and who's not good enough to go public, right?
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The guy thing in a SPAC or public transaction, it's bilateral, right?
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A target's negotiating for Blue Chip Premier SPAC sponsor.
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If there is an understanding agreement to go public, the SPAC could basically take that company public and allow it to go public quickly and expeditiously.
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Yep.
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But then the institutions who've signed on, obviously, into the trust and they've given their 10 to 20 million dollar checks.
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What kind of expectations do they have of the target once that company is public?
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Do they have the same kind of expectations in terms of earnings, in terms of uh target revenues and so on, like you'd see in a traditional IPO?
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Yeah, no, 100%.
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Once you go public, the expectations are the same, right?
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You need to grow, you need to hit your milestones, you need to hit your goals and objectives, right?
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Sometimes a lot of these companies just simply need the venue to go public, right?
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And once they're public, they're gonna be in control of their own destiny, right?
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For them, if they can prove themselves, tell their story in the public markets, they can build a following with institutional investors and research analysts.
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So after a few months, a few quarters of going public, they have the credibility.
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So if they were to do a big follow in equity raise, investors can support them.
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So I think that's the most powerful feature of a SPAC, right?
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It empowers a lot of these private companies to take control of their own destinies and go public on their own terms.
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And a lot of that control, I guess, gets negotiated during that MA process that you outlined.
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And would it be safe to say that there can be different types of control granted depending on the negotiation, the sponsor and the target agree?
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Yeah, no, 100%.
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I think in a DSPAC, so a SPAC MA deal, we call it a D-SPAC process, right?
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It's a negotiation between a target, their shareholders, and a SPAC sponsor.
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So in terms of valuation, in terms of capital raise, in terms of timing, right?
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A lot of it is at the target's control.
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And this is where like SPACs potentially also run into danger because a target, especially if they're coveted and high profile, they can tie to multiple SPACs, right?
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They can extract the best terms, sometimes too good.
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So yeah, yeah.
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And this is still a new world for many, clearly not for you, but this is a new world for certainly many private companies out there and the boards of these private companies.
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And so I guess they need to figure out a little bit how ambitious they can get, what does a good deal look like, and how to manage themselves once they've completed the process.
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Although it sounds like the way they manage themselves isn't that different from any other public company.
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They need to build trust in the markets, they need to set their milestones, they need to achieve those milestones, et cetera.
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Yes, exactly.
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I think the good thing about a SPAC is for a lot of these companies, even through a little earlier stage, it gives them an avenue to go public.
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Otherwise, like if you look at kind of the four forms of going public, you could do a traditional IPO, you could go public through a SPAC, you could do a reverse merger from existing shell, or you could do a direct listing, right?
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I would say like for most established companies, a traditional IPO is the most proven, the most conventional route.
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But I'll be honest, like in this market where there's still a lot of market uncertainty, right?
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The traditional IPO route is just not available to 98% of companies, or even if it is available, the big banks will sign you up, sign you on, but not take you public until they feel ready, right?
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I've seen companies sometimes get delayed for quarters, sometimes even years, right?
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I took a company called Weeble Public.
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It's a$5 billion electronic trading platform.
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Goldman Sachs is their leftly bookrunner.
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Goldman delayed them quarter after quarter for three full years.
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And Weeble decided, look, Gold Public was of strategic importance for them and their shareholders.
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Is that to go public through a spec instead?
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Yes.
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Yeah.
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I can see how that's frustrating, particularly in the deep tech domain.
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I know you and I have spoken before about IQM in particular, which went public in June.
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And speaking to Yan, Jan Getz, who's also been on this show, was talking a little bit about the justification.
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And for many of these deep tech companies, they will be engaged with either defense organizations andor government andor military.
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And when you are at that level of engagement, you need a certain level of trust.
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You've got to operate in a particular way and going public and the going public process, regardless of the avenue or the instrument, actually helps to build that trust.
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If you want to engage at the top level with these top types of organizations, governments and military, you need to have that level of transparency.
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Yeah, no, 100%.
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I would say for a lot of these companies that really want to accelerate their growth, going public allows them to really play offense, right?
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By being public, it lends the credibility to strategics, defense agencies, right?
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By having a public currency, it better allows you to do MA.
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It better allows you to retain and hire great employees, right?
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So there's a lot of benefits.
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For a great company like IQM, also just opens up the universe of potential buyers.
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It's not just institutions, right?
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Once you're public, you have not just strategics and government agencies that can invest, like the Finnish pension fund for IQM, but you also have this wide swath of retail investors.
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I think that's one of the things that's really empowering about the SPAC process.
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It allows you to really level the playing field and allow retail investors to come in as well.
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Yes.
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Let's talk about it from the other side.
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What I'm getting from your answer here is you get speed, actually, you can get speed to market and you get a certain degree of certainty because the money is kind of raised.
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But what do you give up for that compared to, let's say, a traditional IPO?
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What do you think some of the things, if you were arguing the other case, what do you kind of give up for that?
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That's a very good question.
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So I think the benefits you laid out pretty clearly, right?
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It's almost a guaranteed way of going public on NASDAQ and YSC, right?
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You get to go public on your own terms, on your own speed.
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However, I do want to clarify the capital is not necessarily guaranteed in a DSPAC go public.
00:16:51.360 --> 00:16:53.919
Capital raising is on a best efforts basis, right?
00:16:54.240 --> 00:17:00.720
The money in the SPAC trust, whether it's 200 million or 300 million, the investors have what's called a redemption rate.
00:17:00.879 --> 00:17:05.440
They can actually withdraw the cash from the SPAC trust if they don't like the deal, right?
00:17:05.599 --> 00:17:08.240
It's the ultimate protection for SPAC investors, right?
00:17:08.400 --> 00:17:12.000
That's why there's so many SPACs out there, and that's why there's so much capital supporting SPACs.
00:17:12.079 --> 00:17:14.079
The investors could actually walk away.
00:17:14.319 --> 00:17:22.319
But the targets themselves, the companies going public, they can de-risk by raising capital in what's called a pipe.
00:17:22.480 --> 00:17:28.000
A pipe is guaranteed capital that supports these deals that cannot redeem, right?
00:17:28.079 --> 00:17:29.359
That's guaranteed to come in.
00:17:29.519 --> 00:17:38.640
So, for example, in IQM's case, before they publicly announced their DSMAC, they raised$134 million of proceeds from investors.
00:17:38.880 --> 00:17:44.079
So even if all the SPAC money were to redeem, they get$134 million no matter what.
00:17:44.240 --> 00:17:46.319
So that's the protection for targets.
00:17:46.640 --> 00:17:48.480
And that's a separate vehicle then.
00:17:48.640 --> 00:17:51.279
That pipe is a separate vehicle from the trust.
00:17:51.519 --> 00:17:52.480
Yeah, it is.
00:17:52.720 --> 00:17:54.960
It's an augmentation to the trust, right?
00:17:55.039 --> 00:17:56.559
To support the SPAC deal.
00:17:56.720 --> 00:18:00.640
Investors come in and subscribe to this new structure, this pipe.
00:18:00.799 --> 00:18:03.920
And this pipe could be also structured in a variety of ways.
00:18:04.000 --> 00:18:07.839
It could be common equity at$10, which is a typical SPAC price.
00:18:08.000 --> 00:18:11.279
It could be done at a discount, it could be raised in a convertible format.
00:18:11.440 --> 00:18:12.960
Again, that's the beauty of SPACs, right?
00:18:13.039 --> 00:18:15.599
You can be flexible with the capital formation.
00:18:16.000 --> 00:18:19.440
That's pretty wild that you've got that level of creativity.
00:18:19.599 --> 00:18:25.920
And what are some of the reasons why some of these institutions might want to redeem early?
00:18:26.319 --> 00:18:27.599
It's a really good question, right?
00:18:27.759 --> 00:18:34.400
I think if you look at kind of this point of market, right, it's in some ways the best of times, some ways the worst of times, right?
00:18:34.480 --> 00:18:37.920
On one hand, indices are all-time highs, right?
00:18:38.079 --> 00:18:41.119
The Magnificent 7, everything rises vertically, right?
00:18:41.279 --> 00:18:47.920
But on the other hand, if you look at the last couple of years, new issuances, companies going public for the first time, they tend to struggle, right?
00:18:48.000 --> 00:18:55.599
So whether it's regular company IPOs, companies going public through D SPACs, a lot of these companies struggle to necessarily hit all their milestones.
00:18:55.839 --> 00:19:02.000
If you're a big mutual fund, a big hedge fund, the natural play is look to buy the Magnificent 7 or large cap stock, right?
00:19:02.160 --> 00:19:06.880
The risk reward upside is not necessarily there for some of these earlier stage companies.
00:19:07.119 --> 00:19:12.000
So sometimes a safe play for a lot of these investors is to maybe redeem, right?
00:19:12.079 --> 00:19:16.240
Take their money back in a spec meal, monitor the company for a few quarters, few months.
00:19:16.480 --> 00:19:20.000
If they hit their milestones and do everything they say, they can always buy later.
00:19:20.160 --> 00:19:22.400
And I think that's an important thing for these companies.
00:19:22.640 --> 00:19:28.960
Going public is an important event because it allows you to build that credibility with investors.
00:19:29.119 --> 00:19:31.440
Until you go public, you can't really start doing that.
00:19:31.680 --> 00:19:32.240
I get it.
00:19:32.480 --> 00:19:34.319
Raises a couple of interesting points.
00:19:34.400 --> 00:19:39.680
And I want to kind of get to it via question, but I'm gonna go through some research that we prepared.
00:19:39.920 --> 00:19:48.480
Redemption rates over the last, if we look back, I guess three, four years, they've historically been quite high.
00:19:48.720 --> 00:19:54.319
I think they ran above 90% in 2023 and much of 2024.
00:19:54.960 --> 00:20:03.519
Recently, however, it looks like they have come down to as low as a 68% in the fourth quarter of last year.
00:20:03.759 --> 00:20:07.920
And so this goes to the certainty point that I was making earlier.
00:20:08.160 --> 00:20:12.880
But are you seeing a general trend of lower rates of redemption?
00:20:13.119 --> 00:20:15.279
Because the data would indicate that.
00:20:15.440 --> 00:20:17.440
And if so, what do you think is behind that?
00:20:17.680 --> 00:20:18.079
You're right.
00:20:18.160 --> 00:20:24.000
Like redemption rates have been high from 2021 to really, I would say mid-last year, right?
00:20:24.240 --> 00:20:30.480
You had this dynamic I talked about where institutional investors just were not sure of new issuances, right?
00:20:30.640 --> 00:20:39.599
I do think over the last couple quarters, companies that have gone public have been more exciting, more compelling, and they're just generally been doing well, right?
00:20:39.759 --> 00:20:43.759
So IQM, which you and I both worked on, perfect example, right?
00:20:43.920 --> 00:20:51.759
Out of uh a SPAC trust that had about$175 million, they kept$107 million of that SPAC cash.
00:20:51.839 --> 00:20:56.720
That 107 complemented the pipe capital raise already done that was fully committed, right?
00:20:56.880 --> 00:21:04.480
There was another quantum computing deal called inflection, which kept$420 million of cash and trust, 100% of money in trust, right?
00:21:04.640 --> 00:21:08.799
So you're starting to see green shoots in certain sectors where people are excited.
00:21:08.960 --> 00:21:12.000
People want to support these companies as part of go public.
00:21:12.480 --> 00:21:12.880
Yeah.
00:21:13.119 --> 00:21:26.880
I wonder if there's a correlation between the lower rates of redemption from my very basic analysis so far, but I wonder if there's a relationship between the lower rates of redemption and also the track record of some of the sponsors, too.
00:21:27.039 --> 00:21:33.200
And so I wonder how much of it is down to the sponsor, because some sponsors are thematic after a certain time.
00:21:33.440 --> 00:21:37.440
I was reading about one sponsor who's taken a few quantum things public now.
00:21:37.599 --> 00:21:38.799
And so that's quite interesting.
00:21:38.880 --> 00:21:48.160
And maybe the lower rates of redemption for him or for that company, or because actually the sponsor really knows what he's doing, and people want to get in and stay in versus someone who's completely new.
00:21:48.319 --> 00:21:54.160
And then obviously, you need the complement of a professionally run, high performing company that's going to meet its milestones.
00:21:54.319 --> 00:21:55.039
That's going to help.
00:21:55.200 --> 00:21:59.680
But is it that kind of combination, an experienced, successful sponsor?
00:22:00.480 --> 00:22:01.839
Plus the right target.
00:22:02.160 --> 00:22:04.000
That's a great observation.
00:22:04.160 --> 00:22:08.160
I would say it's probably 85% the company, right?
00:22:08.319 --> 00:22:15.119
The target, because investors coming in, they're supporting you, your track record, your ability to really compound growth, right?
00:22:15.440 --> 00:22:21.839
I do think there's an element where 15% of investment thesis is based on the quality of SPAC sponsor, right?
00:22:22.000 --> 00:22:26.720
Their ability to have done diligence, their ability to really, really add value in the long term.
00:22:26.799 --> 00:22:30.319
So, yeah, for example, one of the guys you mentioned is probably Harry E, right?
00:22:30.400 --> 00:22:33.039
He's taken a couple of these quantum computing companies public.
00:22:33.200 --> 00:22:34.480
He took Ion Q public.
00:22:34.799 --> 00:22:37.119
He then took Horizon software public.
00:22:37.200 --> 00:22:40.240
And look, if you look at his background, right, very storied, right?
00:22:40.319 --> 00:22:45.039
He's a lead director on Broadcom, former CFO of Oracle, right?
00:22:45.200 --> 00:22:48.079
Just a really, really well-known tech operator.
00:22:48.240 --> 00:22:55.039
So anything he touches, investors suddenly put a additional credibility because someone like him has done the work.
00:22:55.200 --> 00:23:00.160
Someone like him's not going to put his reputation on the line for a company that's not worthwhile.
00:23:00.480 --> 00:23:01.039
I get it.
00:23:01.200 --> 00:23:02.240
That makes a lot of sense.
00:23:02.559 --> 00:23:05.359
Let's talk a little bit about sectors within deep tech.
00:23:05.519 --> 00:23:09.359
Deep tech is not one sector, it's a broad church, lots of different domains.
00:23:09.680 --> 00:23:16.079
Are there certain types of deep tech companies that really belong in this space?
00:23:16.319 --> 00:23:18.319
And if so, what's the kind of profile?
00:23:18.480 --> 00:23:19.599
What do you look for?
00:23:19.920 --> 00:23:24.559
Yeah, what I ultimately look for is a public-private arbitrage, right?
00:23:24.640 --> 00:23:35.039
To put that simply, it's where the public comps, the public who trade appears, trade at a higher multiple, whether it's a revenue multiple, eat but the multiple, than if you were to stay private.
00:23:35.279 --> 00:23:40.400
If you trade at a higher multiple as a public company, that's the highest value she's gonna get, right?
00:23:40.480 --> 00:23:42.240
That's your cheapest source of financing.
00:23:42.319 --> 00:23:44.240
So you want to go public at all costs.
00:23:44.480 --> 00:23:49.279
Sometimes you want to go public as quickly as you can to capitalize on that arbitrage, right?
00:23:49.519 --> 00:23:50.400
I'll give you an example, right?
00:23:50.480 --> 00:23:54.720
Not deep tech necessarily, but many years ago, I took a company called Hostess Public.
00:23:54.880 --> 00:23:55.759
They make Twinkies.
00:23:55.920 --> 00:23:56.559
I know Hostess.
00:23:56.799 --> 00:23:57.680
I grew up with Hostess.
00:23:57.920 --> 00:23:58.240
Yeah, yeah.
00:23:58.400 --> 00:24:00.240
It's a stored American brand, right?
00:24:00.400 --> 00:24:02.160
At the time, Apollo and D.
00:24:02.240 --> 00:24:03.440
Metropolis owned Hostess.
00:24:03.759 --> 00:24:06.960
They ran an auction, went to like 70 private equity firms, right?
00:24:07.119 --> 00:24:10.240
The highest bet they got was eight times, nine times ZPITA, right?
00:24:10.400 --> 00:24:16.799
At the time, the publicly traded snacking peers were trading at 13 times ZPITA, 14 times ZPIT, right?
00:24:16.880 --> 00:24:18.400
So the play was to take it public.
00:24:18.640 --> 00:24:22.799
But in IPO were taking a long time, and in IPO, they couldn't take enough money off the table.
00:24:22.880 --> 00:24:24.480
So they decided to do a D SPAC.
00:24:24.720 --> 00:24:36.640
They went public at 10 times, higher than all the private bids they got, and it still left room for the upside, where because they went public at 10 times, a 10 port forward to be exact, they traded up to 11, 12 over time, right?
00:24:36.720 --> 00:24:38.559
And that's why the share price traded up.
00:24:38.720 --> 00:24:40.480
All them spec money stayed in, right?
00:24:40.640 --> 00:24:46.720
So taking a step back, that's where you're trying to take advantage of in terms of a great spAC deal, right?
00:24:47.119 --> 00:24:53.680
In the tech, there's certain sectors that kind of exhibit and benefit from this public-private arbitrage, right?
00:24:53.839 --> 00:24:56.559
Quantum computing is one sector, right?
00:24:56.799 --> 00:24:59.119
Space and satellite is another sector, right?
00:24:59.200 --> 00:25:04.160
If you look at the way SpaceX has changed the discourse, defense tech is another one.
00:25:04.319 --> 00:25:08.480
About a couple months ago, crypto digital assets was another one.
00:25:08.640 --> 00:25:12.240
Right now, ICE in some ways kind of considered as tech and deep tech, right?
00:25:12.559 --> 00:25:17.359
Also critical materials and the way critical materials are being exploited to capitalize and refine.
00:25:17.680 --> 00:25:28.000
Those sectors, you have this massive public-private arbitrage where simply by being public, you can trade on much higher valuation and capture a lot more capital, right?
00:25:28.240 --> 00:25:32.960
So if your sector is disrupted by those elements, then you have to go public.
00:25:33.039 --> 00:25:35.839
And you have to ask yourself, how quickly can I go public, right?
00:25:35.920 --> 00:25:37.279
And that's the power of a spec.
00:25:37.759 --> 00:25:40.480
But what stage does your business have to be in?
00:25:40.559 --> 00:25:42.079
Or does that matter less?
00:25:42.319 --> 00:25:44.799
I run a quantum computing company, let's say.
00:25:44.960 --> 00:25:52.400
I don't think we're ready to go public because we don't have a CFO, we don't have the right kind of board yet, we don't have the audit, but I see all of my peers going public.
00:25:52.640 --> 00:25:54.960
Should I be seriously thinking about going public?
00:25:55.279 --> 00:25:57.680
I would say it's sector dependent.
00:25:57.920 --> 00:26:00.079
Quantum computing is a perfect example.
00:26:00.319 --> 00:26:10.319
If your sector is getting disrupted and all your peers are going public, capturing the imagination of the public, driving eyeballs, retaining capital, right?
00:26:10.559 --> 00:26:14.160
You kind of have to go public or certainly explore, right?
00:26:14.559 --> 00:26:16.640
To not lack behind your peers, right?
00:26:16.880 --> 00:26:20.640
So on quantum computing land, there's 10 companies that have gone public.
00:26:20.880 --> 00:26:23.279
Nine have been via these packs, right?
00:26:23.440 --> 00:26:28.720
And every single, I think eight of the nine trade at a premium to$10 where they went public at.
00:26:28.960 --> 00:26:33.680
So if you're a private company, you certainly have to evaluate the option.
00:26:33.839 --> 00:26:37.680
There's other sectors too where sectors are being disrupted, right?
00:26:37.920 --> 00:26:43.839
Even if you're not truly ready, you have to make the determination of seeing if it makes sense.
00:26:44.000 --> 00:26:46.000
If it makes sense, I think it's worth exploring.
00:26:46.160 --> 00:26:49.920
Whether you're a CFO or not, whether public readiness is there or not, right?
00:26:50.079 --> 00:26:50.720
You can get there.
00:26:50.799 --> 00:26:54.079
You can get there in the course of a couple months of a go public process.
00:26:54.400 --> 00:26:54.799
Yep.
00:26:55.039 --> 00:27:05.119
But the fact that you're public means that the public is going to hold you accountable for all those milestones just as they would if you went via an IPO.
00:27:05.359 --> 00:27:15.680
I guess the difference is a little bit the price and how that price, by that I mean the valuation, is ultimately arrived at, and then the level of control that the company has after the event.
00:27:15.839 --> 00:27:16.960
And that's negotiated.
00:27:17.039 --> 00:27:27.759
And it sounds like that's what makes the SPAC process quite special because there are a variety of things that could happen with that, whereas in a traditional IPO, there's far more precedent in terms of what's expected afterwards.
00:27:27.920 --> 00:27:33.759
But it's not like a SPAC lets you off the hook if you're not performing, if you're not delivering against your milestones.
00:27:33.839 --> 00:27:34.400
Is that right?
00:27:34.640 --> 00:27:35.039
That's right.
00:27:35.119 --> 00:27:39.839
And I think the other thing that's really exciting is SPACs are giving birth to certain sectors, right?
00:27:39.920 --> 00:27:41.759
Quantum computing is the perfect example, right?
00:27:41.920 --> 00:27:44.960
INQ was a first of its kind, first mover, right?
00:27:45.039 --> 00:27:48.079
When they went public, there was no public quantum computing comps, right?
00:27:48.319 --> 00:27:52.319
Another sector that's been wildly successful is SMR nuclear, right?
00:27:52.480 --> 00:27:53.119
Nuclear.
00:27:53.279 --> 00:27:56.000
The first couple companies that went public were through SPATS, right?
00:27:56.079 --> 00:27:58.160
New skill were the first was the first to go public.
00:27:58.240 --> 00:27:59.519
It created a sector, right?
00:27:59.599 --> 00:28:02.559
It was the first mover that set the metrics, that kind of set the tone, right?
00:28:02.720 --> 00:28:04.160
Rare Earth is another one, right?
00:28:04.400 --> 00:28:07.680
MP materials, before that, there was no rare earth sector, right?
00:28:07.920 --> 00:28:13.200
So in terms of hitting your milestones, proving to public markets, in some ways is being written, right?
00:28:13.279 --> 00:28:18.240
So if you are going public as one of the early proponent, early movers, you get to tell the story.
00:28:18.319 --> 00:28:20.559
And I think that's the thing that's really exciting, right?
00:28:20.880 --> 00:28:22.079
That's interesting too.
00:28:22.240 --> 00:28:22.960
That's interesting.
00:28:23.200 --> 00:28:25.519
Let's take something like fusion as an example.
00:28:25.680 --> 00:28:30.160
So we know that nuclear fusion is scaling up, and it's scaling up via a variety of means.
00:28:30.319 --> 00:28:38.799
You can either scale up and have one big giant reactor, or as is the fashion these days, you can have these small modular reactors, which seem to be very popular.
00:28:39.039 --> 00:28:45.200
But revenue with fusion as a sector is still some ways away.
00:28:45.440 --> 00:28:54.880
And so, given the importance of earnings, given the importance of revenues and growth, how do you square that with being a public company?
00:28:54.960 --> 00:28:57.599
Or do you get to set new milestones?
00:28:58.319 --> 00:29:01.359
I think it's the latter, and that's what's really exciting, right?
00:29:01.599 --> 00:29:06.079
So we took the first pure play public fusion company, public, general fusion.
00:29:06.240 --> 00:29:07.839
We took that public a couple weeks ago.
00:29:07.920 --> 00:29:09.440
And it's a company that's dear to my heart.
00:29:09.519 --> 00:29:16.000
I grew up in Vancouver, and the company's based in Vancouver actually helped them raise a pipe during Christmas from their offices.
00:29:16.160 --> 00:29:18.000
It was the first company to go public.
00:29:18.160 --> 00:29:19.599
It's trading really, really well.
00:29:19.680 --> 00:29:24.799
And as part of the go public process, we actually raise them$130 million through the SVAC.
00:29:24.880 --> 00:29:28.880
So it's really kind of an early mover and it's kind of telling the story, segnometrics.
00:29:28.960 --> 00:29:30.240
And I think that's what's really exciting.
00:29:30.400 --> 00:29:32.319
There's really no public fusion companies.
00:29:32.400 --> 00:29:40.000
And through the process, through them going public, you're actually we're actually witnessing a couple other fusion companies all exploring the go public process, right?
00:29:40.160 --> 00:29:47.759
Just because of the fact that General Fusion trailblaze and proved to markets that there is capital, there is excitement around this entire theme.
00:29:48.160 --> 00:29:54.079
But if I continue with that thread, so a company like General Fusion, and I don't know what milestones they've sent.
00:29:54.160 --> 00:30:10.960
I haven't looked through their documentation, but they could say something like a key milestone for us is containing plasma in our SMR for a certain period of time, I don't know, a few seconds, or getting our reactor to a certain temperature.
00:30:11.119 --> 00:30:12.880
That's also quite a popular metric.
00:30:13.039 --> 00:30:15.200
Are those the kind of metrics that they could use?
00:30:15.440 --> 00:30:15.920
Exactly.
00:30:16.079 --> 00:30:20.240
Those metrics, they can come up with metrics and come up with things that are important.
00:30:20.400 --> 00:30:24.480
And public market investors, it's still kind of a developing theme, right?
00:30:24.640 --> 00:30:29.839
So whether it's SMR nuclear or fusion or quantum computing, it's still very exciting.
00:30:29.920 --> 00:30:33.519
And you're watching this entire investor fall and grow as a result.
00:30:33.680 --> 00:30:47.200
And I think the other thing that's really exciting about these themes, such as fusion or rare earth or critical materials or space and satellite, is the moment one of these companies go public, there's so much volume in supporting these companies.
00:30:47.279 --> 00:30:49.920
And a lot of that comes from retail investors, right?
00:30:50.160 --> 00:31:05.920
A lot of these companies that have an America first thesis, America first mandate, you're seeing a really strong bid to an average American public retail investor supporting these companies because they understand the geopolitical importance of potentially having energy sovereignty.
00:31:06.079 --> 00:31:11.680
So if a lot of these companies, if they have an exciting thesis, you'll actually see that the moment it go public.
00:31:11.839 --> 00:31:14.960
There's immense volumes, and a lot of that is through retail.
00:31:15.119 --> 00:31:16.799
Quantum computing, for example, right?
00:31:16.960 --> 00:31:19.359
Every single one of these quantum comms trade really, really well.
00:31:19.599 --> 00:31:22.319
60, 70% of the flow is from retail investors.
00:31:22.559 --> 00:31:23.200
That's interesting.
00:31:23.440 --> 00:31:27.839
But some of the quantum computing companies, like our friends at IQM, I mean, they've got actual revenue.
00:31:28.000 --> 00:31:29.200
They've got proper revenue now.
00:31:29.279 --> 00:31:31.279
They're selling actual computers.
00:31:31.440 --> 00:31:35.680
And so you can almost judge them by the old-fashioned metrics to an extent.
00:31:35.920 --> 00:31:46.720
But a fusion company, unless they're going to start finding other commercialization avenues, which I know many of them are considering that and actively exploring that, you'll find less of that.
00:31:46.880 --> 00:31:51.839
And I can see how that can be interesting to retail investors because of geopolitical reasons.
00:31:52.160 --> 00:31:56.480
What about the analysts and the whole analyst and research community?
00:31:56.720 --> 00:31:58.559
Is it having to change?
00:31:58.720 --> 00:32:11.440
And are we having to grow new types of analysts, far more scientific or engineering backgrounds to kind of read through the literature and truly understand whether these milestones are the right ones and just how well a company's doing?
00:32:11.759 --> 00:32:12.720
Yeah, no, 100%.
00:32:13.119 --> 00:32:18.799
I think that's why when you kind of talk about deep tech, you can apply this deep tech lens to a lot of these companies, right?
00:32:18.960 --> 00:32:22.720
Whether it's kind of fusion or something as simple as Red Earth, right?
00:32:22.799 --> 00:32:25.440
There's a company I took public called USA Red Earth.
00:32:25.680 --> 00:32:27.359
Didn't really have revenues at the time.
00:32:27.519 --> 00:32:30.799
Since going public 18 months ago, it's done incredibly well.
00:32:30.960 --> 00:32:35.359
It's traded up 70% from$10 a share to over$17 a share, right?
00:32:35.599 --> 00:32:42.240
And since being public, it's raised$4 billion of capital in the public markets through a combination of equity and also debt.
00:32:42.400 --> 00:32:50.640
The way we curated the research analyst, the Southside analyst space, was looking at this more as a tech company, right?
00:32:50.880 --> 00:32:58.160
So in terms of analysts, we brought on, it was almost a tech focused group of analysts as opposed to traditional metals and mining guys.
00:32:58.240 --> 00:33:01.680
So I think that's another benefit of the go public process through a SPAC.
00:33:01.920 --> 00:33:08.240
Instead of an IPO, which you have a two-week window to nail right, the DSPAC process is multi-months.
00:33:08.480 --> 00:33:12.000
It allows you to really almost create a symphony of momentum, right?
00:33:12.160 --> 00:33:15.119
You have investor market on one hand of institutional investors.
00:33:15.200 --> 00:33:17.759
You can have a great IRPR effort, right?
00:33:17.920 --> 00:33:28.480
Telling the story in the public markets, retail markets, and also creating the right story with the research analyst, all the while the company hopefully has some exciting AKs and Calus to put out.
00:33:28.640 --> 00:33:34.799
If everything comes together and the symphony really jives, right, it really makes some of these stories really exciting.
00:33:35.119 --> 00:33:42.960
And so that coordination effort, as you're speaking there, I'm thinking about the level of coordination required then of the target, of the company itself.
00:33:43.200 --> 00:33:45.279
And that feels like a much bigger job.
00:33:45.440 --> 00:33:51.680
I mean, IPOs are big jobs anyway, requiring a ton of energy and activity and coordination.
00:33:51.839 --> 00:34:01.519
But this, especially given the ideally the longer-term window you've got, if the sponsor and target find each other early, then you've got more time to be able to do that.
00:34:01.680 --> 00:34:03.440
Who is generally driving that?
00:34:03.599 --> 00:34:05.359
Is that going to be a CEO?
00:34:05.519 --> 00:34:07.359
Is that going to be a CFO?
00:34:07.519 --> 00:34:08.960
It's probably going to be a team.
00:34:09.199 --> 00:34:12.480
But in your experience, who do you see generally taking the lead on that?
00:34:12.800 --> 00:34:14.000
It really is a team effort.
00:34:14.079 --> 00:34:15.920
I would say a lot of it's target driven, right?
00:34:16.000 --> 00:34:17.840
The company itself that wants to go public.
00:34:18.079 --> 00:34:21.519
The SPAC sponsored can add a lot of value as well.
00:34:21.760 --> 00:34:23.440
And all the bankers, right?
00:34:23.599 --> 00:34:25.840
The lawyers, the advisors around the team.
00:34:26.079 --> 00:34:30.079
The go public process through a SPAC typically lasts six to nine months, right?
00:34:30.239 --> 00:34:33.519
So through that six to nine months, you can do a lot, right?
00:34:33.599 --> 00:34:37.119
You could do a lot of marketing, you could do a lot of planning and prep.
00:34:37.360 --> 00:34:37.760
Yeah.
00:34:38.000 --> 00:34:42.960
Another stat from our research, there are roughly, and you may have different research.
00:34:43.039 --> 00:34:55.280
And if so, please correct me, but there apparently are roughly 250 specs currently searching for targets, with something like 47 billion sitting in trust.
00:34:55.679 --> 00:35:00.639
And sponsors are clearly under these deadlines, these two-year windows.
00:35:00.880 --> 00:35:07.760
What does that pressure do to the deal quality over the next 18 month to two-year window?
00:35:07.920 --> 00:35:09.360
Do you think, if anything?
00:35:09.599 --> 00:35:09.840
Yeah.
00:35:10.000 --> 00:35:12.239
I think that's a really good question in that.
00:35:12.320 --> 00:35:15.840
Look, this is where potentially SPACs could be led astray, right?
00:35:16.000 --> 00:35:19.360
A traditional IPO, it's genetically engineered to trade up, right?
00:35:19.519 --> 00:35:25.920
One of these big banks, unless they can raise a lot of money and make money for their investor base on the other side, right?
00:35:26.079 --> 00:35:27.440
You're just not going to take a company public.
00:35:27.519 --> 00:35:30.320
So that's why they tackled this traditional IPO pop, right?
00:35:30.400 --> 00:35:33.760
Everything's supposed to trade up 15, 20% in the near term, right?
00:35:33.920 --> 00:35:38.719
Well, for SPAC, because it's more of an MA process, it's more of a negotiation.
00:35:38.960 --> 00:35:43.679
A lot of targets, a lot of companies go public, they do have leverage, sometimes too much leverage, right?
00:35:43.840 --> 00:35:45.599
Sometimes they can overvalue themselves.
00:35:45.760 --> 00:35:48.320
And I think sometimes that's why SPACs have a bad name, right?
00:35:48.400 --> 00:35:53.119
A lot of these companies that go public are attention or sometimes meaningfully overvalued, right?
00:35:53.280 --> 00:35:58.320
So over time, as valuations normalize, they might trade down over time.
00:35:58.480 --> 00:36:00.239
I think that's really the biggest danger.
00:36:00.400 --> 00:36:07.440
But in terms of the 250 SPACs out there, I, as a banker, right, kind of in the middle of it, I'm still very, very bullish.
00:36:07.599 --> 00:36:16.639
Just because being the thick of things, I still see a massive asymmetry of companies that want to go public versus the amount of SPACs out there, right?
00:36:16.880 --> 00:36:21.039
There's close to a thousand companies right now that are trying to go public, right?
00:36:21.199 --> 00:36:24.639
Publicly filed S1s or confidentially filed S1s, right?
00:36:24.880 --> 00:36:27.920
And the big banks cannot IPO them all, right?
00:36:28.079 --> 00:36:47.920
I think with some of these really high profile IPOs, right, trading down or whiplashing like the SpaceX's, the furros, the continuums, the X Energies, I think it's still very, very hard for a company that's below$2 billion of market cap or value to IPO, right?
00:36:48.239 --> 00:36:55.679
As these companies realize if I need to go public for my own strategic reasons and I need to do it quickly, they're gonna decide to go public with a spec.
00:36:56.000 --> 00:36:58.079
Because of that, they still remain very, very bullish.
00:36:58.400 --> 00:36:59.119
Yeah, yeah.
00:36:59.360 --> 00:37:02.960
What separates a company that's ready from one that isn't, in your view?
00:37:03.280 --> 00:37:06.159
Honestly, just a laser focus from the CEO and management team.
00:37:06.320 --> 00:37:09.599
This company called USA Rare Earth, perfect example, right?
00:37:09.840 --> 00:37:12.239
They're the second biggest rare earth company.
00:37:12.400 --> 00:37:17.599
They really kind of set the market as the leading vertically integrated rare earth company in the world, right?
00:37:17.840 --> 00:37:21.119
When we took it public two years ago, when we announced the deal, right?
00:37:21.280 --> 00:37:22.159
They had no CEO.
00:37:22.559 --> 00:37:24.320
They had really no CFO.
00:37:24.559 --> 00:37:26.239
Their board was divided, right?
00:37:26.400 --> 00:37:27.760
But they got ready, right?
00:37:27.840 --> 00:37:29.119
They got ready quickly.
00:37:29.199 --> 00:37:37.199
And over the couple months ago, public process, they hired the right people, and now they're up 70% and they raised$4 billion of capital in the last 18 months.
00:37:37.519 --> 00:37:38.159
That's insane.
00:37:38.400 --> 00:37:40.559
So if there is a will, there is a way, right?
00:37:40.800 --> 00:37:44.800
So honestly, to go public, the requirements are actually pretty simple.
00:37:44.960 --> 00:37:49.760
In the US, you really need just two years of PCAOB audits, right?
00:37:49.920 --> 00:37:52.480
So what that means is two years of audits, right?
00:37:52.559 --> 00:37:55.119
Meeting the public company accounting standard, right?
00:37:55.280 --> 00:38:04.000
So that takes maybe a couple months in terms of C-suite, in terms of reporting, you can get them all hired and ready over the course of the GoPal process.
00:38:04.239 --> 00:38:04.559
Yep.
00:38:04.719 --> 00:38:07.039
And are there certain things you're looking for?
00:38:07.119 --> 00:38:11.760
Are there certain metrics or does revenue have to be above a particular line?
00:38:12.000 --> 00:38:16.719
Does the technology have to be proven beyond a particular technology readiness level?
00:38:16.880 --> 00:38:20.639
Do you have to have a certain confidence level in terms of scaling?
00:38:20.880 --> 00:38:21.840
Anything like this?
00:38:22.159 --> 00:38:27.679
Broadly speaking, you generally should be at least$500 million and market cap or more, right?
00:38:27.760 --> 00:38:33.039
To have the technical dynamics of size, float, liquidity, market cap for institutional investors cared.
00:38:33.360 --> 00:38:35.920
If you're below 500 million, it's probably a little too small, right?
00:38:36.079 --> 00:38:39.280
Just because if you're to go public, investors are hesitant to buy.
00:38:39.360 --> 00:38:42.800
Because even if they can come in at a good price, they might not be able to exit easily, right?
00:38:42.960 --> 00:38:44.480
So size is one, right?
00:38:44.639 --> 00:38:50.239
The other thing I look for, honestly, just a management team, sometimes a CEO who's laser focused, right?
00:38:50.400 --> 00:38:51.840
It sounds all try to say.
00:38:52.000 --> 00:38:55.920
Sometimes they're just a twinkle in their eyes when you talk about this go public, right?
00:38:56.079 --> 00:39:00.880
What I'm looking for is a team whose number one priority is to go public.
00:39:01.199 --> 00:39:06.159
Because the people who are exploring this as a free option, maybe if they can raise capital or not, right?
00:39:06.320 --> 00:39:14.400
Those are the ones that look, the moment times get tough, the moment the market's not there, they're gonna come with excuses, rationalized ways to kind of get out of it, right?
00:39:14.639 --> 00:39:20.960
Whereas the companies whose number one objective is to go public, they're gonna be able to do it through thick within.
00:39:21.119 --> 00:39:24.320
So sometimes it's also just kind of their motivations.
00:39:24.639 --> 00:39:28.880
How many founder CEOs are taking their companies public through spec?
00:39:29.440 --> 00:39:30.639
Quite a lot these days.
00:39:30.960 --> 00:39:36.320
I mean, if you look at 2021 till kind of mid-last year, right?
00:39:36.480 --> 00:39:42.239
During those four years, I think only 200 regular companies IPO regularly, right?
00:39:42.400 --> 00:39:53.920
It was as slow as four years in US IPO formation and decades, because you have this landscape we talked about where even though indices were all-time highs, right, new issues were really, really, really hard.
00:39:54.000 --> 00:39:56.400
So you have this massive backlog built.
00:39:56.559 --> 00:40:00.559
So you already have hundreds up to a thousand companies that want to go public.
00:40:00.719 --> 00:40:05.599
And I would say, look, maybe 200 can IPO over the next year if the markets are healthy.
00:40:05.840 --> 00:40:11.920
So the rest of them, if they want to go public, they're all gonna have to either go public through a SMAC or other means.
00:40:12.159 --> 00:40:12.639
Yep.
00:40:12.880 --> 00:40:22.000
But they've got founder CEOs, and I'm assuming founder CEOs who've never taken a company public before, for whom this may be their first executive experience generally.
00:40:22.159 --> 00:40:28.320
But your view is that they can definitely learn it, they can get the team around them, they can get the right board to support them.
00:40:28.480 --> 00:40:30.159
They can absolutely drive this.
00:40:30.559 --> 00:40:30.960
100%.
00:40:31.440 --> 00:40:35.679
I mean, many years ago, for example, I took a company called Hems and Hers Public, right?
00:40:35.840 --> 00:40:40.000
They're a DTC company that sells health products online, right?
00:40:40.159 --> 00:40:41.280
It's doing really, really well.
00:40:41.440 --> 00:40:44.719
Last time I checked, it was trading significantly above share price.
00:40:45.039 --> 00:40:51.360
When Hems went public through a SPAC, the CEO, this guy Andrew Dudham, I think he was like 27 years old, maybe 29, right?
00:40:51.440 --> 00:40:53.039
Very, very young, inexperienced, right?
00:40:53.119 --> 00:40:55.840
But he went public through the oak tree spAC, right?
00:40:56.079 --> 00:41:00.400
Oak tree parachuted a team, handheld them, and shepherded them to the public markets.
00:41:00.639 --> 00:41:02.159
So I think that's the benefit, right?
00:41:02.239 --> 00:41:06.159
Even if a team is young and inexperienced, right, have not done it before.
00:41:06.320 --> 00:41:08.880
That's the benefit of having a SPAC sponsor, right?
00:41:09.039 --> 00:41:10.159
We talk about the outset of a call.
00:41:10.239 --> 00:41:13.039
It's someone usually who's very experienced in the public markets, right?
00:41:13.199 --> 00:41:15.840
Usually has a falling, maybe like a chamath, right?
00:41:16.000 --> 00:41:19.679
Maybe it's an ex-CEO who's run public companies for decades, right?
00:41:19.920 --> 00:41:24.159
They're guiding this private company to the public markets every step of the way.
00:41:24.239 --> 00:41:25.920
So that's the value to SPAC.
00:41:26.320 --> 00:41:26.719
Yeah.
00:41:27.039 --> 00:41:30.079
You mentioned before about valuation.
00:41:30.400 --> 00:41:34.320
The company's valuation is less than half a billion, it's probably not the right time.
00:41:34.480 --> 00:41:40.320
Are there any other reasons why you would say no to a company if they were to approach you with a view of going public?
00:41:40.639 --> 00:41:42.559
What other reasons would you say no?
00:41:42.719 --> 00:41:44.480
Or is that kind of the only one?
00:41:44.800 --> 00:41:47.039
I'd say that's probably the one of the most important.
00:41:47.199 --> 00:41:52.239
The second one is just making sure you have internal support, not just from the C-suite, right?
00:41:52.320 --> 00:41:54.639
But in terms of major shareholders and terms of their board.
00:41:54.800 --> 00:42:00.880
The other one we kind of talked about a little bit earlier was this concept of a public-private arbitrage, right?
00:42:01.119 --> 00:42:06.400
Do your public peers, do your peers in the public markets trade well at a healthy multiple, right?
00:42:06.719 --> 00:42:09.119
If they do, then it makes sense to go public.
00:42:09.360 --> 00:42:12.960
Sometimes in certain sectors, you actually don't have that dynamic.
00:42:13.119 --> 00:42:18.960
Private companies can actually trade higher because if you have a company, let's say with a lot of IPAT, right?
00:42:19.199 --> 00:42:19.920
A lot of growth, right?
00:42:20.000 --> 00:42:28.880
It might not trade well as a public company, but if a lot of IPA, a private equity firm could tack on a couple turns of leverage and actually pay more in a private context, right?
00:42:29.119 --> 00:42:33.920
So you just gotta make sure that dynamics there where by being public, you can trade higher, right?
00:42:34.159 --> 00:42:38.000
And really the underlying theme that drives that, I would say is growth, right?
00:42:38.159 --> 00:42:49.519
Any company, any sector that grows more than 30% top line, where the revenues grow at more than 30%, you're generally speaking gonna get a premium multiple because of outsized growth.
00:42:49.679 --> 00:42:51.599
So I think growth is a big factor.
00:42:51.760 --> 00:42:55.519
If you're going really, really fast, generally speaking, you're gonna be trading a lot better.
00:42:55.760 --> 00:42:56.079
Yeah.
00:42:56.239 --> 00:43:03.599
But top line growth is elusive for a lot of deep tech companies, a lot of which are pre-revenue, even at very advanced stages.
00:43:04.000 --> 00:43:16.079
And often, you know, if you think about when they're gonna start becoming truly commercial with big chunky revenues, it's not until the technology works at scale at a price point that a value chain can accept.
00:43:16.239 --> 00:43:19.760
And by introducing no risk to that value chain whatsoever.
00:43:20.000 --> 00:43:24.960
Now, in AI, we don't quite have that because there's little distribution cost involved.
00:43:25.199 --> 00:43:28.639
And so it tends to rhyme a lot with software and SaaS.
00:43:28.800 --> 00:43:46.400
But in areas like quantum, where you've got some seriously complex hardware, probably some of the most complex hardware in the world, and then you've got to convince companies to kind of use that and create an experience for them to use it, like a number of quantum computing companies have in certain areas of advanced materials.
00:43:46.559 --> 00:43:58.480
These are kind of decades long investments, potentially worth a lot, but it takes a very long time for them to prove themselves commercially and within value chains.
00:43:58.639 --> 00:43:59.679
So are these companies?
00:44:00.159 --> 00:44:04.400
Company is eligible for it as well if they don't have that top line growth.
00:44:04.639 --> 00:44:05.360
Yeah, 100%.
00:44:05.840 --> 00:44:08.639
But that goes back to the precedent you've established earlier on.
00:44:08.719 --> 00:44:10.960
If you get in early, you can set the milestones.
00:44:11.039 --> 00:44:12.159
You talked about that earlier.
00:44:12.400 --> 00:44:12.800
Exactly.
00:44:12.880 --> 00:44:14.159
You could set the milestones.
00:44:14.239 --> 00:44:17.920
You can basically guide people to a very exciting forward trajectory, right?
00:44:18.079 --> 00:44:23.760
And especially if you have a quality SPAC sponsor that's basically validating that vision, right?
00:44:24.000 --> 00:44:30.320
So it's either a company that has a lot of growth or potential to have really disruptive growth that could change the world one day, right?
00:44:30.400 --> 00:44:31.119
Like fusion.
00:44:31.280 --> 00:44:38.159
And I think the other dynamic that's really exciting, I've noticed, is governments coming in to support a lot of these companies, right?
00:44:38.320 --> 00:44:42.880
One of the reasons nuclear and fusion are doing so well is Trump, right?
00:44:42.960 --> 00:44:47.519
The US government, through the executive order, is supporting a lot of these industries, right?
00:44:47.679 --> 00:44:51.039
If you look at rare earth companies, critical materials, battery companies, right?
00:44:51.199 --> 00:44:57.440
Critical infrastructure in the US government is coming in to support larger kind of national champions, right?
00:44:57.599 --> 00:45:06.880
Because I think they realize as geopolitical tensions with China rise, and the rare earth is actually a perfect example where China controls 95% of supply and refining.
00:45:07.039 --> 00:45:10.480
The US needs to support some of these critical enterprises.
00:45:10.639 --> 00:45:13.280
Otherwise, it's just never gonna catch up, right?
00:45:13.519 --> 00:45:16.719
In quantum computing, you're seeing this firsthand, right?
00:45:16.960 --> 00:45:20.320
As companies go public, governments are supporting these, right?
00:45:20.480 --> 00:45:24.480
XANIDU went public, and it's effectively Canada's national champion.
00:45:24.639 --> 00:45:28.639
The Canadian government gave$390 million of debt financing, right?
00:45:28.880 --> 00:45:32.000
ICANN went public, it's Finland's national champion, right?
00:45:32.159 --> 00:45:36.960
There's an RDSPAC we're working on how Pascal, the French government, is supporting a company.
00:45:37.039 --> 00:45:39.039
It's France's national champion in quantum.
00:45:39.199 --> 00:45:52.079
So I think you're seeing that also across the board where nation states are supporting these companies, making sure they can thrive in the public markets and also provide whether it's energy or tech sovereignty.
00:45:52.400 --> 00:45:53.039
Yeah.
00:45:53.679 --> 00:46:02.239
What looks really exciting for you right now as you look out a year or two years from now, what kinds of big events do you anticipate?
00:46:02.480 --> 00:46:07.840
Obviously, you've had it in your disclaimer earlier, but what kinds of things are really exciting you?
00:46:08.159 --> 00:46:14.239
Some of the existing sectors we talked about, I think space and satellites one, we continue to be really bullish.
00:46:14.400 --> 00:46:21.280
I think robotics and physical AI as a theme will continue to be a thematic that investors are excited over, right?
00:46:21.519 --> 00:46:25.119
I do think digital assets and crypto will come back, right?
00:46:25.280 --> 00:46:27.679
It'll continue to be a thriving sector.
00:46:27.920 --> 00:46:29.840
A lot of sectors we kind of talked about, right?
00:46:29.920 --> 00:46:32.079
Whether it's quantum and critical materials, right?
00:46:32.400 --> 00:46:35.760
Those will remain hot, at least in the foreseeable few years.
00:46:36.000 --> 00:46:36.320
Yeah.
00:46:36.480 --> 00:46:37.440
Yeah, that's great.
00:46:37.760 --> 00:46:41.599
Brandon, thank you so much for your time.
00:46:41.840 --> 00:46:44.400
This morning, your time, this evening, my time.
00:46:44.559 --> 00:46:48.000
I know so much more now than I did at the start of our discussion.
00:46:48.159 --> 00:46:50.159
And I think our listeners will too.
00:46:50.400 --> 00:46:51.360
This has been great.
00:46:51.599 --> 00:46:52.880
Really, really super.
00:46:53.360 --> 00:46:58.880
And I didn't appreciate just how creative you can be, actually, as part of the SPAC process.
00:46:58.960 --> 00:47:00.639
And I think that's really exciting.
00:47:00.800 --> 00:47:03.519
I think a lot more companies are going to be considering this.
00:47:03.599 --> 00:47:11.920
It's clear that they already are within these domains, and it represents a genuine avenue for later stage financing for a lot of them.
00:47:12.079 --> 00:47:18.480
So if you're out there, if you're looking for deep tech financing, I'm going to actively promote Brandon's son.
00:47:18.800 --> 00:47:21.599
I hope you get in touch with him and ask for his advice.
00:47:22.000 --> 00:47:27.519
What he doesn't know about SPAC or DSPAC public offerings is probably not worth knowing.
00:47:27.760 --> 00:47:32.559
Chris, thank you again so much for your time and your podium and the ability to share my message.
00:47:32.639 --> 00:47:34.079
So I really, really appreciate it.
00:47:34.320 --> 00:47:34.880
My pleasure.
00:47:35.039 --> 00:47:35.440
Thank you.
00:47:36.000 --> 00:47:37.119
Thank you, Chris.
00:47:37.679 --> 00:47:43.360
You've been listening to the Lab to Market Leadership Podcast, brought to you by Deep Tech Leaders.
00:47:43.519 --> 00:47:50.559
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