Let’s say that you have a startup and want to go public. In the “old” world, you would go for a traditional IPO such as Beyond Meat’s. Would you want to avoid the high costs associated with this path, you can also envision a direct listing as Spotify did.
But now, the trendiest way is to use a SPAC or Special Purpose Acquisition Company. A SPAC is a publicly-traded company that has raised money under its founders’ name and which goal is to acquire a privately hold (which can be a startup) company and hence make it public. SPAC’s merits are simple: they are raising a lot of money, are driving up valuations, early investors win additional rights, and they are making deals simpler for everyone. You can take the same arguments for the risks associated (less scrutiny, insane valuations, etc.).
Here are some examples in the past couple of weeks:
- Local Bounti, an indoor farming startup, announced in June that it had agreed to be acquired for $1.1B by a SPAC backed by Cargill
- Other indoor and urban farming startups have already been acquired through SPACs (AppHarvest for $1B and Aerofarms for $1.1B) or announced that they are looking to be acquired or are considering it (rumours are notably mentioning Infarm)
What matters now is that many SPACs are full of cash and looking for prey to acquired. And to spice up things, SPACs have a limited time to make the acquisition (around 2 years).
Already a handful of well-developed FoodTech startups have announced that they were looking to get acquired by SPACs and will be public by the end of the year. If successful, these deals could attract many other startups, and we could have dozens of (20 to 30) FoodTech unicorns publicly traded in the next 2 years.