PitchBook News - Why the rise of SPACs may be fleeting

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The Daily Pitch: VC

September 1, 2020

Like our newsletter? The data comes from the PitchBook Platform — our data software for VC, PE and M&A

Today's Top Stories

SPACs' rise may be fleeting

Hedge fund pro Bill Ackman's SPAC, Pershing Square Tontine Holdings, amassed $4 billion in July. (Bryan Bedder/Getty Images)

Despite the frenzy of interest in special-purpose acquisition companies, their potential to disrupt the traditional IPO process could be limited. While SPACs offer an innovative pathway to the public markets and have seen a surge in 2020, they aren't a cure-all and may lose some of their luster when more certainty returns to the financial markets. In our latest analyst note, we take a deep dive into blank-check vehicles, with findings including:

SPAC sponsors benefit from a shorter and simpler fundraising process
Backers could gain access to innovative companies that otherwise couldn't list on the public markets
A merger with a SPAC nets out to essentially the same financial cost to the company as a traditional IPO

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TikTok prepares to unveil deal

TikTok has selected a buyer for its operations in the US, Australia and New Zealand, and could announce a deal as soon as today, according to CNBC. The leading contenders are reportedly Oracle and a joint bid by Microsoft and Walmart. Microsoft said last month it was pursuing the company's Canadian assets as well.

The Chinese government could throw a wrench into those plans, however. On Friday, Beijing changed the rules concerning the sale of technology to foreign companies, an act that may require ByteDance to secure a license in order to sell TikTok, according to state news agency Xinhua.

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Real assets fundraising tops $100B in H1

(Ashkan Forouzani/Unsplash)

After bringing in over $200 billion in 2019, real assets funds remain strong, with more than $100 billion raised through the first six months of this year. Notably, real estate fundraising has been remarkably resilient despite the ongoing economic crisis, accounting for more than half of that total.

Capital is continuing to pour into real assets funds as institutional investors bet on the pandemic's longer-term recovery, according to PitchBook's H1 2020 Real Assets Report. And as fund managers search for opportunities, the burgeoning life sciences sector, detailed in the report's spotlight, may be worth a look. Other key takeaways include:

Brookfield's $20 billion vehicle was the second infrastructure fund ever to reach that threshold

Many physical infrastructure assets saw write-downs, while digital infrastructure assets outperformed

The oil and gas sector hit low points for both fundraising and deal activity, as global shutdowns hammered demand

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On the podcast: What's driving 2020's SPAC surge?

(Mixetto/Getty Images)

From sports executives to hedge fund billionaires, more investors are registering SPACs than at any point in recent memory. And there's no sign of the trend slowing down.

PitchBook VC analyst Cameron Stanfill joined the latest episode of "In Visible Capital" to discuss his analyst note, which examines what's causing the surge. Topics include:

How volatility in the public markets has pushed founders to team up with SPACs

What common characteristics private equity firms and SPACs have that make them a natural fit for each other

How SPACs have ditched their previously unsavory reputation to become a more mainstream investment vehicle

Intriguing SPACs to watch over the next couple of years

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Recommended Reads

A recently signed agreement between California state officials and federal forest agents could help prevent future catastrophic fires in the state. [Popular Science]

Why venture capitalists provided two 27-year-old online convenience store founders with $1 billion. [Forbes]

A profile of Gertrude Elion, the woman who gave the world antiviral drugs. [National Geographic]

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Quick Takes


	The Daily Benchmark
	2012 Vintage US PE Funds
	VC Deals
	Eruditus takes in $113M Series D
	NeuroPace nails down $67M in latest round
	Erasca adds $36M to Series B
	Exits & IPOs
	Shopping app Wish files to go public
	Bayer inks deal for VC-backed supplement company
	Founders of LinkedIn, Zynga co-lead new SPAC

The Daily Benchmark

2012 Vintage US PE Funds

Median IRR

14.36%

Top Quartile IRR Hurdle Rate

24.70%

1.56x

Median TVPI

Select top performers

Clearlake Capital Partners III

Seaport Capital Partners IV

Parthenon Investors IV

*IRR: net of fees

82 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

Eruditus takes in $113M Series D

The Eruditus Group, which operates Eruditus Executive Education and online division Emeritus, has raised $113 million. The round was led by Leeds Equity Partners and Prosus Ventures, with participation from Chan Zuckerberg Initiative, Sequoia India and Ved Capital. Eruditus, which has offices in six countries, collaborates with universities to provide education courses for working professionals across the globe.

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NeuroPace nails down $67M in latest round

Medical tech company NeuroPace has raised $33 million in equity and $34 million in convertible debt, with an additional $27 million in additional committed capital available via a second tranche. The round was led by Accelmed Partners, with support from Revelation Partners, Soleus Capital, KCK Group and Orbimed Advisors. Based in Mountain View, Calif., the company is the developer of a neurostimulator designed to treat refractory epilepsy. NeuroPace was valued at $94 million in 2017, according to PitchBook data.

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Erasca adds $36M to Series B

Erasca has raised $36 million in Series B funding, bringing the round's total to $236 million. New investors including Partner Fund Management and OrbiMed participated in the financing. Founded in 2018, the San Diego-based company is developing precision therapies to treat cancer. Erasca has now raised $300 million in total VC funding.

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Exits & IPOs

Shopping app Wish files to go public

Wish, a mobile shopping app provider, has confidentially filed for an IPO with the SEC. The San Francisco-based company was valued at $11.2 billion in August 2019 after a Series H led by General Atlantic. Founded in 2010, Wish also counts GGV Capital, JD.com and Peter Thiel's Founders Fund among its investors.

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Bayer inks deal for VC-backed supplement company

Pharmaceutical powerhouse Bayer has agreed to buy a 70% stake in Care/of that values the startup at $225 million, according to Bloomberg. Bayer will reportedly be able to purchase the remainder of the company by 2022. New York-based Care/of, which sells customized vitamin and supplement subscriptions, was valued at $240 million earlier this year, according to PitchBook data. Tusk Ventures, Goodwater Capital and RRE Ventures are among Care/of's investors.

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Founders of LinkedIn, Zynga co-lead new SPAC

A blank-check company co-led by LinkedIn founder Reid Hoffman and Mark Pincus, the founder of video game company Zynga, is seeking a $600 million initial public offering. The SPAC, Reinvent Technology Partners, plans to focus on acquisitions in sectors including consumer internet and mobile gaming.

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Chart of the Day

"The median angel and seed-stage pre-money valuations in H1 2020 were $6.5 million and $7.5 million, respectively, with both tracking to see a minuscule $0.1 million decline over 2019's medians. While macroeconomic headwinds and the COVID-19 pandemic have battered the public markets, angel & seed-stage valuations have been largely insulated from volatility given how upstream in the venture lifecycle these deals typically are."

Source: PitchBook's Q2 2020 US VC Valuations Report