In a recent discussion with Isabelle Freidheim, Founder, Chairman, and CEO of Athena SPAC, a company led entirely by women, we explore whether fintech should lean into SPACs.
A SPAC, or Special Purpose Acquisition Company, is a “blank shell” corporation designed to take companies public without going through the traditional IPO process, which takes under two years.
Though SPACs have been around for decades, the financial maneuver has gained traction in recent months as more private companies eye exit opportunities as the COVID-19 pandemic created uncertainty in the IPO market.
“SPACs aren’t for everyone. It is one viable capital solution for founders to consider. That being said, it has multiple advantages to a traditional way IPO, including being the quickest path to the public equity markets,” Freidheim said.
“Fintech is a brilliant space, but the spread in leveraging technology between legacy traditional financial institutions and fintech companies is still massive. Think about how asset heavy the largest financial institutions are versus more nascent operators.”
Freidheim believes that these new business models’ new effectiveness and productivity will put constant pressure on more prominent legacy players and create a new order of industry leadership.
“It is essential to have the first mover advantage in each sub-sectors,” she said. “Thus, even if the sector is not in favor, it is more critical that fintech companies continue to fuel their best ideas and retain their best talent to maintain leadership positions.”
“Engaging with the best SPAC sponsors to understand that path makes great sense now for the space. Finally, having a public acquisition currency will bode well when the attractiveness of the space returns. And it will return as the economics of the productivity gap between legacy operators and fintech companies has to shrink.”
Why should some companies not go public?
According to Freidheim, “there are lots of companies — most companies — that should not go public. Most don’t qualify as there are scale standards on public exchanges. However, many big enough shouldn’t because their business isn’t mature enough. That could be that they don’t have the infrastructure to support the legal and financial governance required.”
“It’s great to be a public company and have access to the deepest pool of capital in the world. At the same time, have an acquisition currency and liquid incentive for your best talent to align with shareholder value. However, public companies stand in the bright light. It is much easier to affect a turnaround as a private company than a public one.”
Given the profound experience of Athena in sponsoring SPAC, Freidheim sees a typical challenge with companies positioned to grow but could use SPAC support.
“We architected Athena to provide a deal, capital markets, and operating expertise as well as a network of most experienced professionals well positioned to magnify the company’s operating success,” Freidheim said.
“It is rare that we encounter a company that would not benefit from the platform we have built. However, each company has its own set of strengths and central value propositions. Where we can support their success and vision truly depends on the specific situation.”
“That being said, many companies today are looking for help to position themselves best to access the capital markets. With all the innovation in the SPAC world, it behooves them to talk to experienced and talented platforms.”
What makes Athena successful?
Athena has successfully secured the most talented professionals who have been central to the Athena value proposition, Freidheim noted. By establishing themselves as the first all-women SPAC, they have secured extraordinarily talented founders, board members, and CEOs compelled to make a positive difference in the demographic landscape of finance.
That gives them the ability to deliver to combination partner companies a talent they would otherwise not have access to. By focusing on diversity, they can secure industry-leading talent and thus value for their partners, Freidheim said.
Athena’s network has helped launch dozens of SPACs. Athena is currently working on a German Electric vehicle company that will close in late April or May. Other fintech companies are in the pipeline however cannot say publicly as of now.