A New Spin on SPACs

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‘Venture at scale’

In a crowded field of blank-check companies, Reid Hoffman and Mark Pincus think that their special purpose acquisition company, or SPAC, is particularly special. Their company, Reinvent Technology Partners, raised $600 million in an I.P.O. and started trading yesterday, posting one of the biggest one-day share price gains of any SPAC so far this year. That suggests that investors see promise in their approach, well before their vehicle finds a target company to merge with.

It also helps that the duo are Silicon Valley royalty: Mr. Hoffman co-founded LinkedIn and is a respected venture capitalist, while Mr. Pincus founded the game maker Zynga. Both are sought-after mentors among the tech set. They spoke with Andrew about how SPACs differ, and in some cases, complement, traditional I.P.O.s, venture capital, private equity and all the other ways that companies can raise money these days.

On whether SPACs are a rebuke of traditional I.P.O.s:

While some SPAC founders, like Chamath Palihapitiya, have made that argument, Mr. Hoffman played down the idea. “I think marketing against I.P.O.s is wrong,” he said, noting that a SPAC lists on the public markets through … an I.P.O.

On whether SPACs compete with venture capital or private equity:

Mr. Pincus described SPACs as “venture at scale,” letting companies go public in close partnership with experienced growth investors. The “scale” comes from SPAC founders pushing the companies they merge with to maintain a venture mind-set even after they list. “There’s an interesting entry point into a company at the point they’re going public,” Mr. Pincus said, “to help them think, ‘How do you go from $1 billion to $10 billion in revenues? How do you 10X and 100X your business long after you’re public?’”

On the future of SPACs:

Mr. Pincus is thinking big. “Maybe the next beauty contest for an Airbnb, before they go public, there is somebody saying, ‘Hey, we’re going to invest in you now, and be on your board,’ ” Mr. Pincus said. “I believe it’s more compelling to say to the next Brian Chesky, ‘Look, I’m going to be in the trenches with you. I’m not getting out. You’re not going to be here alone holding the keys.’ ” (A reminder: Airbnb was courted by Bill Ackman’s SPAC — and rejected the offer.)

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Today’s DealBook Briefing was written by Andrew Ross Sorkin in Connecticut, Lauren Hirsch in New York, Ephrat Livni in Washington, and Michael J. de la Merced and Jason Karaian in London.

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Here’s what’s happening

Elizabeth Warren dismissed the Business Roundtable’s new focus on stakeholders as a “stunt.” In a letter to the trade group, which represents top American C.E.O.s, the senator said (in 11 pages, with 59 footnotes) that companies failed to provide “any evidence of a change in behavior” to support their pledge to focus on more than shareholders.

Moderna and Pfizer unveiled their Covid-19 vaccine road maps. The highly unusual move — clinical trials are usually shrouded in secrecy — is meant to instill confidence about the safety of their treatments. Relatedly, here’s why distributing vaccines will be really hard.

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