Hum Capital recently brought together a panel of experts in the world of financing to discuss today’s capital-raising environment, the rise of SPACs, and how companies can best position themselves for success as they go public and beyond. Our panel was moderated by Alastair Goldfisher, editor of Venture Capital Journal, and featured Howard Morgan, co-founder and chairman of B Capital; Chris Gaertner, Global Head of Technology at Rothschild & Co.; Ashley Fieglein Johnson, CFO of Planet; and of course Blair Silverberg, CEO of Hum Capital.
Here’s the high-level summary of the conversation:
The current market is great for companies in need of funding. Howard noted the overabundance of funds available for all business stages, and Chris clarified that this funding is primarily going towards the top one or two players in each sector. For companies that aren’t the market leader or primary disruptor, this funding is less readily available. “If you’re not in that category, then the traditional rules apply: you have to make a pretty strong case for why they should back your company,” Ashley said.
While everyone on the panel agreed they were tired of speaking about the pandemic, they also agreed that it has changed the game for funding. Companies in Howard’s portfolio took a dip at the start of the pandemic, but quickly recovered and are taking advantage of all the funding available. Both investors and companies alike have had to change how they handle investment deals. “People started to adapt. We’ve now done a number of investments in companies where we have never physically met the founders,” Howard said. As far as spending investment funds goes, Chris saw that founders spending their own money became very conservative when COVID hit, whereas founders spending investor money were encouraged to keep spending to drive growth. While it’s risky to spend money and potentially lose it in such a volatile environment, it will likely pay off for those companies.
SPACs were also a major topic of conversation. They’ve been around for a long time, but they’ve taken off recently as a good alternative to IPOs. Chris noted that IPOs have been broken for a long time, and while SPACs aren’t a solution to every problem, they do have some distinct benefits. “I don’t think SPACs will answer all the questions, but they certainly allow for more direct conversation with the buy side and through the merger proxy, you can tell your story and forecast as opposed to going through an analyst,” he said. To Howard, the most interesting part of SPACs is the amount of negotiation around lockup. For one company he worked with, the lockup was until the first earnings release — unless the stock traded above a certain price for ten consecutive trading days, in which case, some of the lockup was released. That SPACs allow for more negotiation will likely push IPOs to do the same in time.
Ashley agreed with the value of SPACs, but said that they should be one tool in the toolbox for companies looking to go public. “Remember that when you SPAC, you’re going public. Your readiness to be a public company is a significant factor in the decision. It can be so tempting. The SPAC promoters have a great pitch when they come along about how much easier, faster, and more efficient it will be over the traditional IPO process. But the decision it comes down to is, when are we ready to go public?”
The panel was rounded out with advice to CFOs and CEOs. Howard said that now is the time to fundraise, so companies shouldn’t be shy about pushing ahead. Ashley’s advice was to focus on the business’s fundamentals, ensuring that systems and infrastructure are in place to make the most of new funds. And Chris encouraged everyone in the company to be on the same page about what they’re promising to investors and what they can deliver on.
Hum Capital is incredibly grateful to have had the opportunity to bring together these brilliant people and gain their insight about our industry. While we can’t know what’s to come, the future for capital raising looks bright.
Thinking about fundraising? Sign up for a free account on Hum’s Intelligent Capital Market, and learn what kind of financing your company might be qualified for today.