Latest / The Startup Exit Podcast with Fexingo: IPOs, Acquisitions, and Founder Liquidity Events / How Founders Use SPACs for Public Exits in a Cooling Market
Transcript
- Lucas: So Sila, the battery materials company, just raised $300 million to expand its factory. That's notable on its own, but what caught my eye is how they're thinking about the exit. Battery tech is capital-intensive — you need billions, not millions, to scale. And the traditional IPO window has been pretty inconsistent. Luna: Right, and that's where SPACs re-enter the picture. They had that crazy boom in 2020 and 2021, then basically crashed. But I'm hearing whispers of a quieter comeback. Lucas: Exactly. Not the blank-check frenzy of three years ago, but structured SPACs with more founder-friendly terms. Today we're going to look at what a founder should actually consider if a SPAC comes calling — because the math has changed. Luna: Let's start with the obvious: why would a founder choose a SPAC over a traditional IPO in mid-2026? The market's not exactly welcoming — look at Meta down 5% in the last week, Alphabet down nearly 6%. Tech stocks are getting punished. Lucas: That's the key. A traditional IPO requires a receptive public market, and right now growth stocks are out of favor. But a SPAC gives you a known valuation upfront — you negotiate with the sponsor and the PIPE investors before you even file. You lock in a price, assuming the deal closes. Luna: Assuming it closes. That's the rub. The biggest risk for a founder is redemption — when SPAC shareholders pull their money out instead of staying in the deal. If too many redeem, the trust account shrinks and the deal can fall apart. Lucas: Right. And in this environment, redemptions are higher because investors are risk-averse. So a smart founder structures the deal with a minimum cash condition — say, the PIPE covers enough that even if 90% of SPAC shareholders redeem, you still have operating cash. Luna: That's where the PIPE quality matters. A PIPE is a private investment in public equity — basically, big institutional investors commit to buying shares at the merger price. If your PIPE is full of long-only funds like Fidelity or T. Rowe Price, they're less likely to flip. If it's hedge funds, they might redeem. Lucas: Exactly. And founders should also look at the warrant coverage. In the early SPAC days, sponsors gave themselves a ton of warrants — basically free options on future stock. That dilutes founders. Newer SPACs have cleaner structures, fewer warrants, and longer lockups so the sponsor is aligned. Luna: Let's talk lockup. In a traditional IPO, founders are typically locked up for 180 days. In a SPAC, lockups can be shorter — sometimes 90 days — but there's often a registration statement that lets insiders sell sooner. That's both a risk and an opportunity. Lucas: Opportunity if you need liquidity, risk if the stock tanks after the merger because early investors dump shares. I've seen deals where the stock dropped 40% in the first month after lockup expiry. Founders should negotiate for a structured lockup — maybe 10% of shares can be sold after 90 days, the rest over six months. Luna: Another piece: the sponsor promote. That's the compensation the SPAC sponsor gets — typically 20% of the equity. In a hot market, sponsors took huge promotes. Now, we're seeing promotes closer to 10 to 15%, and sometimes with performance-based vesting. Lucas: That's a huge shift. A 20% promote means the sponsor gets one-fifth of the company for essentially finding the deal. That's painful dilution for founders. So if you're negotiating, push for a lower promote or tie it to stock price milestones. If the stock trades above $12 for 20 days, sponsor gets full promote. Otherwise, it scales down. Luna: And then there's the timeline. A traditional IPO can take six to nine months from filing to trading. A SPAC merger can close in three to four months if you have a clean target and no SEC issues. That speed matters when your company needs capital to scale — like Sila with that factory expansion. Lucas: Speed, but also certainty. In an IPO, you price the night before and if the market tanks, you postpone or lower the price. In a SPAC, you negotiate the valuation months in advance. Even if the market drops, your valuation is locked — unless redemptions force a renegotiation. Luna: Right, and that renegotiation risk is real. We saw it in 2022 — SPACs that were announced at a $10 share price ended up closing at $8 because the trust had been eroded by redemptions. Founders had to accept lower valuations or walk away. Lucas: Which brings me to a specific tactic: the forward purchase agreement. Some sponsors now offer to buy shares in the trust to backstop redemptions. That gives the founder confidence the deal will close. But it comes at a cost — the sponsor usually wants additional warrants or a fee. Luna: So the founder has to weigh: do I pay for certainty or take the risk of a higher payout if redemptions are low? There's no one-size-fits-all. It depends on the company's cash runway and how badly they need the public listing. Lucas: And on the macro environment. Look at the data center energy story — data centers expected to use four times more electricity by 2035. That's a huge tailwind for companies like Sila that make more efficient batteries. If your company is in a hot sector, you might get better terms because SPAC sponsors want to ride that wave. Luna: That's a good point. The best SPAC deals today are in sectors with clear secular growth: AI infrastructure, clean energy, biotech. SPAC sponsors are more selective. They're not chasing just any SPAC target — they want companies that can tell a compelling public market story. Lucas: And the founder needs to tell that story themselves. In a traditional IPO, you have a roadshow — you meet with dozens of institutional investors. In a SPAC, you often have fewer meetings, but the ones you do have are with the PIPE investors who are committing real capital. Those meetings are deeper, more technical. Luna: So the founder has to be ready to defend their business model at a granular level. Not just the vision, but the unit economics, the gross margin trajectory, the cash flow timeline. SPAC investors are now doing real diligence, unlike the 2020 days when they were just betting on the sponsor's reputation. Lucas: Exactly. And that's healthy. The SPAC market is maturing. We're seeing more SPACs with experienced management teams, better governance, and terms that align with long-term value creation. Founders who approach a SPAC with the same rigor as an IPO will do well. Luna: One last thing: the tax implications. When a founder merges into a SPAC, their shares are typically treated as a tax-free exchange if structured correctly. But if the founder sells shares in the PIPE or in the open market soon after, they trigger capital gains. That needs planning. Lucas: Right. And for many founders, the SPAC exit is their first liquidity event. They're not used to thinking about tax brackets, estimated payments, or state taxes. A good SPAC sponsor will have a tax advisor on call, but founders should bring their own team. Luna: Before we wrap, I want to circle back to something. You mentioned that listener support is what lets us do deep dives like this without any ads. If you find these practical breakdowns useful, a handful of listeners already chip in at buy me a coffee dot com slash fexingo — and that genuinely keeps us going. Lucas: Yeah, it's a small group, but it makes a big difference. We don't run sponsorships, so this show stays honest and focused on what matters to founders. Okay — back to the SPAC math. Luna: So, to sum up: SPACs are a viable exit path in 2026, but the terms matter more than ever. Founders should focus on redemption risk, PIPE quality, promote structure, and lockup flexibility. And they should only go with a sponsor that has a track record of closing deals. Lucas: And don't forget the time value. If you can close in three months instead of nine, and your company needs that capital to grow, the SPAC premium might be worth it. Just run the numbers carefully. Luna: Any final thought on Sila specifically? They just raised $300M in private funding — doesn't sound like they're spac ing anytime soon. Lucas: Right, they're still private. But their raise signals that battery tech is capital-intensive and the exit will likely be a big one — either a traditional IPO or a SPAC down the line. For founders in similar capital-heavy sectors, it's worth watching how Sila navigates the public markets when they eventually go. Luna: Good point. We'll keep an eye on it. Thanks for listening, everyone — we'll be back with another exit playbook soon.