Forge’s SPAC agreement is a bet on the illiquidity of the unicorn – TechCrunch

What Warby parker, Freshworks, Amplitude and Toasted Look at the list in the coming weeks, we must not forget the boom of SPAC. This week, for example, Forge Global (Forge), a technology startup that operates a market for secondary transactions in private companies, announced that it would go public through a combination of blank checks.

And while we’re not unpacking every SPAC combination that crosses our radar, Forge’s deal is a good one to spend time analyzing.

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Why? Many reasons. First of all, we are curious to know how the company generates income and how diversified its income is. We’re also interested in how big the market can get for secondary equity trading on unicorns – late-stage tech startup capital is popular on secondary exchanges. Also, we want to know if the deal seems expensive, because that can help us get a heat review on the SPAC market more broadly.

First, some details about the transaction. Then we have fun. To work!

The Forge SPAC

Forge is merging with Motive Capital, a blank check company that raised $ 360 million in December 2020.

According to the company’s calculations, the combined entity will have a valuation of approximately $ 2 billion on a “fully diluted equity value on a pro forma basis.” The anticipated company company The value is $ 1.60 billion smaller thanks to the expected $ 435 million in cash after the deal is finalized, although that number will change slightly before it is negotiated.

Skipping the nuances of the transaction: there is a PIPE, a 90% capital renewal of existing shareholders and more, in case you wanted to participate, what matters is that Forge will be worth around $ 2 billion in terms of capital and you will have hundreds of millions of dollars in the bank after the deal.

The resulting valuation is notable not only for making Forge a unicorn, but also for representing a dramatic upward movement in the value of the company. Data from PitchBook and Crunchbase agree that Forge was last valued at $ 700 million (post-money) when it raised $ 150 million earlier this year. Therefore, the company appears to be willing to provide a solid return to more than just its early backers; even private investors who invested capital in the company recently should do well on the deal.

That brings us to the business and the business model of the company. Forge helps pre-IPO companies trade before they float. It’s somewhat ironic that price discovery is something the company claims its platform can help businesses with before debuting, while the company will see its private valuation quickly outweighed by a public debut.

Regardless, let’s talk about unicorns.

A solution to the unicorn jam?

One of my favorite long-term problems with the late-stage startup market is that it is much better at creating value than at finding an exit point for that accumulated value. More simply, the startup market is great for creating unicorns, but poor for making them public.

That regulatory antitrust concerns have made it difficult for wealthy tech companies to seize promising startups that could challenge them is only part of the story. There just aren’t enough IPOs, even this year, to counter the growth in the number of global unicorns.

That pressure goes a long way to explaining why Forge is an interesting company. The more non-existent unicorns there are in the world, the higher the demand, presumably, from markets like the one you operate, allowing existing shareholders in valuable private companies to boost liquidity on their own before their eventual debut on the public market.

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