Starting a SPAC

Based on the most helpful WSO content, here are some insights and considerations for your questions about starting a SPAC:

Current Environment for SPACs

• Market Sentiment: SPACs have indeed seen a decline in popularity since their peak in 2021. The market environment has shifted, and investor appetite for SPACs has cooled down. However, this doesn't mean opportunities don't exist. The current market conditions might present a unique opportunity for well-structured SPACs, especially if you can identify undervalued companies looking to go public.

Partnership Agreement for SPAC Execution

• Structure: A partnership agreement for executing a SPAC typically involves:
  • Roles and Responsibilities: Clearly defining the roles of each partner, including who will handle the financial, legal, and operational aspects.
  • Equity Split: Determining how the equity will be divided among the partners, especially considering you are putting up the at-risk capital.
  • Decision-Making: Establishing a decision-making process for key actions, such as selecting a target company and negotiating terms.
  • Compensation: Outlining how partners will be compensated, including any management fees, performance bonuses, or carried interest.

Probability of Success: Smaller vs. Larger SPAC

• Smaller SPACs:
  • Advantages: Easier to manage, potentially quicker to market, and may face less competition for target companies.
  • Disadvantages: Limited capital might restrict the size and type of companies you can target.
• Larger SPACs:
  • Advantages: Greater capital allows for targeting larger, potentially more stable companies, which might be more attractive to investors.
  • Disadvantages: More complex to manage, higher scrutiny from investors and regulators, and potentially more competition for high-quality targets.

Additional Considerations

• Industry Expertise: Given your previous experience in finance, leveraging your network and industry knowledge will be crucial. Hiring someone with recent SPAC experience can bridge the gap and provide the necessary expertise.
• Market Research: Conduct thorough market research to identify sectors with high growth potential and companies that are strong candidates for going public.
• Regulatory Environment: Stay updated on the regulatory landscape for SPACs, as changes can impact the feasibility and attractiveness of your SPAC.

Conclusion

While the SPAC market has cooled, there are still opportunities for well-structured and strategically planned SPACs. Consider the size of the SPAC based on your risk tolerance, target market, and available capital. Partnering with experienced professionals and conducting thorough market research will be key to your success.

For more detailed discussions and advice, engaging with industry professionals on platforms like Wall Street Oasis can provide valuable insights and connections.

Sources: Why You Should Launch a Startup Instead of Going to the Buyside, Will SPACs destroy PE?, Why You Should Launch a Startup Instead of Going to the Buyside, Small Fund vs. Rollup, LMM PE or MBA better for Search Fund / Entrepreneurship?