June 27, 2025
Skin in the Game: Sponsor Risk Capital
You might think SPAC sponsors just show up and collect a payday.
But the good ones? They put real skin in the game.
Most sponsors invest millions of dollars in risk capital just to launch the IPO.
If they don’t close a deal in 2 years, they lose it all.
That’s high-stakes conviction — not just compensation.
And it’s one of the clearest ways to judge sponsor alignment with investors.
Talking Points:
- Sponsors typically cover the risk capital upfront.
- This covers legal, IPO, and administrative costs.
- If no deal is completed, that capital is lost.
- It’s one of the clearest signals of sponsor alignment with public investors.
- Also used to buy private placement warrants (not in the public trust).