SPAC 2.0: Why the Next Wave of Public Companies Will Be Built Through SPACs

Michael Blankenship: I am joined by Roland Austrup. Roland how are you doing today? 

Roland Austrup: Doing I'm good, Mike. How are you doing today? 

Michael Blankenship: Doing all right. You wanna give a little background about yourself and your experience and kinda what brings you here today? 

Roland Austrup: Sure. I, in terms of what I officially do, I'm the Chief Growth Officer and part of the executive committee of In Venture Inc.

Which is now a, publicly traded industrial conglomerate on NASDAQ. But I've spent most of my career in the, prior to that in the edge fund industry. So I started out as a currency trader and then started my own hedge fund shop back in 1996. Still a director of that company, but passed the baton on to the next generation there.

And but along the way interesting businesses. And I became friends with the founders of In Venture and joined them to help them monetize the first business that they created, and they asked me to join thereafter. 

Michael Blankenship: Excellent. So let's talk about SPACs and we've seen a evolution, right?

They started in, in, in the nineties, around the time, you, your hedge fund was formed. But today we're seeing a lot different, 30 plus years, even in the last five years, they've certainly changed and sponsors have, I think we're gotten some higher quality out there.

So better I guess paper trade, people trade on. I've been working on for a long time. How has your view evolved or what's your view on SPACs and how they can help companies go public? And why they should look at SPACs. 

Roland Austrup: It's it's a more efficient vehicle. And I think you're correct in what you said, Mike.

The industry's really matured. I would say the real break point, if you say when did 2.0 start, is probably post 2023 when you had, newer SEC rules. You saw the time to market shrink from 24 months. 12 to 18 months fewer extensions. It just grew up. But I always saw it as a more efficient vehicle for small cap companies to go public.

IPO process is really driven for. The larger companies that have a need to be public, but there are a lot of small companies particularly ones that are involved in transformative technologies that need access to, to, to public markets. And I just think that the SPAC marketplace was a far more efficient way for.

For those companies to, to go public and for investors, it made a lot of sense too. In the initial version of SPACs, you were getting a free look. And and still today you're getting yield on your money. You're getting a free look. You can keep your warrants as part of the maturation process.

Initially the vote was tied to your money staying in. Today it's not so you have to have a sound business that can stand on its own two feet. But I think one of the, one of the advantages to investors is you do get that free look. So I think there's just a better matchmaking between inve investors that are potentially interested in remaining invested and more, not large cap companies that need access to the public capital markets 

Michael Blankenship: And then you mentioned about the, hypes of companies. What is it as, the hot companies? Now I could tell you my viewpoint on that, but what do you see right now? And as we sit here in 2026. 

Roland Austrup: Yeah, I think you're looking, in the earlier stages I think there were come a lot of, I think part of the problem with SPAC 1.0 is there were a lot of quick promotes and it was just, there's a lot of transactional business or a lot of fees to be earned and you're, and the quality of deal flow wasn't as good, but what the SPAC market was really designed for, and I think if you're looking at, SPAC 2.0, what it's achieving.

Is that you're finding companies with real value high growth companies with real value. And again, they have a need for access to capital because of their growth trajectories. And this is a way in which they can grow without having to rely on venture or private equity. They can really rely on the broader capital markets.

So I tend to think that they're more higher growth companies, but they're earlier stage and that matches really well with with the SPAC marketplace. I'm curious on your view as well, Mike, 'cause you said you have one. 

Michael Blankenship: I wouldn't, I guess be a lawyer, but I would be on everything. Yeah, I I, look, I think the high growth ones are good stories for spac. They're ones that you put 'em in that vehicle, there is that growth. Now you mentioned the SEC. They did come out and put in those adopted rules in July of 24, where they've really basically made it harder or almost impossible for folks that have the safe harbor to put out these projections, which look, that helps the market because you don't want some.

Fly by the night company saying, oh, in five years we're gonna have a hundred billion dollars when right now we have nothing. So that changed that, but it did, I think it did make it where high quality, high growth type companies. And then we look at today you mentioned industrials, you look at today, anything kind of energy adjacent is really hot right now. I meaning AI data centers. Oh yeah. Computing. And those are all ones that have that high growth potential. Just be given where they are. And so that's why I see. Whereas, consumer goods isn't the thing that's there right now, but you do have, a computing, anything.

Computing now is what's gonna change. Robotics probably gonna be more of that. Things that, are, high capital intensive businesses, then it's good to be public because you can raise capital quicker. You can use the ca, the equity to buy thing, roll up things. So those are how I see it.

Roland Austrup: Yeah, I would agree with that 100%. And, energy clearly is tied to the whole AI growth story. We really are in Industry 4.0 right now. We're literally creating the railway of the modern industry, which that's the railway for data. And there's this big build out of the infrastructure.

Now you've got this major trend in high performance compute and AI converging, and the infrastructure for that is not there. Nor is the power for that there. So yes, those are both high growth areas, transformative areas that I think are well suited to the SPAC marketplace. 

Michael Blankenship: Yeah. And then, your involvement, how long have you been involved in SPAC since we've seen that success for you?

Roland Austrup: Sure. My involvement with SPACs started probably in the, just around 2018, 2019. Not so much my direct involvement with them, but I became aware of the participants in the SPAC sponsors and some of them were friends of mine. I actively got involved in it around 2019 20 when in Venture approached me with their first company that they had built that's a company called Pure Cycle, which now trades on NASDAQ as well.

I, as I said, I knew the principals quite well. They approached me they were struggling with access to capital, and a lot of the reasons you just mentioned here tie into that story. They were working on a municipal bond underwriting, and it wasn't, there was some, hesitation.

Or cold feet on the part of the investors. And when I when a venture approached me and showed me pure cycle and I looked at each of the plants they were building, they had plans to build, multiple plants around the world over time that were all gonna be a couple hundred million I.

Or thereabouts. I said, you're not gonna finance that privately. You and this was a time when the cash in the SPAC was tied to the yes or no vote. So if you're gonna proceed, you knew you were gonna get the capital from the SPACs. But I realized the importance of having an equity strategy with the bond strategy that they had.

And I said, if you can dovetail an equity strategy with the bond financing, your bond investors are gonna be there and the equity investors will likely vote 'cause they know you have the bond money there. And that's exactly what happened. So that's really where I got involved is when a venture approached me for help, I advised them that the right strategy for Pure Cycle was a public strategy, not a private strategy.

And then I introduced 'em to the SPAC sponsors I knew. And so that was my really first transaction in spac was actually was that peer cycle transaction.

Michael Blankenship: Must have enjoyed it. 'cause you stuck to it. And the spac, look, the SPAC market is ups and downs we talked about earlier. But what, is there anything in your mind that you would change today?

Whether it be regulatory or some other thing to even improve the financial product that a SPAC is, 

Roland Austrup: I think a lot of that improvement has happened. I think you just needed, a reformed version of the earlier market. Leaner timelines, tighter governance clear, SEC rules better disclosures, of fees, of conflicts, of interests financial disclosures, if you're gonna have financial models.

So I think that this. The, I think the natural industry has done a good job of evolving and those changes are in place. So I don't think there's anything that I would recommend that needs to be changed just to need to continue in this direction. Just a much stronger regulatory framework.

Tighter timelines, which, so you don't have idle capital sitting there for months and months or years. It just it just needs to be an efficient market and a regulated market, and I think it's going in that direction. 

Michael Blankenship: I certainly agree. We look at the. Securities Exchange Commission.

For many years there, it was taking a lot longer to close a transaction, but now I think we're at a good place where, they're, to your point there, the disclosures, a lot of it's self-regulatory in the nature, right? The banks, the lawyers, the auditors, they want to put the right disclosures in and have all that disclosure.

So I think it continues to to evolve there. So 

Roland Austrup: I 

Michael Blankenship: definitely see that. 

Roland Austrup: So I think you need better just to make sure you have better alignment, better make sure you have good companies with strong fundamentals companies that should be public. That, the whole point of capital markets is that the, is that there are companies, real companies that have a need for capital.

And of course there are investors that have the capital to provide and you just wanna have a platform that brings that together. 

Michael Blankenship: Yeah, and I think from the capital market, and I'd love your view, but like we're down to, 57, 5800 public companies where the heyday, it was double that. And this is a way, 'cause there's really three ways, SPACs, direct listings, traditional IPOs.

As you mentioned earlier, traditional APOs are like really big operating type companies. 

Roland Austrup: Yeah.

Michael Blankenship: That, and of course we've done SPAC deals with those kind of companies, but they want to go through the spac 'cause they like the founder team and they get that valuation pinned. But I do think it helps the public market that democratization of this, because there are more companies for 4 0 1 Ks that are real companies.

They grow. There are more, there's just more access to stuff that like. When you're a, a fund, you're not, mom and Pop aren't able to invest there. I know we're trying to change rules, but they're not able to invest in that and so they don't get the returns. And so this is a way for them to, show it and we see it in the retail space in that growth.

But love to get your take on that and how you see it. 'cause I do think we need more public companies. I think it's not a bad thing and all I know funds own a lot of Port cos and they're not. Making it public. I'd love to see more public and SPACs our way to do that. 

Roland Austrup: I would agree with you.

I actually think you're gonna see more of a resurgence towards public companies, Mike. We haven't published it yet. I've got a white paper that I'm working on which compares, private equity to public markets. So I'm not gonna go into great detail on it, but I'll characterize the main themes that we're seeing there right now.

We did a study of, what I would call modern operating conglomerates because a venture isn't operating conglomerate, but what we do under the hood is different than what Danaher Constellation or Brookfield or Roper or Berkshire do. But you can classify a number of companies as modern, operating conglomerates and what we've noticed or public conglomerates, what we've noticed is that the performance of those companies actually outperforms private equity indices. So the thesis that, one of the thesis of our, the paper writing is that there, there's, and this is not to take anything away from private equity or venture, but.

A lot of companies decided not to go public because they didn't really want to have the cost of being a public company or the regulatory burden of being a public company. They thought they'd have more freedom by being funded privately. I would argue that's not the case. If you have if you're not democratized with public market investors, you have very few people that can control you and if you don't perform.

They have certainly more controls on your business than, a broader a public market investor base would have. So I think a lot of the, a lot of operating companies are realizing that. They have more handcuffs being private than if they're public. Sure you've got a cost, you've got regulatory obligations to conform to, but you get more handcuffs when you're controlled by private equity.

And you also could be more financially. Exposed because a lot of private equity tends to use leverage. And you have a, not necessarily an alignment of interest because the investor is looking for a rate of return within a defined timeline. So you've got a financial engineering going on in order to get a result for your investors, and you're not there building long-term value.

I would argue that a lot of operators would say that their experience being funded privately was not what they expected. The bill of goods that was delivered was different than the bill of goods marketed. And from the investor standpoint I would say the same. Investors were told that rates of re returns are better, but there's a lot of evidence out there now that says, actually, the only reason the volatility is lowered because you don't have the same mark to market going on. So the risk is really the same. It's equity versus equity. It's just whether it's mark to market valuation or not. And if you look at the rates of return, in fact, if you take into account the excess financial leverage, that's.

Applied to private companies, which is a little higher. It's more like five to one debt to equity versus three to one. Or if you take that into account, which you can achieve as a public market investor just by using margin in your account that the rates of return are actually quite comparable to the broader market indices, they're no better.

I would argue that that as those things become more well known. I think you might see more of a resurgence in companies becoming public, and I think the, there, there is investor appetite as I said earlier in this conversation, the economic function of capital markets is to match those who have capital.

With those. Productive companies that need it and that, that works. But if you wanna democratize that process, you can only do that publicly because very few people can invest in not everybody can invest in, in lp or GPLP structures with lockup periods and higher minimums. 

Michael Blankenship: Yeah, and I think the beauty of the SPAC is they're you're getting more disciplined valuations and yeah, to your point, the funds, it's run by a board, your port code the company's run by a board made up by the fund, and it's only a few people deciding, so it's like reverse democratization.

You have just the control on that. So I think. This allows for you to have that kind of investment and you, or growth rather in your story and continue to do that. So there, speaking of financing are there kind of financing things you're looking at today or see from a spac? I know the pipes have become a little, are back and we're certainly seeing that, but they're, structured.

They may be smaller, but they're definitely there and we're starting to see converts and other things, but. How have you seen or what's your view on the financing for these transactions? 

Roland Austrup: For us, the goal is of course to retain as much of the tr if you're going public with a spac, the goal is to retain as much of the capital as possible from the trust assets.

But really the pipes are important ways to bolster that. We had to do some some, for financings along the way. But the goal is obviously to get, to be shelf eligible and have to be able to do registered offerings. Which we just became shelf eligible recently which worked out well.

So we did do some pipe financing along the way. We did some some convertible preferreds and then we did a small pipe offering just to bridges to shelf eligibility. In your first year of being public, you need to rely on those because you're really not a public company from your ability to access the capital markets until you get one year out.

Michael Blankenship: Yeah,

Roland Austrup: I think the broader question though, and this ties to something important, when you, when operating companies decide to go public. One of the mistakes they make is they just assume that the market's there, that if they're public, the money will show up. That's not the case.

You have to have a capital strategy to raise capital and you have to compete with other companies that are looking for capital. So you better have not just a strong business, but a strategy for raising capital. Don't just assume that it's gonna show up.

Michael Blankenship: When you guys did the Pure Cycle deal, did you guys have a minimum cash condition there?

Are you seeing, you know that, or how would you advise a target there? 

Roland Austrup: Oh, I can't remember on the Pure Cycle one, but on the Pure Cycle one was a bit different because we knew how much money was in the spac and we knew that if the transaction was gonna happen, it would all be there. 'cause that was again, a pre pres separation of the money staying in versus the transaction happening.

And when Venture went public, our view was that. We wanted to have about 75 million or access to 75 million in capital. And so when we went public, the first thing we had to do was have the committed equity facility in place or CIPA in place. So we did put that in place, which was really more of a backstop so solution.

But the real goal was to make sure that when we depac. We, outside of that, we had real capital in hand. And we raised 23 million in equity. Was equally split between Tru trust assets we kept and and new fresh capital that we raised with a convertible preferred. And then at the same time, we were able to get a $50 million credit facility.

In place. And so for us, that was really the requirement is making sure we had about 75 access to 75 million in capital with a couple of backstops around it. And the main reason for that is what you wanna do is make sure you have a couple of years of opex covered. That's really the goal of all of it, is to have access to a few years of op opex so that you can run your business.

Michael Blankenship: Yeah, it's critically important. You can't be like a zombie company and then you go out, right? So 

Roland Austrup: no, and many companies went public and they were undercapitalized from day one because they had 90% redemptions and no strategy to raise additional capital. And so all of a sudden you've just being, you went from being a private company.

To a public company with a big bill from the process of going public and no capital and you're under capitalized from day one. You have to have a capital strategy where you've got your opex and you've got a line of sight at least to your opex for a couple of years. So 

Michael Blankenship: what about aftermarket support with some of your investors and, does that factor in at all?

And, having an investor base, especially as you're trying to grow, that's giving you some aftermarket support. 

Roland Austrup: Yeah, again, that comes from a couple of things. You, again, you have to start with a good business and be well capitalized. But you, again, this is again where I say operating companies really have to understand that becoming public means you have to.

Put other infrastructure in place. You definitely need strong IR pr. You need to hire a good IR firm. You have to have a strategy for communicating to the public. You have to have a strategy for you have to have a megaphone. You have to be able to tell the market who you are. And many companies, again, they say I just gotta run my business.

Everything else will work out. That's not how it works.

Michael Blankenship: What I advise clients too is, and, being outside counsel, but it's it is the story, right? 'cause people are buying the story. It's like anything, you're gonna go invest and believe in what you're doing. So you have to have the right, credible story there.

And 

Roland Austrup: yeah, you can't, you can't put lipstick on a pig and hope that's you have to have a good story. Having a good story is not enough, is what I was saying, Mike, yeah. You have to have capital, you have to have ir, you have to have pr 'cause you're competing with other good stories.

I remember once earlier in my career, this is an analogy more than anything else, a friend of mine or not a friend of mine, 1, 1 1, 1 person that was interviewing. Basically said I don't have to work a lot of hours. I'm really smart. I'm smarter than the average person.

And I said I said, there's a lot of smart people that also work hard. You need to do both. Very much the same thing when you're going, if you have a good operating business, if you're going public, you have to understand the difference of what it means to be a good public company. So you have to be able to manage being a public company.

So it's not enough to have a good product, a good story. You have to have. The infrastructure to manage being public, you have to have the com the compliance and governance structures Internally. You have to have the IRPR and you have to have the capital strategy that, that all supports. The good story in business that that, that underlie, that underlies the company.

Michael Blankenship: Yeah I completely agree. Because otherwise, what? How are you gonna, how are you gonna survive? 

Roland Austrup: No, that's true. That's true. When we initially had not planned on going public for a couple of years, we had al always planned on being a public company. When we realized the growth story of our third company, which is involved in data center cooling Excelsius, we realized we had a really strong growth story that was tying into that whole ai and, let's not call it AI yet, because when we were doing an AI really wasn't there, but we were seeing the convergence of high performance compute and eventually ai. And, but you need that story and you need to have a revenue ramp. You may, you can go public, pre-revenue or early revenue, but you better have line of sight to a quick revenue and earnings ramp and a story that supports that.

Michael Blankenship: Yeah, I guess it's a sort of, when you're looking at later funding rounds too, just to make sure you have that story and you've seen that growth that you need in the right, right place.

Roland Austrup: Yeah.

Michael Blankenship: I. I don't know. Is there anything else you wanna talk about? Roland? I, this has been a real pleasure speaking with you about SPACs and just the market in general.

So you, 

Roland Austrup: On the SPAC marketplace? No I would just go to what we were talking about earlier. The reason we went public is we saw that the market needs access to high growth stories. But if you look at what adventure is, at the end of the day, we create companies from the ground up by.

Commercializing technologies that have been developed by major large cap multinational companies. And so what is in venture really going back to the beginning when you asked me to introduce myself, we're effectively a public industrial conglomerate, but if you say what does that mean?

We're a portfolio of the companies we've created. So we're literally a VC, tope ladder portfolio of the companies we've created. Those are exactly the types of things that should be public. They're all high growth companies will need access to capital, but it matches with what investors are looking for, investors who want access to growth stories, so again this is the whole reason that public markets exist is to bridge the gap between capital and innovation.

And I will say this, if you look at the one of the things I've learned. Is that the amount of innovation going on in the US and globally is absolutely astounding and we're in the early stages, I think, of a significant change like Industry 4.0. Again, if you wanna call it that, and with what's going on with AI is going to lead to more discovery of ideas, more transformative technologies.

And capital market. Public markets need to be there to support these companies going forward. So I think we're in a good place and see in terms of where we are in the commercialization of innovation, I think the SPAC industry's going to be ideally situated to increase the number of public companies versus an IPO process.

Michael Blankenship: I completely agree. I love the name of your company too, in Venture. 'cause it's, I like to play on it.

Roland Austrup: Yeah,

Michael Blankenship: totally believe in innovation and, the entrepreneurial spirit here. That people, if you have the grit and you want to get out and you are innovative and I, you're right. We have a.

Country world full of people who want to innovate and make a better place. And seeing people or companies like Venture help fund is important and you're, and obviously I agree on the SPAC space, I think there's a lot more out there. I think the funds will probably start giving up and letting people go public.

I think the multiples will be better on those as well, because the m and a trade is not doing as well as, they thought so. And then continuing it may not be the best solution. Continuing out in that SPAC space is important.

Roland Austrup: Yeah, and I think it does need to get out there. It's funny sometimes they listen to LP investors and they say, I just had a great return on this fund and the manager made 20%.

But now I own that same company in another fund. So you're seeing a lot of things. Just circle. 

Michael Blankenship: I had that same conversation at lunch today, that season. Yeah. Look, it's it's, an interesting time because we've seen, private equity and all that hasn't been out that long. So now we're starting to see the, where it's longer in the tooth for sure.

And so this public market still exists. It's still there. And the SPACs provide some of that ways to get liquidity. 

Roland Austrup: Absolutely, especially for the smaller companies that are growing, as you said that, I think the, one of the overriding themes that we talked that I can say was in this IPO market was built for large companies.

But if you're looking to provide for capital markets to be able to provide small companies the money and for small companies to be able to be available to, main street investors, you need the SPAC marketplace. And it's nice to see that it's matured and we're in SPAC 2.0.

Again leaner, more regulated. Just it's better for investors. It's better for companies. 

Michael Blankenship: The small cap space is where typically you'd see innovation and growth. And so putting a lot of those in there and then as they see them go to the mid cap and even to the larger ones they'll eventually get there and graduate to it.

We've seen a lot of those today remain consistent. I definitely support it and I appreciate your time today, Roland, taking the time outta your today to speak with me. 

Roland Austrup: Mike, I really appreciate it. Thank you for having me on today.