Was it SPAC week? SEC charges SPAC with misleading statements

Perfectly calibrated to slap an exclamation point on last Wednesday’s 581-page SPAC release (see this PubCo post), this new SEC Order, posted the following day, reflects settled charges against Northern Star Investment Corp. II, a SPAC, for misleading statements in its SEC filings in connection with its SPAC IPO and failed de-SPAC transaction. In the SPAC release, the SEC noted concerns from commentators regarding the adequacy of the disclosures provided to investors in SPAC IPOs and de-SPAC transactions.  In this case, the SEC charged that Northern Star stated in its SEC filings that, prior to filing its S-1 for its IPO, it had had no substantive discussions with any potential target; in reality, however, Northern Star had had several discussions with the ultimate target regarding a potential SPAC business combination. According to the Director of the SEC’s Philadelphia Regional Office, “Northern Star’s failure to disclose discussions with its merger target kept investors in the dark about its future plans, information that would have been important in deciding whether to invest in this SPAC….Given that the purpose of a SPAC is to identify and acquire an operating business, SPACs should be transparent about any pre-IPO discussions with potential acquisition targets.”  Northern Star was ordered to pay a civil money penalty of $1.5 million for violation of the antifraud provisions of the Securities Act. READ MORE

SEC's blank-check rules coincide with market slump

The SEC approved a new set of rules for special-purpose acquisition companies (SPACs) this week, long after the damage was done by the recent mania.

Why it matters: It remains to be seen what effect they'll have on the future of blank-check companies.

The big picture: Following the SPAC mania of 2020–2021, the SEC proposed rules nearly two years ago to curb what it saw as loopholes in regulations for blank-check companies. READ MORE

Team, timing, and execution — the trilogy of success

Last year, 2023, will be remembered in the tech world for massive losses, as 3,200 startups and over $27 billion in venture funding evaporated, not to mention the most significant U.S. bank collapses since 2008.

At the same time, venture investment into early-stage businesses declined significantly, with VCs undertaking greater due diligence and displaying reticence toward founders unable to signpost a clear pathway to profitability. READ MORE

Shadow Governance And Antitrust In The Age Of Big Tech

As Big Tech investments proliferate across emerging startups—advancing everything from AI to crypto to biotech—markets brim with promise of human progress through innovation. But when titans extend tentacles into rising potential competitors, what whispers echo from conference rooms with two-way mirrors? Emerging trends around influence through minority board positions should spur regulators to reassess antitrust frameworks developed long before today's complex web of strategic investments between dominant platforms and startups. READ MORE

Silicon Valley investors build $300bn cash pile in start-up funding crunch

US venture capitalists are sitting on $311bn in unspent cash, as they shy away from risky bets on Silicon Valley start-ups and concentrate on finding ways to return capital to their own backers.

American VC groups have deployed just half of a record $435bn they raised from investors during the pandemic-era boom between 2020 and 2022, according to private markets data company PitchBook. READ MORE

In An Uncertain Market, Survival Mode Is Not Your Only Option

Despite small glimmers of hope, the market turnaround has not yet materialized, putting startup founders in a challenging position as they decide how to optimize resources.

The vast majority of the founders I talk to are focusing on slashing costs to extend their runways — they’re in survival mode. While this is certainly the default option, there are drawbacks to it, and I’m not seeing enough founders pushing to consider the viable alternatives. READ MORE

Junior bankers are getting fussy about the private equity funds they'll join

It used to be the case that junior bankers were so desperate to work in private equity that the big funds could compel them to interview through the night. With private equity recruitment season around the corner, similar scenes may still occur at the biggest funds this year, but others are struggling to get bankers to interview even in daylight. 

"Candidates are suddenly being very fussy," says one senior private equity headhunter in London, speaking on condition of anonymity. "They know that the worst place to be right now is at a fund that can't raise money, and so they're looking very carefully at whether a fund has had a successful fundraising in the past year." READ MORE

Another sign of investor optimism: Dividend recaps are back

You know the market has officially shaken off its doldrums when dividend recaps are back.

Catch up fast: A dividend recapitalization is what it's called when companies issue debt and use some of the proceeds to pay shareholders a dividend. Sometimes public companies do this — more often, it's those owned by private equity firms.

Why it matters: These deals are peak financial engineering, a purely opportunistic — and potentially risky — use of the debt market. It's notable they're making a comeback even as interest rates remain pretty high. READ MORE

As college sports faces more change, is private equity money coming in?

There are high-stakes lawsuits and labor relations boards, congressional hearings and an NCAA president's controversial overhaul plan. There's an angry school taking its conference to court over a grant of rights, and that conference preemptively striking against the school.

There's the disruption of name, image and likeness, grumbling over essentially unlimited transfers and million-dollar portal acquisitions. There are Hall of Fame coaches in football and men's basketball sprinting to retirement. There's a yawning gap between the SEC and Big Ten and the rest of the leagues, with those Power 2 commissioners beginning to realize the power of leveraging their ascension above the fray. READ MORE

Private Equity Is Starting to Share With Workers, Without Taking a Financial Hit

In 2018, Anna-Lisa Miller was working with agricultural cooperatives in Hawaii, helping them reinvest in their communities through shared ownership.

Ms. Miller, who had gone to law school and had planned to do civil rights litigation, loved the principle of workers partaking in the financial success of their employers, and the next year joined Project Equity, a nonprofit that helps small businesses transition to worker ownership. But it was slow going, with each transaction requiring customized assistance. READ MORE

VC Funding in 2024: High-Profile Departures, Layoffs and a Glut of Investors Struggling to Generate Returns

Last December, the outlook for venture capital felt grim. Compared to the flush days of 2021, startups were looking at a much drier funding landscape, as interest rate hikes came to present a sobering reality. 

The situation was spelled out by Wesley Chan, co-founder and managing partner at FPV Ventures, who told Inc last December that limited partners, such as pension funds and university endowments that invest in VC funds, were spooked by the macro conditions: "Most LPs are saying, 'Why would I put more money into venture when I can get risk-free returns by buying treasuries at almost five and a half percent?'" READ MORE

How to fire a VC

Venture firms are feeling bloated these days.

Years of ballooning assets prompted investment firms to grow their headcount, and many now want to slim down. This week, The Information reported that several Tiger Global employees who focused on raising capital have left the firm, and that startup accelerator Techstars shed 7% of its staff, primarily in support and operations roles. READ MORE

Another Sign That Venture Capital Is Slowly Improving

It’s hard to say that the future of venture capital is looking brighter. But maybe it’s turned a corner?

Rising interest rates and fear of a recession in the U.S. made 2022 and 2023 terrible years in venture capital, a period that included a five-quarter streak of negative performance. That streak broke in the second quarter last year, when VC funds returned 0.2 percent, according to a report by BlackRock’s eFront, which calculated the return using the cash flow information of 2,431 VC funds a (mix of early-stage, balanced, and late-stage) on a net-of-fee basis. But the second quarter’s positive momentum didn’t continue into the second half of 2023. READ MORE

3 VCs offer their investment outlook for 2024

For venture capital (VC) investors, the economic uncertainty of this sort-of-post-pandemic world has proven tricky. Add in things like a national anti-DEI backlash (complete with lawsuits) and a substantial drop in 2023 funding despite the launch of open-source generative AI, and you might call it fraught.

To better navigate this uncertainty, we connected with VCs based in Baltimore, DC and Milwaukee to see what trends they’re seeing for 2024. How cautious are they, and what kinds of companies are they interested in investing in?

Here’s what they told us: READ MORE

"There is currently a trillion dollars trapped in VC funds and investors are desperate for liquidity”

In the last decade, a staggering 1,200 venture capital funds emerged, marking one of the tech sector's most remarkable periods. This era witnessed an influx of hundreds of billions of dollars from both seasoned and novice investors, drawn by promises of dream returns as long as the unicorn factory kept galloping.

The years 2021 and 2022 became industry milestones with record fundraising surpassing $300 billion, and even the Israeli venture capital market joined in the celebration. However, the winds shifted in 2023, leaving many disillusioned from their VC ventures as valuation levels plummeted, new fundraising rounds vanished, and exits disappeared from the horizon. READ MORE