Special purpose acquisition The vehicles gained popularity as an alternative way to make the startup public in 2020, and are now eyeing EdTech companies.
So far, Skillsoft has gone public through Churchill Capital, and Nerdy, the parent company of Varsity Tutors, did the same through a reverse merger with TPG Pace Tech Opportunities. On the investor side, the Edify and Adit EdTech acquisitions are both separate, $ 200 million SPACs for education companies.
SPAC is not being used to publicize companies that may not be public by traditional methods.
But is there anything specific to SPAC that makes them a better route for edtech companies than traditional IPOs or direct listings? To address this question, I reached out to Nard CEO Chuck Cohan, who is currently in the process of being SPACed by TPG, and Susan Wolford, Chairperson of Edify Acquisition, a $ 200 million SPAC for Edtech companies.
Nerdy’s business is growing, but the company is not expected to be profitable until 2023 and wants to drive revenue from its 2020 and 2021 expectations by 31% and 43% respectively. Cohan said that is the way the balance sheet looks, as they are investing heavily in product and engineering, and focusing on being well capitalized.
SPAC said, Nerdy’s core business is an opportunity to accelerate: “It’s less about going into the public markets, and more about it. This transaction allows us to take an aggressive position and tilt into bigger opportunities.” . “
Cohan said he pursued an SPAC because it is a fast route to going public. As vaccines roll out, growth in distance education will slow, hurting growth expectations – especially as ambitious as Nerdy. For this reason, it is clear why some edtech companies want to exit the public markets as soon as possible.
Despite some naysayers, Cohn said SPAC is not being used to publicize companies that may not be public by traditional methods.
“I think the assumption was reasonable a year ago,” he said. “But if you look at companies that have recently adopted this route, including OpenDoor, they are of very high quality. One fundamental assumption is change. “He said that” SPACs have been reaching out over the years, “but the timing felt more fortunate because of TPG’s interest and track record.
On the other side of the table, Wolfford said it is currently looking for an EdTech company to bring in a public company on behalf of Edit, which has raised $ 200 million of SPAC. He said that PIPE Instruments aka private investment in public institutions has helped put SPX at risk for the general audience. These devices have been around for decades, but Wolfford said that they have recently become more mainstream to use in SPAC.