Raphaëlle d'Ornano
5 min readApr 7, 2021


D’Ornano + Co. — Tech: Path to Growth

Why Founders Must Start Preparing For A SPAC Now

SPACs have moved with astounding speed from the fringes of the financial world to become a mainstream phenomenon. The U.S. markets ignited this trend last year and now they are finally coming to Europe.

This has touched off a fierce debate about whether SPACs are good for the economy and startups or whether they are creating a dangerous financial bubble. While there are valid points on both sides, in the end, a SPAC is like most financial instruments: Another tool that can be useful for achieving goals or squandered if the holder is irresponsible.

In either case, SPACs are here and it’s critical that startup founders understand them. SPACs have the potential to help companies accelerate their growth. Fast is good. Speed is crucial for succeeding at a global scale.

Yet this SPAC-driven speed requires not just educating oneself, but dramatically shifting the team’s thinking about how and when an exit might occur. In my conversations with early stage companies, it’s clear that most founders have not begun to grapple with the implications of SPACs and how they are changing the rules around funding and scaling.

It’s imperative that those preparations start early. SPACs can be a great opportunity. But failure to build the right foundation in terms of financial controls and governance could lead to disaster should the company ever be targeted by a SPAC.

The Big Picture

SPACs have been around for decades. But last year in the U.S., there were 248 SPACs, up from 59 in 2019. Already in 2021, the have been 279 SPAC IPOs. This trend is here to stay for the foreseeable future.

After much indecision, Europe is finally, if slowly, getting in the game, though so far mostly through U.S. markets. On March 25, U.K.-based electric vehicle manufacturer Arrival went public through a SPAC on Nasdaq. The former London Stock Exchange CEO created a SPAC on the New York Stock Exchange. German flying taxi startup just went public through a SPAC on Nasdaq. And now 360 Capital, the Paris-based early stage VC firm, has said it will create France’s first SPAC on the Paris stock exchange.

For founders looking to raise money this creates an environment that is both exciting and complex. The SPAC explosion is just one sign of the massive amount of liquidity in global financial systems that is hunting for investments with high returns. This means there is more access to late-stage venture money, more private equity investors looking to invest or acquire high-flying startups, and more cash for fund tradition M&A. SPACs offer yet another enticing option for raising tons of cash to fuel growth.

But unlike these other avenues, SPACs almost instantly transform a relatively young startup into an independent public company. That’s enticing in many ways, because it allows a founder to circumvent the resource-intensive process of filing for an IPO, conducting a roadshow, and wooing institutional investors. But taking this short-cut can leave that startup completely unprepared for the shock of being a public company and all the regulatory and investor scrutiny that comes with it.

The founders I’ve been meeting lately often view a SPAC as not so very different from raising their next round of funding. Last year, our firm opened an office in New York City as we began to advise French clients abroad as well as at home about raising venture capital and their financial future. This gave us a unique view into the SPAC trend.

For instance, it’s true that with each successively larger round of funding, a startup must be able to demonstrate key metrics and have a system for measuring their progress. This is an evolution that we traditionally help companies make. But there is a huge governance and reporting gap between raising a Series C round and suddenly becoming a publicly traded company.

In many cases, that means that a French company will be subject to U.S. securities regulations. The biggest, most successful startups have historically spent years putting in place the reporting systems and hiring financial officers who understand these rules and can establish the necessary controls and governance. A SPAC dramatically shortens the time for creating those structures

So, what should founders be doing now? First, don’t panic and don’t be afraid of a potential SPAC. This can indeed be a great opportunity. Instead, prepare yourself.

That starts with trying to see the world through the eyes of the modern investor. Ask: What metrics will they want? What do they need to know about the addressable market? How are they going to conduct their due diligence? Have a firm grasp of your path to growth and profitability and be ready to defend it. Really dig in to understand the information they’ll request around cost structures, recurring revenues, bookings, and assets.

Equipped with the answers, a founder needs to start establishing stronger legal and financial structures much earlier in the startup lifecycle. Keeping track of the right Unit Economics can’t wait until the later rounds.

It’s also important that founders consider the emotional and managerial impact. Unlike raising the next round and giving away some equity, a SPAC likely means losing control of your company. Your investors will now be the majority owners at a much earlier stage. That means you work for them and they and be much for unforgiving than a VC who sees themselves as a partner and mentor. There are ways to structure the governance and equity to retain greater voting power. But again, that consideration needs to be made much earlier in the game.

These steps can feel cumbersome when the company is trying to refine its early product versions and get traction with customers and hire employees. But embracing this mindset early will pay dividends later, no matter what funding or exit route one takes.

If you want to be serious about this, you’re going to have to confront the heightened expectations that come with being a public company. So far, we haven’t seen the consequences for companies that failed to take the necessary steps in advance of their SPAC IPO. The trend is too recent. But trust me, a reckoning is coming for some of these companies that took the leap without looking.

That’s not a reason to be paralyzed with fear. A SPAC can help your company go faster and speed is key to a sustainable advantage in the tech industry. It could be a huge opportunity if the founders have taken prudent steps early to mitigate their risks. Only be being ready to seize this moment will the SPAC route truly be a successful one.



Raphaëlle d'Ornano

Managing Partner + Founder D’Ornano + Co. A pioneer in Hybrid Growth Diligence. Paris - NY. Young Leader French American Foundation 2022. Marathon runner.