The tech industry loves speed. Founders want to scale fast, attract capital fast, and exit fast. But when it comes to going public, the choice between a SPAC and a traditional IPO can dramatically shape a company’s future. The numbers reveal fascinating patterns. Here’s what the data shows, with each stat giving us real insight into the best path forward.
1. In 2021, SPACs accounted for 60% of all tech IPOs in the U.S.
The sudden rise of SPACs in tech
Back in 2021, SPACs became the go-to option for many tech startups. More than half of all public exits happened through SPACs, not traditional IPOs. That shift didn’t happen by accident. It was a signal.
SPACs, or Special Purpose Acquisition Companies, gave tech founders a shortcut to the public markets. These blank-check companies raised money first and looked for targets later. Tech founders loved the flexibility. They could negotiate their own terms, skip the roadshows, and move faster than they ever could with an IPO.
What this means for founders
If you’re leading a tech company and eyeing an exit, that stat tells you that SPACs have been more than a passing trend. They’ve shaped the landscape in real ways. Investors have shown interest in tech via SPACs. But high participation doesn’t always equal high performance — a lesson we’ll explore throughout this article.
Still, SPACs are worth evaluating seriously if you’re a founder trying to weigh speed vs control. But don’t be swayed by what was popular in 2021. Popularity is not performance.
2. The average time to go public via SPAC is 3–6 months, compared to 12–18 months for a traditional IPO.
Speed is the SPAC advantage
Time matters. If your tech company is on the edge of a breakthrough — maybe you just landed a big partnership or hit a revenue milestone — you might want to go public quickly and ride that momentum. SPACs let you do that.
With SPACs, the timeline is often 3 to 6 months. You negotiate directly with a sponsor, handle less scrutiny up front, and skip the long due diligence of an IPO. Traditional IPOs, by contrast, take 12 to 18 months. That’s a long time to maintain momentum, especially in fast-moving tech sectors.
Is faster always better?
No. Rushing can lead to mistakes. Many founders regret moving too fast without solid financial systems in place. If your books aren’t clean or your projections aren’t realistic, that speed can turn into a trap. Public investors expect results, and Wall Street has no patience.
So while the shorter SPAC timeline is appealing, it only makes sense if your internal systems are already airtight. If you’re not ready, it’s better to take the longer IPO path and avoid post-listing surprises.
3. Tech companies that went public via SPAC in 2020–2021 underperformed traditional IPOs by approximately 30% one year post-listing.
The cost of going public the easy way
When SPACs first surged in popularity, it felt like a revolution. Founders were thrilled. Investors were intrigued. But within a year, reality set in.
By 2022, companies that went public via SPAC were trading significantly lower than those that chose the traditional IPO route. On average, they underperformed by 30%. That’s not a small gap. It’s the kind of shortfall that spooks institutional investors and discourages long-term holders.
This performance lag wasn’t always because the companies were bad. Many were promising. The issue? Expectations were set too high, and post-merger execution fell short.
Why the gap exists
SPAC targets often projected very high revenue growth. These projections helped secure PIPE deals and generate buzz. But public investors aren’t kind to missed expectations. When growth didn’t materialize, stock prices took a hit.
By contrast, traditional IPO companies go through a longer vetting process. They’re grilled by underwriters, roadshow participants, and analysts. The scrutiny weeds out weak points. It’s harder to overpromise.
What founders can take away
If you want a strong start in the public markets, think beyond the initial pop. Focus on fundamentals. If you can’t meet projections or communicate your growth story effectively, the market will punish you — especially in a SPAC structure where the cushion of institutional support may be thinner.
4. The median valuation of tech SPAC targets at merger announcement in 2021 was $2.1 billion, compared to $1.3 billion for traditional IPOs.
SPACs gave bigger numbers upfront
A $2.1 billion median valuation sounds impressive. And to many founders, it was. SPACs were handing out better headline valuations than traditional IPOs.
This was a big reason why so many tech companies — especially pre-revenue or early-revenue startups — preferred SPAC deals. They could negotiate terms, anchor PIPE deals, and close at valuations they might never reach in a traditional IPO book-building process.
But were these valuations justified? In many cases, no.
The inflation trap
Higher SPAC valuations weren’t always based on fundamentals. Many were driven by forward-looking revenue projections and sponsor pressure to close deals quickly before redemption deadlines.
Compare that to traditional IPOs, where pricing is driven by a syndicate of banks, investor appetite, and hard financials. That $1.3 billion median valuation might seem modest, but it was often more grounded in reality.
SPAC valuations, while attractive, created pressure to perform. Companies that couldn’t grow fast enough post-merger saw their stocks decline sharply. Many are now trading at a fraction of their original valuation.
Advice for founders
Chasing the highest valuation isn’t always the smartest move. It feels good in the short term, but if you can’t back it up with actual results, you’ll face angry investors, legal risks, and reputational damage. Choose the path that reflects your company’s real, defensible worth — not just the best number on paper.
5. 80% of tech SPACs in 2021 included PIPE (Private Investment in Public Equity) financing to support the transaction.
Why PIPEs became a standard feature
PIPE financing helped make tech SPACs work. In most deals, the money in the SPAC trust wasn’t enough to fund operations, pay out existing shareholders, or support growth plans. Enter the PIPE — a group of institutional investors who agreed to buy shares at a set price (usually $10) to inject fresh capital.
Without PIPE deals, many SPAC mergers would’ve collapsed. The PIPE gave credibility to the deal, assured investors the company wasn’t underfunded, and served as a vote of confidence from big-name backers.
The downside of relying on PIPEs
But there’s a flip side. PIPE investors usually negotiated favorable terms — discounts, warrants, or board seats. They were also under no obligation to hold shares post-merger. Many sold quickly, creating selling pressure and contributing to price declines.
In contrast, traditional IPOs tend to attract long-only investors who are locked in longer and more aligned with long-term performance.
What this means for your exit strategy
If you’re considering a SPAC and know you’ll need a PIPE, treat it like a mini fundraising round. Negotiate smart terms. Choose long-term partners, not just the ones offering the fastest check.
PIPEs aren’t bad — they’re often necessary. But if your company can’t attract high-quality PIPE investors, it may be a signal that the market isn’t confident in your story just yet.
6. Redemption rates for tech SPACs surged to over 85% in 2022, compared to an average of 30–40% in 2020.
What redemption really means
When a SPAC proposes a merger, shareholders can vote in favor of the deal — and still redeem their shares for cash. That’s a unique feature of SPACs. In early 2020, only around 30–40% of investors took that route. But by 2022, redemption rates skyrocketed to over 85%.
That means in most SPACs, nearly all the investors who initially funded the blank-check company chose to take their money back instead of sticking around for the merger. It’s like a vote of no confidence — and it puts real pressure on the company trying to go public.
Why redemptions rose so high
There are several reasons behind this trend. For one, many tech SPACs missed earlier projections. Others went public too early and failed to meet investor expectations. That led to massive volatility and price drops, which scared off new investors and made SPAC shares unattractive.
Also, as more redemptions occurred, it became a self-fulfilling cycle. If investors expect others to redeem, they’re more likely to do it themselves just to be safe.
This high redemption environment forced companies to scramble for replacement capital — often through more expensive or dilutive financing.
What to think about as a founder
If you’re thinking about going public via SPAC, you can’t ignore redemptions. Even if the SPAC raises $200 million, you may end up with only $20 million after redemptions.
That’s a huge risk.
Founders must plan for scenarios where most of the capital disappears before the deal closes. Ask yourself: can your company survive and grow with minimal SPAC proceeds? If not, you’ll need a strong PIPE in place — or consider waiting until investor sentiment improves.
7. The average return of tech SPACs from IPO to one year post-merger was -45% in 2022.
When hype turns into a harsh reality
A 45% average loss is a brutal number. It tells us something very important: public markets don’t care how hot your sector is or how exciting your story sounds. They care about performance, clarity, and results.
In 2022, most tech SPACs failed to deliver. And when that happens in the public market, stock prices fall — fast.
Why returns collapsed
Many companies went public too early. They were still refining their products, lacked predictable revenue, or hadn’t built out basic infrastructure like accounting or compliance. Public investors expect more than vision. They want proof.
Also, during the SPAC boom, valuation inflation was rampant. Deals got done at high multiples based on aggressive projections. When those numbers weren’t met, investors quickly lost faith.
Add in poor liquidity, heavy insider selling, and limited analyst coverage — and it’s not hard to see why so many stocks tanked.
What this tells you about timing
This stat is a warning. Going public is not the end goal — it’s the beginning of a very public journey. If your company isn’t ready to be judged every quarter, it’s better to wait.
Before signing a SPAC deal, make sure you can handle being a public company. That means financial controls, investor relations, audited statements, and a leadership team that knows how to communicate with Wall Street.
8. In traditional IPOs, tech companies experienced average first-day pops of 25–35%, compared to 5–10% for SPAC mergers.
The buzz effect of a traditional IPO
One of the big draws of a traditional IPO is the first-day “pop” — the jump in share price once trading begins. This excitement is driven by a carefully managed book-building process where demand is usually higher than supply.
For tech companies, these first-day pops averaged between 25–35%. It’s not just good PR. It can drive investor confidence, attract media attention, and create a halo effect around the company’s long-term outlook.
In comparison, SPAC mergers tend to have much more muted openings. That’s because shares have often been trading for months before the merger, and the “event moment” of going public is diluted.
Is a first-day pop a good thing?
There’s a debate around this. Some say a huge pop means the company left money on the table — selling shares too cheap. Others argue it’s a sign of healthy demand and helps long-term performance.
In truth, a moderate pop can be a strong signal that the market believes in your growth story and is willing to back it. SPACs rarely get that benefit.
Advice for founders weighing visibility
If brand recognition and credibility matter to your business model — say you’re in B2C, fintech, or platform tech — then a traditional IPO can give you that high-impact moment that SPACs typically don’t.
The pop isn’t just vanity. It’s market validation. And if you can leverage it with strong post-IPO performance, it can be a powerful growth accelerator.
9. Over 60% of tech SPAC deals from 2020–2022 saw target company projections miss by over 20% within 12 months post-merger.
Overpromising and underdelivering
One of the major pitfalls of SPAC deals has been the reliance on forward-looking projections. Unlike traditional IPOs — which are limited in how much they can promote future revenue or earnings — SPACs allow companies to share long-term forecasts during the merger process. On paper, this seems like a win. But in reality, it often leads to overpromising.
More than 60% of tech companies that went public via SPAC missed their revenue or earnings targets by over 20% within just a year of listing. That’s a massive gap. And public investors notice.
Why projections missed the mark
These misses weren’t just bad luck. In many cases, the projections were too aggressive from the start. Founders, under pressure to attract PIPE capital or meet sponsor expectations, painted an overly optimistic picture.
There were also operational challenges. Some companies didn’t have strong CFOs or public-ready reporting systems. Others were still figuring out product-market fit. And some simply struggled to execute in a post-COVID market that was less forgiving.
The result? Stocks tumbled. Investor trust eroded. And many of these companies faced class-action lawsuits for misleading forecasts.
Actionable takeaway for founders
If you’re considering a SPAC, be careful with projections. You will be judged by them. And unlike in private markets, public investors expect accountability every quarter.
Focus on realistic, data-backed forecasting. Build in contingencies. And ensure your internal team has the resources to deliver on what you’re promising. A conservative forecast that you exceed is far better than an aggressive one you miss.
10. By 2022, more than 50% of de-SPACed tech companies traded below their $10 NAV (net asset value).
The value erosion problem
SPACs typically IPO at $10 per share. That’s the base NAV — or the amount early investors expect to get back if they redeem. After the merger, the goal is for the company’s performance to drive the share price upward.
But by 2022, more than half of tech companies that had completed SPAC mergers were trading below that $10 level. Some dropped to $5 or lower. This was a clear sign that the market had lost faith in these businesses.
It’s not just a psychological barrier. Trading below NAV signals to investors that something went wrong — either the business underperformed, projections were missed, or the company wasn’t ready to be public.
Why falling below NAV matters
Once your stock breaks that $10 level, momentum works against you. Institutional investors hesitate to buy in. Analysts avoid coverage. Liquidity drops. And public perception shifts toward failure — even if your fundamentals are solid.
Worse, if your stock stays low for too long, you risk delisting from major exchanges. That can create even more selling pressure and damage your brand.
What founders should prepare for
Going public is just the start. Once listed, your company must constantly communicate, deliver, and engage with shareholders.
Before merging with a SPAC, ask yourself: what will keep your stock above $10? Do you have a compelling narrative? Are your financials strong? Is your investor relations team ready?
If the answer is no, you might want to hold off. The public markets won’t wait for you to catch up.
11. The SEC issued over 100 comment letters to tech SPACs in 2022, flagging disclosure and accounting issues.
Scrutiny is growing — fast
In 2022, the SEC ramped up its oversight of SPACs, especially in the tech space. More than 100 comment letters were issued targeting disclosure practices, accounting methods, and investor communication.
These letters are a warning. They tell the market that SPACs — once a backdoor to the public markets — are now firmly on the regulatory radar. And for good reason. Many tech SPACs pushed the limits on forward-looking statements, accounting assumptions, and risk disclosures.
What these letters focused on
Most letters flagged issues like aggressive revenue projections, unclear business models, and complex sponsor incentives that weren’t clearly explained to investors. Others raised concerns about restated financials and missing risk factors.
This kind of scrutiny isn’t just a legal formality. It slows down deals. It scares off PIPE investors. And it can damage your company’s reputation before you even go public.
What to do if you’re exploring a SPAC
Take disclosure seriously. Work with experienced securities lawyers. Get your audits done by top-tier firms. And above all, be transparent.
If you’re not comfortable putting every risk on paper — from product development delays to customer concentration — you’re not ready to go public. The SEC will find the gaps, and investors will too.
12. From 2020–2021, SPAC IPO proceeds grew from $13 billion to over $83 billion, with a large share focused on tech.
The capital explosion in tech SPACs
In just one year, SPAC proceeds in the U.S. ballooned from $13 billion to over $83 billion — and tech took a major slice of that pie. Startups in artificial intelligence, fintech, autonomous vehicles, SaaS, and clean tech found themselves flooded with attention from SPAC sponsors eager to strike a deal.
This wasn’t a slow rise. It was a wave. Founders who previously had to fight for Series C funding were suddenly being approached with $500 million blank-check proposals. Many took the money. Others hesitated but eventually gave in to pressure from early investors eager for an exit.
What drove the boom?
Two major things. First, interest rates were low. Investors were hunting for yield. SPACs offered an option that felt safer than buying private equity or jumping into overvalued public stocks.
Second, the pandemic created urgency. Many tech startups had strong tailwinds — remote work, digital transformation, and online consumption were exploding. SPACs promised quick liquidity while traditional IPOs were still seen as too slow.
What should founders think about today?
This stat tells us how quickly the market can change. In one year, SPAC funding grew sixfold. But that doesn’t mean it’s always sustainable. Chasing the money just because it’s available isn’t a strategy. It’s a gamble.
If you’re approached by a SPAC sponsor, don’t get blinded by the capital. Ask how long they’ve been tracking your space. Ask about post-merger support. Ask about their PIPE investor network and their post-deal involvement. The easy money phase is over — now, quality matters more than ever.
13. Nearly 70% of SPACs launched in 2020–2021 were targeting high-growth tech sectors like fintech, EVs, and SaaS.
The tech-first focus of SPAC sponsors
Most SPACs weren’t hunting for random acquisitions. They had specific targets in mind — and tech was the darling. Fintech, electric vehicles, software-as-a-service, and deep tech were at the top of every SPAC’s wishlist.
Why? Because these sectors offered the kind of growth stories that could justify high valuations. Investors wanted to believe in “the next Tesla” or “the next Stripe,” and SPAC sponsors were eager to deliver.
The problem was, there weren’t enough great targets to match the demand.
When too many SPACs chase too few good companies
This led to a classic supply-demand imbalance. Too much money was chasing too few high-quality tech businesses. That drove up valuations, encouraged earlier-than-ideal exits, and pressured founders to go public before they were ready.
Many founders entered deals they wouldn’t have considered in a more balanced market. And in the rush to close, some skipped critical steps like financial system upgrades, compliance reviews, and building out an IR function.
Founders, here’s what this means for you
Being in a “hot” sector will attract attention. But not all attention is good. If multiple SPACs approach you, don’t treat that as validation. Evaluate them just as hard as they evaluate you. Ask:
- Have they closed deals before?
- Who are their PIPE investors?
- What’s their reputation on post-merger support?
Being in a desirable industry means you have leverage. Use it wisely — don’t just take the first check that shows up.
14. Tech companies via SPAC had average revenue growth estimates of 60–80% YoY, vs 30–40% in traditional IPO filings.
The projection gap tells the story
If you compare the typical revenue growth forecasts of SPAC targets vs traditional IPO companies, one thing stands out: SPAC projections are far more aggressive. On average, SPAC-deal tech companies claimed they’d grow revenue 60% to 80% per year. In contrast, tech firms in IPOs forecasted a more grounded 30% to 40%.
This isn’t just about ambition — it’s about incentives. SPACs are structured to close fast and attract PIPE investors. And big projections help fuel that excitement.
But Wall Street doesn’t reward ambition. It rewards results. When companies fail to hit these sky-high targets, investor confidence collapses.
Why realistic projections matter more
Inflated forecasts might get you a deal. But they often lead to pain later. You’ll face pressure to “grow into the valuation,” and that pressure can distort decision-making. Companies start chasing vanity metrics instead of healthy unit economics. They prioritize quarterly optics over long-term infrastructure.
Traditional IPOs, by contrast, tend to feature more conservative financial models. That makes them less exciting at first — but more stable after listing.
How to approach forecasting as a founder
Build your projections from the ground up. Don’t just pick a number that sounds good. Tie every growth assumption to real data — conversion rates, customer acquisition cost, churn, expansion revenue.
And remember: public markets care about consistency. One missed quarter after going public can wipe out years of goodwill. Set achievable goals, beat them, and let your credibility compound.
15. Only 12% of tech SPAC mergers in 2021 achieved profitability within 12 months.
The profit problem post-SPAC
Tech startups often operate at a loss — that’s nothing new. But when you go public, everything changes. Investors want to see a clear path to profitability. Unfortunately, just 12% of tech companies that merged with SPACs in 2021 became profitable within a year.
That’s a sobering figure. It reflects how many of these businesses went public too early, without the structure or scale needed to control costs and drive consistent margins.
Why profitability is so rare in SPAC-backed tech firms
There are several reasons. First, many of the companies that chose SPACs were earlier in their lifecycle than those pursuing traditional IPOs. They were still scaling, hiring, and figuring out operations. Second, there was less scrutiny in the SPAC process. These companies didn’t face the same tough questions IPO candidates did from underwriters, analysts, and institutional buyers.
As a result, some went public without strong gross margins, repeatable revenue models, or optimized burn rates. Once public, the runway shortened — but the expenses stayed high.
Founders need to think ahead
Even if your company is pre-profit, you need a clear financial roadmap. Investors want to know when and how you plan to break even. That means:
- Detailed cost structure forecasts
- Hiring plans that match revenue growth
- Margins that improve over time
Being realistic builds trust. If you tell the market you’ll be profitable in two years and then hit that goal, you’ll earn investor confidence — and likely, a higher valuation.
16. SPAC sponsor promote dilution ranged from 15–20%, often exceeding traditional IPO underwriting fees of 7%.
Hidden costs in SPAC deals
Many founders are drawn to SPACs because they seem cheaper than traditional IPOs. There’s no bank roadshow. No 7% fee to underwriters. No months of expensive prep.
But here’s what often gets missed: sponsor dilution. Most SPAC sponsors receive what’s called a “promote” — usually about 20% of the post-deal equity — in exchange for finding and closing the deal. That means the company gives up a big chunk of ownership before it even hits the public market.
Compare that to the 7% fee in a traditional IPO. It’s easy to see how SPACs can actually cost more.
Why dilution matters
Let’s say you’re merging with a SPAC and issuing 100 million shares. The sponsor’s promote takes 20 million of those. That’s equity not going to employees, founders, or new public investors. It affects earnings per share, voting control, and your future fundraising potential.
If your stock underperforms after listing, the dilution feels even worse. Founders often find themselves holding a smaller stake in a struggling public company.
What to do about it
You can negotiate with sponsors. Some have agreed to earn-out clauses — they only get their promote if the stock hits certain price targets. Others reduce their promote to align better with long-term value creation.
Founders should push for these terms. Don’t accept standard dilution just because it’s common. Understand the full cost of your SPAC deal, not just the headline proceeds.
17. Over 30% of SPAC-acquired tech firms in 2021 restated earnings within 18 months post-merger.
When the numbers don’t hold up
Restating earnings is a red flag in public markets. It signals that the company’s financials were wrong — sometimes due to honest mistakes, other times due to sloppy accounting or poor controls. Either way, investors don’t like it.
In the SPAC tech space, more than 30% of companies restated their earnings within 18 months of going public. That’s a big number. And it suggests a deeper issue: many weren’t ready to operate under the scrutiny of public company accounting standards.
Why restatements happen in SPACs
Unlike IPOs, which require years of audited financials and intense due diligence, SPACs often fast-track the process. Some companies merge with limited historical audits. Others use aggressive revenue recognition methods or untested forecasting models.
Once public, the SEC and independent auditors look closer — and issues start to surface.
Restatements damage trust. They often lead to stock drops, regulatory inquiries, and shareholder lawsuits. They can also delay follow-on offerings or strategic deals.
If you’re a founder — prepare your numbers early
Before you go public, invest in your finance team. Hire a CFO with public company experience. Get multiple years of audits done, not just what’s legally required. Stress test your accounting policies.
Public markets are unforgiving when it comes to restatements. Get it right the first time, and you’ll set your company up for long-term credibility and growth.
18. Average institutional ownership in SPAC tech deals post-merger was 30%, compared to 70% in traditional IPOs.
The institutional investor gap
Institutional investors — like mutual funds, pension funds, and large asset managers — bring stability, scale, and long-term focus to public companies. In traditional tech IPOs, they usually hold about 70% of the post-listing float. But in SPAC mergers, that number drops sharply to just 30%.
This ownership gap has real implications for stock performance, volatility, and investor trust.
Why institutional investors prefer traditional IPOs
The traditional IPO process includes rigorous due diligence, in-depth roadshows, and pricing controls. Institutions like this structure. It gives them confidence in the quality of the offering and allows them to participate at a fair entry point.
SPACs, on the other hand, often lack this transparency. The deal comes together behind closed doors, with fewer touchpoints between the company and the buy-side. For many institutions, that’s a deal-breaker.
Also, with high redemption rates in SPACs, institutions worry they won’t have a stable shareholder base post-merger. They’re also wary of PIPE dilution and sponsor promotes.
Why this matters for founders
A shareholder base dominated by retail traders and hedge funds is more likely to trade on sentiment and news cycles. That creates more price swings and less patience during down quarters.
If you want long-term support and a stable stock, attracting institutions should be part of your strategy. That means better disclosures, a credible financial team, and a thoughtful investor relations plan — all of which are more aligned with the traditional IPO path.
If you’re going through a SPAC, make sure your PIPE includes institutions. Build relationships with them early, even if they don’t invest on Day 1. Their trust will matter in the quarters to come.
19. Retail investor ownership was significantly higher in SPACs (up to 40%) than in traditional IPOs (typically 10–20%).
The retail wave in SPAC land
Retail investors — everyday traders using platforms like Robinhood, Webull, or E-Trade — flocked to SPACs during the boom. Many SPACs were marketed heavily online. Social media, Reddit, and YouTube were full of hype and speculation.
In many deals, retail ownership reached 40%. In traditional IPOs, that number rarely crosses 20%.
At first glance, this might seem like a good thing. More access for more investors. But there’s a catch: retail traders tend to be short-term oriented, highly reactive, and prone to panic selling.
Why high retail ownership adds risk
Retail interest can boost share prices quickly — but it can also lead to wild volatility. If sentiment turns, retail exits fast. And since they typically don’t attend earnings calls or read SEC filings, their behavior is harder to predict.
SPACs with high retail ownership saw large price swings based on rumors, influencer tweets, or Reddit threads. That makes life difficult for founders trying to manage a stable stock price or communicate a long-term vision.
Also, when insiders sell or earnings disappoint, the backlash from retail investors can be intense — both on the charts and in public sentiment.
Managing retail interest as a founder
If you’re going public through a SPAC, understand who your investors are. Communicate clearly. Keep updates simple, regular, and transparent.
Retail investors can be allies if managed well. But they shouldn’t be your only base. Use a balanced investor relations approach that also includes institutions, analysts, and long-term holders. This mix gives your stock more resilience when things get tough.
20. The average tech SPAC merger took 4.5 months longer than expected due to regulatory and investor pushback in 2022.
The growing friction in SPAC deals
In 2020 and early 2021, SPAC deals closed quickly — often within a few months. But by 2022, the average merger took an extra 4.5 months beyond the original timeline.
What changed? A lot.
First, regulatory scrutiny increased. The SEC began asking tougher questions, demanding better disclosures, and slowing approvals. Second, PIPE investors became more cautious, asking for more time and better terms. And finally, redemption rates soared, forcing companies to renegotiate financing mid-deal.
Why this matters for your planning
If you’re counting on a SPAC deal to close by a certain quarter — to unlock capital or start a hiring wave — be careful. Timelines are more uncertain than they used to be.
A delay of 4 to 6 months can disrupt forecasts, affect your burn rate, and shake employee confidence. You may also find yourself redoing parts of the S-4 filing, extending PIPE negotiations, or adjusting your business plan to meet new investor concerns.
Advice for founders navigating the timeline
Build in cushion. Expect delays. Overcommunicate with your board and internal team.
If you have a hard cash need tied to the merger closing, line up alternative financing or bridge capital. And if your runway is short, consider whether a SPAC is the right path in this environment.
Deals are still getting done — but they require more patience, legal precision, and flexibility than before.
21. Median deal size for tech traditional IPOs in 2021 was $250 million, versus $300 million for SPAC mergers.
A larger deal doesn’t always mean a better one
On the surface, SPAC mergers in 2021 looked like a great opportunity for founders. The average tech SPAC deal brought in about $300 million — even more than traditional IPOs, which came in at around $250 million.
More capital sounds like a win. But the structure of how that capital comes in — and what’s attached to it — matters just as much as the amount.
What’s behind the bigger SPAC proceeds?
SPACs raise a pool of capital upfront and then add PIPE financing during the merger. The final total can look impressive. But here’s the catch: redemptions and dilution often reduce the actual cash delivered to the company. In many cases, founders saw just a fraction of that $300 million after redemptions and sponsor fees were taken into account.
Traditional IPOs, while slightly smaller in median size, are more predictable. The money raised is typically what lands on the balance sheet, minus underwriting fees. There’s less drama, fewer surprises, and better transparency.
What to consider when evaluating proceeds
As a founder, don’t just compare headline numbers. Ask:
- What’s the expected redemption rate?
- How much of the sponsor promote is negotiable?
- What are the terms of the PIPE?
You might see a term sheet with a $300 million headline, but if half of that is redeemable and another portion is going to insiders, your net cash could be well below expectations.
Know the real number that will help grow your business. And don’t sacrifice financial clarity for a bigger press release.
22. 47% of tech SPACs in 2021 saw significant insider selling within 6 months post-merger.
The sell-off behind the scenes
Insider selling isn’t always a red flag. Founders and early investors need liquidity. But when nearly half of tech SPACs saw major insider selling within six months, it raises an eyebrow — especially when paired with underperformance and missed projections.
What message does it send when those closest to the company are eager to exit right after going public? For many retail and institutional investors, it signals a lack of long-term confidence.
Why this happened so often in SPACs
In traditional IPOs, insider lockups are stricter. Founders and early investors usually can’t sell shares for six months — and sometimes longer. But in SPAC deals, the terms vary widely. Some insiders negotiated early release clauses or staged unlocks tied to share price targets.
This flexibility became a loophole. As soon as shares became liquid, many insiders sold large chunks — often before the company had even delivered a full earnings cycle as a public company.
This selling pressure contributed to price declines and increased volatility, especially in companies with high retail ownership.
What founders should learn from this
Going public should be about building long-term value — not just taking chips off the table. If you’re preparing to merge with a SPAC, structure your insider selling carefully. Consider:
- Lockups that match your business roadmap
- Milestone-based unlocks (e.g. tied to profitability or revenue growth)
- Transparent communication about insider plans
Early exits may solve short-term liquidity needs, but they can erode public trust. Show investors that you’re in it for the long haul, and they’ll be more likely to stick with you when the market gets rough.
23. Traditional IPOs in tech saw lower volatility post-listing, with average daily swings of 3–5%, vs 10–15% for SPACs.
The calm after the storm — or not
Market volatility is part of being public. But how much a stock moves day to day can affect everything from investor sentiment to employee morale.
In tech IPOs, the average daily swing was around 3% to 5%. That’s manageable. In SPACs, the number soared to 10% to 15% — sometimes more.
This level of volatility makes it hard for founders to focus on execution. It also discourages long-term investors who want steady returns, not wild price action.
Why SPACs are more volatile
There are a few key reasons:
- Lower institutional ownership means more influence from retail traders and short-term funds.
- Many SPACs start trading on hype and speculation, without solid fundamentals to anchor the price.
- Thin trading volumes mean even small orders can move the stock significantly.
Also, companies that aren’t yet profitable or lack strong guidance tend to see more price swings as the market tries to “price in” future performance.
How to reduce volatility after going public
If you’re heading toward a SPAC, build your communications plan early. Offer clear guidance, meet expectations consistently, and stay visible to the investor community.
Consider hiring an experienced IR lead before the merger — not after. Hold quarterly calls, publish shareholder letters, and avoid surprises.
Volatility isn’t just a stock market issue. It affects recruiting, partnerships, and your ability to raise additional capital. The more predictability you offer, the stronger your company’s public narrative becomes.
24. Over 90 tech-focused SPACs were still seeking targets by mid-2023, risking liquidation.
The ticking clock behind SPACs
Every SPAC has a built-in expiration date — usually 18 to 24 months after it goes public. If the sponsor doesn’t find and close a merger by then, the SPAC is liquidated, and the funds are returned to shareholders. By mid-2023, over 90 tech-focused SPACs were still out hunting for targets, running dangerously close to their deadlines.
That creates desperation. Sponsors under pressure to avoid liquidation may settle for deals they wouldn’t have considered earlier. That’s not good for founders — or investors.
Why so many SPACs struggled to find targets
The market changed fast. In 2021, it was a seller’s market. Founders had multiple SPAC offers. By 2023, sentiment had shifted. Investor appetite for speculative tech plays shrank. PIPE funding dried up. Regulatory scrutiny intensified.
For many SPACs, the original plan to target a high-growth tech company became harder to execute. Founders became more cautious. Sponsors couldn’t justify the valuations they had promised investors.
And with time running out, some SPACs began eyeing smaller, less prepared companies just to get a deal done — often with poor results.
What founders need to watch for
If you’re approached by a SPAC, ask about their timeline. How many months are left before they expire? If the answer is less than six, proceed with caution.
You don’t want to be rushed into a public listing just so a sponsor can avoid liquidation. That’s a recipe for misaligned incentives and a shaky post-merger foundation.
Good SPAC sponsors will be upfront, transparent, and willing to slow down if needed. The desperate ones? They’ll push hard and pressure you to sign fast. Know the difference.
25. In 2020–2021, more than 100 tech unicorns opted for SPAC over traditional IPO due to faster timelines.
The unicorn shortcut
During the peak SPAC boom, speed became the ultimate selling point. Over 100 tech unicorns — startups valued at $1 billion or more — chose the SPAC route, not because it was better, but because it was faster.
They wanted quick capital, faster exits for early investors, and the prestige of being publicly listed — all within months instead of years.
And SPACs delivered that. Deals closed fast. Valuations stayed high. Sponsors rolled out red carpets and promised minimal friction.
But speed comes with trade-offs.
What many of these unicorns discovered
Once listed, many of these companies struggled. They hadn’t built internal finance teams. They weren’t ready for quarterly reporting. They hadn’t practiced investor communications or earned trust with Wall Street analysts.
The results? Missed guidance, stock drops, lawsuits, and employee turnover.
A fast path to the public market doesn’t guarantee a smooth life once you get there.
If you’re leading a unicorn — take a breath
Just because your valuation crossed $1 billion doesn’t mean you’re ready to be public. Look inward first.
- Do you have GAAP-compliant financials?
- Can your systems scale?
- Are your projections realistic?
If the answer to any of those is no, slow down. A well-timed IPO or SPAC — even if it takes longer — will pay off more than rushing into the market and stumbling immediately afterward.
Speed is tempting. But readiness is everything.
26. SPACs delivered on average lower long-term shareholder returns (3-year) compared to traditional tech IPOs by 35%.
The long game favors discipline
Initial excitement often fades. In the end, it’s long-term returns that define success for public companies. And over a 3-year period, SPAC-backed tech companies underperformed their IPO counterparts by an average of 35%.
That’s a massive gap. And it reflects how much structure, discipline, and transparency matter in the public markets.
Why traditional IPOs tend to perform better long-term
The IPO process isn’t just for show. It forces companies to mature. Bankers scrutinize your numbers. Investors ask tough questions. Analysts dig into every metric. This process weeds out weak spots.
Companies that make it through an IPO tend to be more prepared. They have stronger financial controls, clearer roadmaps, and better management teams. And once public, they’re used to the rhythm of earnings calls, investor relations, and strategic clarity.
SPACs skip much of that. And the market notices.
What founders should take from this
If you’re thinking about the next 3 to 5 years — not just the next funding round — prioritize preparation. Whether you choose a SPAC or IPO, treat the process like a stress test. Identify gaps. Shore up weaknesses. Build the kind of foundation that can survive market cycles.
Investors reward consistency, clarity, and execution. If your company can deliver that, the exit route matters less. But if you’re not ready, the route won’t save you.
27. SPAC redemption rates in late 2022 were so high that 50% of planned mergers were canceled or restructured.
Deals falling apart before they close
In late 2022, the SPAC landscape saw a new low. Redemption rates — the number of SPAC shareholders who opted to pull their money out instead of funding the deal — reached unprecedented highs. In fact, it got so bad that half of all planned SPAC mergers either fell apart completely or had to be restructured.
That’s not just a hiccup. It’s a fundamental breakdown in deal flow.
Why redemptions were so high
Investor confidence was eroding fast. After wave after wave of underperforming SPAC-backed tech firms, shareholders grew cautious. Many no longer believed the rosy projections. They saw missed earnings, share price collapses, and lawsuits mounting.
So when a new SPAC deal was announced, investors rushed to redeem. They’d rather take their $10 back than take a chance on another volatile stock.
This led to a domino effect: with fewer funds available post-redemption, the target company couldn’t access the capital it was counting on. That forced deal terms to change or dissolve entirely.
What this means for founders
If you’re eyeing a SPAC merger, understand that the funding is not guaranteed. Just because the trust account says $200 million doesn’t mean you’ll see all of it — or any of it — after redemptions.
Build in contingency plans. Secure a PIPE early. Negotiate flexible terms. And make sure your company can survive even if the deal raises less than expected.
More importantly, be prepared to walk away. A SPAC merger that brings insufficient capital or requires you to slash your valuation may not be worth the cost of going public too early.
28. Traditional IPOs had a 98% deal completion rate, while tech SPACs saw completion rates fall to below 70% in 2022.
Reliability versus uncertainty
One of the quiet strengths of the traditional IPO process is its reliability. Once a company enters the final stages of an IPO, the deal almost always gets done. In 2022, the completion rate for traditional tech IPOs was 98%.
SPACs? Not so much.
Tech SPAC mergers saw their completion rates fall below 70%. That means nearly 1 in 3 deals announced never made it to the finish line.
For founders, that’s more than just a number — it’s months of wasted time, money, and energy.
Why IPOs complete and SPACs don’t
The IPO path includes months of preparation. By the time a company files its final S-1, it’s already passed the hurdles of investor demand, valuation expectations, and regulatory compliance. Most of the risk has already been worked out behind the scenes.
SPACs, however, move faster and rely more on sponsor relationships and market sentiment. That flexibility can backfire. If market conditions shift or redemptions spike, the deal can quickly fall apart.
Also, many SPAC targets don’t realize how much work is still required post-announcement. The SEC reviews, shareholder votes, and PIPE fundraising still need to align — and that doesn’t always happen smoothly.
What founders should consider
Time is a resource. If you commit 6–12 months to a deal that never closes, you’ll have lost valuable momentum.
Before engaging with a SPAC, evaluate:
- How close is the sponsor to its deadline?
- How committed are PIPE investors?
- What’s your backup plan if the deal falls apart?
If you want a path with a higher probability of success, the traditional IPO still stands as the more reliable option. But if you choose the SPAC route, enter with eyes wide open — and a Plan B.
29. Litigation risk post-merger was 3x higher for SPAC-acquired tech companies versus traditional IPO peers.
When legal risk becomes part of your growth story
Lawsuits are an unfortunate reality for public companies. But if you’re a tech firm that went public via SPAC, your odds of facing litigation were nearly three times higher than if you went public the traditional way.
That’s a staggering difference — and it reflects the structural weaknesses that often come with SPAC mergers.
What triggers these lawsuits?
Most lawsuits stemmed from missed projections, misleading disclosures, or conflicts of interest that weren’t fully explained. In many cases, plaintiffs alleged that the sponsor had too much influence and the company was pushed to merge before it was ready.
Others involved accounting issues, restatements, or sudden insider selling that triggered investor backlash.
These lawsuits don’t just cost money — they sap time, focus, and leadership attention. For high-growth startups, that distraction can derail product launches, hiring plans, and strategic deals.
How to protect your company
If you’re heading toward a SPAC, invest early in legal readiness. Work with top-tier securities counsel. Get a D&O insurance policy that covers post-merger litigation. Review your investor presentations carefully and scrub all projections for accuracy and disclaimers.
Transparency isn’t just good ethics — it’s protection. Overcommunicate your risks and uncertainties so that if something does go wrong, you’re already covered in your filings.
Public life brings exposure. And the SPAC path, while faster, brings more legal landmines. Tread carefully.
30. Investor trust in SPACs dropped sharply in 2022, with SPAC ETF outflows surpassing $1.5 billion.
When the market pulls back — hard
Trust is the foundation of public markets. When investors lose confidence, they don’t just hesitate — they leave. In 2022, the data showed a sharp drop in investor faith in SPACs. One clear signal: more than $1.5 billion flowed out of SPAC ETFs.
These ETFs were built to offer exposure to a wide range of SPACs — both pre- and post-merger. But when returns dipped, redemptions soared, and scandals emerged, even diversified exposure wasn’t enough to keep investors interested.
They pulled out — fast.
Why trust collapsed
SPACs went from being an exciting shortcut to being seen as risky, opaque, and overly promotional. Too many missed forecasts. Too many companies weren’t ready for the public stage. Investors watched stocks they bought at $10 fall to $3, $2, or even less.
And when dozens of lawsuits and SEC investigations hit the headlines, it reinforced the idea that SPACs were less about long-term value and more about short-term gains for insiders.
For retail and institutional investors alike, this erosion of trust triggered a full retreat.
Why this matters for founders today
If you’re considering going public via SPAC, understand that you’re operating in a very different environment than in 2020 or 2021. Investors are cautious. Regulators are tougher. And the burden of proof — that your company is worthy of public investment — is now much higher.
This doesn’t mean SPACs are dead. But it does mean you need to be more transparent, better prepared, and more credible than ever before.
Focus on building trust before the deal. Through strong financials, realistic projections, and clear communication. If you can show that your company isn’t just riding a wave, but building real long-term value, investors will come back — even in a skeptical market.
Conclusion:
The story of SPAC vs traditional IPO in tech isn’t black and white. It’s a tale of trade-offs, timing, and trust.
SPACs offered speed, flexibility, and big checks. But many founders paid for it later — with missed projections, legal challenges, and share price collapses. The traditional IPO route, though slower and more expensive up front, created stronger long-term outcomes for many tech companies.
