Acquisition of special purpose vehicles regained popularity in 2020 as an alternative to taking startups publicly and now they are looking at edtech companies. So far, Skillsoft has gone public with Churchill Capital, and Nerdy TPG, the parent company of varsity tutors, did so through a reverse link with Pace Tech Opportunity.
However, is there anything specific with SPACs that makes it a better route for edtech companies than a traditional themed IPO or direct listing? To turn the question around, I reached out to Nerdy CEO Chuck Cohen, who is currently in the process of being SPACed by TPG, and Susan Wolford, chairperson of SPAC’s a $200 million Edify acquisition for edtech. Nerdy’s business is growing, but the company does not expect to be profitable until 2023 and expects to earn 31% and 43% of its 2020 and 2021 expectations, respectively. Cohen said the balance sheet looks like this because they invest heavily in products and engineering and focus on well capitalized.
SPAC, he said, is an opportunity to accelerate Nerdy’s core business: “Going to public markets is less, and this transaction allows us to take an offensive position and lean towards bigger opportunities.” Cohen said they followed a spec because it was a faster way to reach the public. As vaccines roll out, the growth of distance learning will slow, which could hurt growth expectations – especially for ambitious ones like Nerdy’s, which is why some edtech companies want to go public as soon as possible.
Despite having some naysayers, Cohen said SPAC not used to create companies that cannot run to the public in a consensual way. “I think a year ago this idea was fair,” he said. “But if you look at the companies that have recently taken this route, including OpenDoor, they are very high quality. There is a fundamental perception change. “He added that“SPACs have arrived year after year,”but the timing seemed more fortunate because of TPG’s interest and track record.
On the other side of the table, Wolford said he is currently looking for an edtech organization for the public on behalf of Edify, which he raised for $200 million. Have been around for decades, but Wolford said they have recently become more for mainstream Use in SPACs.