Investment banker Vishal Agarwal and corporate lawyer Raj Kulasingam, who have been actively investing in African startups since 2017, plan to list a special purpose acquisition company (SPAC) targeting to invest in technology companies from the continent.
“As there is more interest in Africa, we want to give founders a route to market. A SPAC gives an acceleration to our founders and is overall a good thing for the ecosystem.” Vishal Agarwal, a former partner at PWC was quoted by Bloomberg without providing further details on the SPAC listing plan.
The two experienced business executives are confident that their reputation and experience will help them identify promising technology startups.
Last year alone, Mr Agarwal and Raj Kulasingam did 33 deals – across Africa, in Silicon Valley, in the UK, and Indonesia.
They have also invested in more than 50 startups as well as in Acuity Ventures, an early-stage fund which had stakes in Flutterwave and Paystack way before the fintechs attained unicorn status.
Their biggest win so far has been their investment in Kuda Bank, a Nigerian based digital only bank which raised $55 million at a valuation of $500 Million in August 2021. The duo invested $600,000 in Kuda at seed stage and exited with 14.5-fold gain in 20 months.
“You don’t need a dog walking app in Nairobi. It is about moving money from one point to another: how do you get medicine to the people who need it, when transport is so difficult?” says Raj Kulasingam.
How a SPAC Company Works
A special purpose acquisition company (SPAC) or a blank-check company, is a corporation formed for the sole purpose of raising investment capital through an Initial Public Offering (IPO).
When the blank-check company raises the required funds through an IPO, the money is held in a trust until a predetermined period elapses or the desired acquisition is made. In the event that the planned acquisition is not made or legal formalities are still pending, the SPAC is required to return the funds to the investors, after deducting bank and broker fees.
After the SPAC has raised the required capital through an IPO, the management team has up to 2 years to identify a target and complete the acquisition. Once acquisition is done, the founders will profit from their stake in the new company, while the investors receive an equity interest according to their capital contribution.
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