Two VC firms form SPAC in US, will seek Indian startups planning IPOs

Venture capital firms Elevation Capital and US-based Think Investments are together launching a special purpose acquisition company (SPAC) focused on Indian technology companies seeking to list in America.

The new SPAC, Think Elevation Capital Growth Opportunities, had filed for a $225 million initial public offering with USA’s Securities and Exchange Commission (SEC) earlier this month, offering 22.5 million stock units at $10 each.

“We are a newly incorporated blank check company incorporated as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this prospectus as our initial business combination,” said the SPAC in a SEC filing.

“Our primary focus will be on the Indian technology ecosystem. The Indian technology sector is a large and growing market that we believe will provide attractive target opportunities for us.”

VC investors Ravi Adusumalli and Shashin Shah will lead the SPAC. Adusumalli is the founder and managing partner of Elevation Capital, earlier known as SAIF Partners, who sits on the board of Paytm, UrbanCompany, and ClearTax. Shah is a portfolio manager at Think Investments.

Think Investments and Elevation Capital on a combined basis have invested $1.3 billion in private companies in India so far.

Think Investments CFO Tom Glaser would serve as the CFO of the newly formed entity with Elevation Capital’s Vivek Mathur as the company’s COO. Other A-listers who are a part of the company board include Paytm founder Vijay Shekhar Sharma, Dream Sports founder Harsh Jain, former WhatsApp global business head Neeraj Arora and former managing partner at SoftBank Group Kabir Misra.

“Our business strategy is to identify and acquire a company with ties to Indian technology ecosystem, a strategy that complements the experience of our sponsor, management team and directors and can benefit from their experience and expertise," said the new SPAC in a filing.

Indian companies including grocery platform Grofers and ecommerce major Flipkart have been exploring the SPAC route for a US listing. SPACs are listed shell companies created with the purpose to acquire private companies and then merge with the latter. These don’t have business operations or any revenue of their own but are created to raise capital through an IPO to acquire private companies later on.

SPAC provides a more suitable and definitely a faster listing route for Indian tech startups and the government must recognize and enable such new structures to propel startups which are the key to a $5 trillion economy, according to Ankur Bansal, co-founder and director, BlackSoil.

“Given that most tech startups are loss-making, how traditional Indian investors will perceive them is yet to be seen. The mindset of most traditional investors is to check profitability. This will take some time to change. But that doesn't mean that just because a company is loss-making they shouldn't be listed. Overseas investors are perceived to understand tech companies better, thus leading to more premium valuations,” said Bansal.

“Developed markets like the USA, Singapore and Hong Kong have displayed a healthy appetite for Indian technology stock, a trend which is likely to grow stronger in the near future. The investment by leveraging the SPAC route aims at raising working capital for future investment in a target company within a specified sector within two years of such capital raise,” said Mahesh Singhi founder and managing director of Singhi Advisors.

Apart from Flipkart and Grofers, a slew of Indian startups such as Zomato, PolicyBazaar, Nykaa and Delhivery plan to go public too.