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First Aussie-focused SPAC hunts the ‘next Atlassian’

Paul Smith
Paul SmithTechnology editor

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Former Rich Lister and serial tech entrepreneur Patrick Grove is on the hunt for an Australian or Asian tech company to buy and take public on the New York Stock Exchange, after an initial public offering that looks set to raise more than $US300 million ($390 million) for a special purpose acquisition company in a heavily oversubscribed funding roadshow.

SPACs are an increasingly common investment vehicle, also sometimes referred to as “blank cheque companies”, which exist as a publicly listed entity with the sole aim of acquiring a private company to list in the shell.

Patrick Grove says his new SPAC will give an entrepreneur a fast track to a successful IPO, without the hassles.  Scott Woodward

Mr Grove and his Catcha Group co-founder Luke Elliott are behind the new SPAC, which listed on the NYSE on Friday US time under the name Catcha Investment Corp. He told The Australian Financial Review the capital raising was 10 times oversubscribed, with investors excited by the fact it was the first SPAC to specifically mention Australia as a core focus.

“We are looking for the next Atlassian, and will be looking for companies worth north of $US1 billion,” Mr Grove said.

“I’m personally really excited to find a great entrepreneur and company, help them get to the next level and share everything we know about how to build great companies fast in the public markets area.”

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SPACs have exploded in popularity in the past year, with research from Goldman Sachs showing they raised $US70 billion from investors in 2020, up fivefold from 2018. Goldman said 36 SPACs that had originally raised a total of $US10 billion in equity completed deals that had a combined enterprise value of $US51 billion.

There have been some concerns that they encourage characteristics synonymous with market bubbles, as investors in the SPAC are essentially investing blind in a company that has not been named yet.

Catcha Investment Corp listed on the New York Stock Exchange on Friday in an IPO Mr Grove said would net it $US300 million. NYSE

Catcha Group is one of the longest standing internet-focused investment groups in south-east Asia, having been founded by Mr Grove and Mr Elliott in 1999. The group has made more than 50 investments globally and has taken five digital business from start-up to an IPO, including four on the ASX.

Catcha’s south-east Asia online property portal, iProperty Group, was its most successful listing, eventually being acquired by REA Group.

Mr Grove said there was now no target company in mind for acquisition by the SPAC, but that it intended to focus its search on a target with operations or prospective operations in the technology, digital media, financial technology or digital services sectors, which it refers to as the “new economy sectors”, across the Asia-Pacific region, in particular south-east Asia and Australia.

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He said he liked the software as a service business model, and was also interested in consumer internet firms and online marketplaces. Despite the open-ended nature of investing in a SPAC, Mr Grove said investors on its roadshow had been keen to deal with them because of their entrepreneurial background and knowledge of a largely untapped Australia and south-east Asian tech scene.

As well as Mr Grove and Mr Elliot, former Goldman Sachs Asia TMT investment banker Kit Wong will be the chief financial officer of the SPAC, and it has an advisory board of leading venture capitalists in the region including David Gowdey, managing partner at Jungle Ventures; Helen Wong, partner at Qiming Venture Partners; Khailee Ng, managing partner at 500 Startups; MX Kuok, founder and managing partner at K3 Ventures; and Thomas Tsao, founder and managing partner at Gobi Partners.

Mr Grove said the main challenge in selecting the right company to acquire was identifying the right company founder or CEO. He said the prospect of being acquired by a SPAC should be an exciting one for the founder of a tech company.

“Rather than financiers or investors, we consider ourselves entrepreneurs first,” he said. “Having founded and taken multiple businesses public over the last two decades, we can empathise intimately with the experience and concerns of other entrepreneurs, especially those around the process of taking a company public.”

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“To go public in the US takes six to nine months, but via a SPAC it takes two months. So for most entrepreneurs, the ability to save six months of their life and have certainty is a huge benefit as to why they would consider this.”

The rush to list in Australia’s technology scene is tempered somewhat by it being relatively awash with cash. Despite the COVID-19 pandemic, 2020 saw a record-breaking sum of more than $2 billion invested in local early-stage private businesses by venture capital funds.

However Mr Grove said the local VC sector would be delighted if more SPACs turned their attention to Australia in order to give them fresh exit options on their investments.

The Catcha IPO made 27,500,000 units available at a price of $US10 each, with JPMorgan Securities serving as sole book-running manager. JPMorgan has an option to purchase up to an additional 4,125,000 units to cover over-allotments, which would increase the final size of the offering to above the $US300 million mark. The offering is expected to close on Wednesday, February 17.

Paul Smith edits the technology coverage and has been a leading writer on the sector for 20 years. He covers big tech, business use of tech, the fast-growing Australian tech industry and start-ups, telecommunications and national innovation policy. Connect with Paul on Twitter. Email Paul at psmith@afr.com

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