Research shows that hundreds of SPACs are looking to acquire tech companies in the coming months, heating up competition for startups and inflating deal values
‘Blank check’ firms known as SPACs are in pursuit of America's hottest startups. Is the invasion a sign of a market euphoria that can't last?
Context & Ripple Effects
This lands at the inflection point of a fast-building arc: after SPAC issuance more than doubled to over 66 vehicles in 2020 amid pandemic-era uncertainty about traditional IPOs, earlier coverage already showed the format handing targeted companies improved terms and a lower cost of capital than a weakening conventional IPO path. What changes now is scale — research finds hundreds of these blank-check firms hunting tech targets simultaneously, turning a financing workaround into an outright bidding war for startups.
That demand shock matters because it collides with an already rich private market: PitchBook counted nearly 340 startups raising at $1B-plus valuations, more than triple the prior year, so SPAC hunger is layering public-market capital on top of record private valuations.
First-order effects
- Startup founders gain immediate leverage: multiple SPAC sponsors chasing the same companies forces competitive bids and inflates deal values versus what a single buyer or an IPO would have commanded.
- SPAC sponsors themselves face a squeeze — with hundreds of vehicles racing the clock to deploy raised cash, the scarcest resource shifts from capital to qualified tech targets.
Second-order effects
- Venture investors and late-stage funds see exits repriced upward, reinforcing the unicorn boom PitchBook documented and giving boards a credible alternative to underpriced traditional IPOs when weighing liquidity.
- Investment banks and advisers pivot toward SPAC origination and sponsor-side work, reallocating dealmaking capacity away from conventional underwriting as the fee pool migrates.
Third-order effects
- If inflated deal values persist, the pipeline risks a reckoning on quality: among the first cohort of tech startups that went public via SPAC, shares had fallen 12.6% on average by mid-May per the WSJ study, suggesting sponsor urgency was buying targets at prices the public market wouldn't sustain.
- Structurally, the pattern points toward SPACs becoming a cyclical second exit channel whose availability swings with sentiment — widening founder choice in hot markets while concentrating downside risk on SPAC shareholders rather than sellers.
The trend: Abundant blank-check capital is displacing the traditional IPO as the default path to public markets for hot startups, with valuation inflation and post-deal performance setting up the next test of whether the shift lasts.