VC fund investors not raising alarms over SPAC trend
- Kia Kokalitcheva, author of Axios Pro Rata

Illustration: Sarah Grillo/Axios
Venture capital firms, formed to invest in startups, are increasingly becoming sponsors of SPACs, blank-check companies that bring later-stage businesses into the public markets. It's significant strategy creep, but so far there hasn't been much opposition from venture capital fund investors, known as limited partners.
Be smart: SPACs are similar to VC in spirit and skills, which is how firms are selling it to their own investors.
The big picture: More than a dozen VC firms have formed SPACs, with many more in the pipeline.
- Among them are Khosla Ventures, FirstMark Capital, Highland Capital Partners, Dragoneer, Tribe Capital, Lerer Hippeau, Greycroft, Foundry Group, Ribbit Capital and Lux Capital.
What they’re saying: “This is a growth investment for the fund, it happens to be done in a different way,” says Lux Capital managing partner Peter Hebert. “It’s just a financing product in our view.”
Between the lines: Limited partners seem mostly at ease.
- “This is just another tool in their toolbox,” explains an investor whose portfolio includes three VC firms that have formed SPACs.
- "They're able to back founders from the seed stage to the public markets now, as efficiently as possible," another LP offers, referring to it as a "full-stack" approach.
Yes, but: LPs who invest exclusively in early-stage VC funds aren’t quite as jazzed, believing it reflects diverted focus. Or, as one tells Axios: “None of my early stage funds better bring that noise!"
Line of demarcation: Limited partner sentiment is impacted, at least in part, by whether they get to participate (i.e. aligned interests).
- In some cases, the VC firm uses fund capital, meaning that gains or losses are shared with limited partners.
- In some cases, such as Thayer Ventures, limited partners are offered co-investment opportunities in the SPAC.
- But, in some cases, the SPAC is either separate from fund LPs, or even a side hustle by individual partners in a fund.
The bottom line: SPAC performance will ultimately dictate how long LPs stay aboard the train.