SCVX is going public today through what has been called a “blank check IPO,” where investors put money into a shell company for the purpose of acquiring another company or companies.
SCVX will then use the estimated $200 million from the IPO, known as a special purpose acquisition company (SPAC), to acquire cybersecurity companies.
The idea is to consolidate a lot of different security applications into a single, “highly capable, well-resourced, publicly traded company.”
Above: SCVX CTO Hank Thomas
As Hank Thomas, chief technology officer and board director at SCVX explained in an email to VentureBeat, the cybersecurity market is fragmented.
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“It has grown to look at lot like the vitamins and supplements industry,” Thomas wrote. “If you start to take too many, it’s hard to determine which ones are truly beneficial, which ones are counteracting the other, and which ones don’t work at all. Especially as your problems change over time.”
Fortune 1000 chief information security officers are looking for ways to reduce this “fog of cyber war, and the number of vendors with point solutions (vitamins) in their security stack,” Thomas said.
Above: SCVX CEO Mike Doniger
“We want to be a part of solving this problem, so we identified a financial vehicle called a Special Purpose Acquisition Company, or SPAC, that provides us with a vehicle to begin to do so,” he said.
SCVX is the first cybersecurity-focused SPAC. The company plans to use its investor money to acquire, partner with, and resource a cornerstone cybersecurity company capable of integrating with other best-in-breed security technologies.
“Through a SPAC, and the fast track to IPO that it provides, the public markets will provide all of the needed capital to make this vision a reality,” he said. “Now that we have gone public, we will research and meet with companies that have the right mix of excellent leadership and technology.”
The company will prowl for acquisitions at the upcoming RSA security conference in San Francisco in a few weeks.
The SCVX team believes that this concept will resonate with many venture-backed firms in the space that are at the right stage of maturity and considering what to do next. As they see it, many cyber technologies are now at an inflexion point, creating numerous opportunities for partnerships and consolidation.
The company is led by Mike Doniger, SCVX CEO and chair and former research and portfolio manager at Citadel Fundamental Strategies. Thomas is also CEO and a board member of Strategic Cyber Ventures (SCV).
SCVX board members include Senator Dan Coats, a former Director of National Intelligence (2017-2019); Jeff Lunglhofer, managing director and CISO of BNY Mellon; Sounil Yu, creator of the Cyber Defense Matrix and previous chief security scientist at Bank of America; and Vivian Schneck-Last, former managing director and global head of Technology Governance for Goldman Sachs & Company.
SCVX has sold 20 million shares at $10 a share on the New York Stock Exchange under the ticker symbol SCVX.U.
The company is targeting businesses in the cybersecurity industry globally, with enterprise valuations in the range of $600 million to $1.5 billion.
While the SPAC took form in the 1990s, the idea has enjoyed a surge of interest in the last few years.
Even though SPACs may be referred to as a type of IPO, there is a very different playbook for successfully executing the deal. Once a SPAC is set up, the clock starts in the hunt to find a suitable acquisition target. This is executed like a reverse merger as an alternative way for a fully operating private company to enter public markets with a liquidity event for its investors and other shareholders.
In part, this is why SPACs have risen in popularity among private equity investors. This type of deal offers an enticing exit path, with a faster timeline to public markets at a fraction of the cost, while also generally producing fewer distractions to the executive operating team at the acquisition target, relative to the rigor of preparing for and executing a traditional IPO.
