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Private equity, a SPAC and an IPO walk into a bar

The first part of 2021 was a busy season for engineering outlets. Coming off a hot period in the last quarter of 2020, it was no surprise that tech upstarts haunted liquidity through various categories of mechanisms as the new year began.

There were IPOs, there were direct leans, there were PE treats. Hell, we even saw enough SPACs that we lost track of a few; amid all the noise, you’ll miss the periodic record no matter how well-tuned your ear.

The Exchange explores startups, business and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.

Each path is still open for later-stage startups to pursue departures: The IPO market was welcoming until a few minutes ago and private equity firms are stacked with cash and willing to pay higher various than they are likely in more normal times. And there are sufficient SPACs to make the entire recent Y Combinator class public.

Choosing which option is best from a buffet’s worth of possibilities is an interesting task for startup CEOs and their boards.

DigitalOcean went public via a traditional IPO, growing a bullet of fund in the process. The SMB-focused public cloud firm likely felt like a rather self-evident IPO candidate when you read its results. The Exchange spoke with the company’s CEO, Yancey Spruill, about the choice.

Latch, in differ, decided that a SPAC was its best roadwayout the door. The Exchange caught up with the company’s CFO, Garth Mitchell, about the transaction and why it compiled feel for his company.

And, lastly, The Exchange spoke with AlertMedia’s founder and CEO, Brian Cruver, about his decision to sell his Texas-based company to a private equity firm.

To prevent this berth from reaching an astronomic text weigh, we’ll open a brief overview of each deal and then summarize the company’s thoughts about why their liquidity pick was the right one.

Three roads to liquidity

Kicking off with DigitalOcean, a few cases observes: First, the company has been quite darn public about its increment in the last few years. We knew that it had an annualized operated pace of around $200 million in 2018, $250 million in 2019 and around $300 million in the first half of 2020. It later announced that it hit that crisscros in May of last year.

So when DigitalOcean decided to go public, we weren’t bowled over. The fellowship wound up pricing at $47 per share, the high-pitched culminate of its stray. Since then, its inventory has struggled reasonably, precipitating below $37 per share before recovering to $43.80 at the end of trading yesterday.

Enough of all that. Why did the company choose to go public via a traditional IPO? Spruill said his company looked at SPAC transactions and direct directories. It selected the IPO route because it fit the company’s goals of render a vast base of stockholders while creating a branding opportunity.

The cost of an IPO is comparable, he lent, to other outlet alternatives. Spruill also praised the IPO process itself , noting that its meticulous requirements represented DigitalOcean a better company.

Earlier in our chat, I invited Spruill an issue that I put to every CEO on IPO day: How are you feeling? It’s a bit of a sop, but it sometimes derives insights from executives and benefactors who, after weeks of discussing their companies’ inner workings, are asked a rare personal question.

Spruill said he felt incredible and that nothing could repeat an IPO as the consummation of so much work put into building a company and the project team. If you add together the wins and losses over term, with more of the former than the latter, and can cross the finish line with the claim metrics and sell, you can earn a place to be ” grilled ” by the” best investors ,” he said.

Those investors framed $750 million or so into his companionship, Spruill computed. Funds that it can use to retire debt and free up more cash flow. Not a bad period, I’d say.

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