- Hims founder Andrew Dudum is among the many leaders taking their corporations public via a special-purpose acquisition firm.
- The startup is valued at $1.6 billion and raised about $280 million in money.
- Dudum informed Business Insider why he went this route, the challenges of it, and the way the transfer would form the corporate.
- Visit Business Insider’s homepage for extra tales.
Since the day he launched the well being startup Hims and Hers in 2017, Andrew Dudum had goals of going public. Today he acquired his want: The firm started buying and selling on the New York Stock Exchange at a valuation of $1.6 billion after elevating $280 million in money.
Dudum is becoming a member of an rising class of entrepreneurs who’re taking their corporations public via a special-purpose acquisition firm, also referred to as a SPAC, which gives an accelerated timeline and fewer regulatory hurdles.
There had been greater than 221 SPAC preliminary public choices final 12 months, up from 59 in 2019, in accordance to the SPAC information and analysis platform SPAC Analytics. High-profile offers like that of the sports-betting operator DraftKings final 12 months have validated SPACs within the enterprise world, Kristi Marvin, an analyst at SPACInsider, mentioned.
Hims and Hers introduced in October that it will merge with a SPAC sponsored by the investment-management agency Oaktree Capital Management. Dudum gave Business Insider the unique story to his SPAC journey, together with his resolution to go public via SPAC, the challenges he confronted, and the way the transfer would form his firm’s future.
A speedy course of for a rising firm
The SPAC construction’s accelerated course of wooed Dudum away from the standard IPO, he mentioned. Deals might be accomplished in six months in contrast with the 12-month timeline it sometimes takes for a conventional IPO, which let him focus extra on Hims’ progress, he added.
“There’s a huge advantage of keeping myself and the leadership team focused on the business,” Dudum mentioned. “It’s probably the most beneficial factor for us to be doing.
Dudum launched his San Francisco startup in 2017, then below the unique identify Hims, and centered on offering males direct-to-consumer options for situations like hair loss and erectile dysfunction. The enterprise has since expanded to embody ladies and sells birth-control capsules, skin-care merchandise, and dietary supplements. Hims estimated it will shut 2020 with about $138 million in income, in accordance to the corporate’s investor deck.
Dudum mentioned he deliberate to develop his 131-person firm additional by tackling situations comparable to diabetes, ldl cholesterol, and fertility.
“We want to be a trusted partner to individuals as they grow in their life and more things pop up,” Dudum mentioned, including that his ldl cholesterol spiked within the fall, which impressed him to add extra companies to Hims. “The mission for the company is to grow with these customers for the next 10 to 20 years.”
What’s extra, SPACs have an added degree of safety that comes from negotiating with a single entity for one giant pool of money, Marvin mentioned. The conventional IPO course of sometimes includes an extended interval of assembly with a number of buyers, which is much less engaging throughout a interval of financial instability, she added.
“If you take the fact that a traditional IPO is risky to begin with, and then you layer in a pandemic, and then you layer in an election year, the traditional IPO route is far more unappealing,” Marvin mentioned.
Flexibility in fundraising
Another perk of the SPAC construction is the pliability it gives when it comes to fundraising, Dudum mentioned.
Dudum took benefit of the choice to join personal funding in public fairness (PIPE) buyers alongside his SPAC deal, which allowed Hims to elevate a set sum of money at an agreed-upon valuation. In a conventional IPO course of, Dudum would not understand how a lot cash Hims would elevate or at which value till the day its IPO priced.
Hims raised $75 million utilizing PIPE buyers, bringing its complete funding to $335 million. The funding agency Franklin Templeton led the spherical, which was one other benefit of the SPAC construction, Dudum mentioned.
“You have the flexibility to craft the investor roster, which doesn’t exist with the IPO process today,” he mentioned. “And you have a catered amount of cash coming to the business, which is a great advantage.”
Building helpful relationships
The SPAC construction additionally permits Dudum to develop a deeper relationship with the Los Angeles different funding administration agency Oaktree Capital Management.
In a typical SPAC construction, an individual from the SPAC accomplice may be a part of the corporate’s board, which was a perk that Dudum favored. But nobody from Oaktree took a board seat, as Hims did not really feel it was mandatory, Dudum mentioned.
“The SPAC transaction lets you have a deep partnership with Oaktree or another high-quality institutional investor,” Dudum mentioned.
While Oaktree did not take a board seat with the corporate, the agency talked Dudum by going public, selecting different board members, and navigating the method of welcoming them, he mentioned.
Hims added two individuals to its board: David Wells, the previous chief monetary officer of Netflix who will function Hims’ audit chair, and Lynne Chou O’Keefe, the founding father of the early-stage digital-health-focused fund Define Ventures. Hims has not launched what O’Keefe’s function will probably be on the firm.
The problem of attempting one thing new
One of the main challenges Dudum thought-about concerning the SPAC course of was the burden of explaining it to buyers and analysts. While a rising variety of startups are going public via a SPAC, some individuals aren’t acquainted with the nuances of the method in contrast with a conventional IPO.
“Are the benefits we see worth the brain damage of having to explain to people why we went this route?” Dudum mentioned. “Doing anything new is difficult and requires explanation, but it requires a certain amount of risk tolerance.”
Max Jungreis contributed reporting to this text.