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potential sales of MariaDB acquired by K1 Investment Management for $37 million SPACs are the cornerstone of a failed era of mergers gained fame for a short time In the enterprise board during the last startup boom.
Remember SPACs? Special purpose acquisition companies, also known as blank-check companies, were heavily used to take many venture-backed startups public in 2021 and 2022. countless combinations arose lawsuits, going bankruptand a Large sum of shareholder wealth removed,
And while some companies that took this shortcut to the public markets were speculative, others were more serious businesses – MariaDB was one such company.
after rearing nine figures in a decadeMariaDB said it has closed a $104 million Series D round together Merged with Angel Pond Holdings, a SPAC. In its initial pitchMariaDB said its equity valuation following the merger would be $973.6 million, with an enterprise value of $672.1 million – the difference in valuation here was attributed to a larger fundraising program that would come as part of the proposed SPAC deal.
However, by the time the merger closed, most of the SPAC’s cash was nowhere to be found. Angel Pond held approximately 99% of the shares Redeemed at $10 per share, removing $263 million from the deal’s value. Investors who decided to sell their shares this way outperformed those who stayed, as MariaDB’s stock tanked fast During its first day as a public company. Today, MariaDB stock is trading at $0.36 per share, marginally better than its 52-week low of $0.16 per share hit on February 2.
Barring modest gains, MariaDB has not lived up to its investors’ expectations. In its SPAC pitchThe company estimates its annual recurring revenue (ARR) to reach $53 million in FY2022 and $72 million in FY2023. It also expects revenue of $47 million in fiscal year 2022 and $64 million in fiscal year 2023.
But the company lagged behind its projected growth curve by a full year, reporting revenue of $53.1 million and ARR of $50.3 million in 2023. First quarter of fiscal year 2024MariaDB reported revenue of $13.6 million, up from $12.8 million a year earlier. Aside from that modest improvement in the top line, MariaDB managed to more than halve its operating loss to $5.6 million, and narrow its net loss to $8.9 million from $12.8 million a year earlier. More importantly, the company has dramatically reduced its cash burn. And its operating cash loss improved from $14.1 million to $1.4 million in the same quarter.
But these improvements seemed to come a little late: the combined effect of slow revenue growth and an increasingly empty treasury meant that MariaDB could not survive much longer without raising more money. Then again, it makes sense that Company released Last October, RP Ventures was given a “senior secured promissory note” worth $26.5 million. that funding was used To meet the maturity of a term loan With the European Investment Bank. But the company breached its rescue loan and now finds its options are limited.
This situation makes the K1 offering more interesting, as the terms of the RP Note were clear with regard to the limitations placed on the company. Presumably, K1 hopes that the RP will approve the potential purchase of MariaDB.
MariaDB went public while still unprofitable, but without as much fuel as it had hoped. For any startup, this turn of events is largely the worst-case scenario: you go public (more scrutiny) while losing money (cash dependent) against limited reserves (cash balance), a downturn in the industry and a sudden collapse of conservatorship. Evaluating climate together. You run out of cash and don’t have much equity value left to throw away. Investors effectively send your stock price to zero, and the value of all those years of work and nearly $50 million in annual revenue goes to zero.
MariaDB creates a two-part instance. First, it is a reminder of the enthusiasm that led to SPAC deals, which in retrospect were very expensive and poorly timed. Second, it shows that not all software companies that reach modest scale, such as annual revenues of $25 million, will continue to grow at a sufficient pace to survive as a public company.
Be wary of exotic deals in tough times, and never consider your future ARR growth certain – even if you reach the critical growth threshold.
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