Prime Movers Lab, an investor in scientific breakthrough startups that has attracted capital from hedge fund managers Bill Ackman and Dmitry Balyasny, may soon benefit from a deal with another blank-check company.
The firm was an early backer of commercial space business Momentus, which is going public through a merger with special purpose acquisition company Stable Road Acquisition Corp. More SPAC mergers are coming, according to founder Dakin Sloss. “We have three others that will be announced soon,” he said during a phone interview with Institutional Investor.
While Sloss declined to name the companies in the firm’s portfolio that will be next to go public, he said he believes that SPACs are more rewarding for shareholders compared to initial public offerings. That’s because “companies are allowed to show forward-looking financial statements” when setting valuation terms, which is similar to private funding markets but can’t be done in the IPO process, according to Sloss.
His firm announced last week that it raised $245 million for its second early-stage investment fund, including contributions from Ackman, founder of Pershing Square Capital Management; Dmitry Balyasny, founder of Balyasny Asset Management; the University of Wyoming; the Lerner Family Office; and Joe Lonsdale, who co-founded Palentir Technologies and OpenGov.
All these investors had also contributed to the firm’s first pool, the $100 million Prime Movers Lab Fund I, according to Sloss, who described Lonsdale as a mentor. Sloss earned an undergraduate degree in math from Stanford University in 2011, and helped found OpenGov, a provider of cloud-based financial software for state and local governments, the following year, according to his firm’s website.
As for Ackman, the Prime Movers Lab fonder said he first connected with the high-profile hedge fund manager through tennis. “In a lot of the finance world there’s great tennis players,” Sloss said.
While Sloss declined to disclose the returns for Prime Movers Lab I, he said it was on track to become one of the best-performing venture funds from vintage year 2018. He said that returns have been driven by companies in its portfolio going public within three years of their initial backing by the firm.
Momentus was Prime Mover’s first SPAC deal, according to Sloss. The startup announced in October that it was merging with Stable Road Acquisition Corp., saying the deal will make it the first publicly-traded space infrastructure company. Sloss, who serves on the board of Momentus, said “space is expanding massively as an economy.”
Recently, Wilbur Ross, the Secretary of Commerce under former President Donald Trump, formed a SPAC with the aim of profiting from the next industrial revolution — possibly through a deal involving space.
The blank-check company, Ross Acquisition Corp. II, disclosed in a regulatory filing this week that it is planning to raise $300 million through an IPO as it seeks a merger in an area undergoing transformation. That might include electric cars, energy storage, automated manufacturing, or space traffic management, the filing shows.
“Space is going to be a multi-trillion industry over time,” Sloss predicted, adding that Elon Musk’s SpaceX has “dramatically” lowered the transportation cost of getting off the earth into space.
Prime Movers Lab’s portfolio includes Space Perspective, a company in which its second fund has invested, said Sloss. Space Perspective will fly people to the edge of space in “a giant balloon,” giving them a view of earth that may provide a better sense of the human family, he said.
While the firm will soon announce another space-related investment, Prime Movers Lab’s mandate is much broader, according to Sloss.
“We invest in breakthrough scientific inventions that have the ability to transform billions of lives,” said Sloss, explaining that means backing companies in areas such as neuroscience, biotherapeutics, energy, transportation, infrastructure, manufacturing, and agriculture.
The firm’s two funds follow the same investment strategies, according to Sloss. The startups that it backs may work with well-known leadership coach Tony Robbins, who is a partner and business strategist at Prime Movers Lab. “The most important thing, I think, in business is the psychology of the leaders,” said Sloss, noting that Robbins has worked with chief executive offers such as Salesforce.com CEO Marc Benioff and investors including Paul Tudor Jones.
As for making money from its investments, blank-check companies seem likely to remain an important avenue for Prime Movers Lab.
“Really what the SPACs are doing versus the IPO is making it possible to value these companies appropriately based on their growth expectations,” Sloss said. It’s particularly important for “breakthrough science” companies to forecast financial performance one to five years out, he added.