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By Joshua Rosen, California Business Journal.
It’s 2008. Andrea Betti-Berutto and his longtime associate, Dr. Avi Katz, had just launched GigOptix a year prior, and at this stage, they are still reliant on investments.
Then the Great Recession hit.
Reflecting back to those times, Betti-Berutto says the company lost its main investor overnight — right at the beginning of the crisis.
“We were able to navigate through that tough period with a dose of optimism, tight control of our operation and cash, and quickly making the decision to move immediately to the public market,” says Betti-Berutto, speaking on his laptop from his California living room.
Betti-Berutto is the Chief Technology Officer at GigCapital Global. Like everyone, he is in quarantine working from home, watching the markets, and navigating the dual-crises of the COVID-19 pandemic, and looming economic collapse.
In the last crisis, GigOptix successfully completed a reverse merger into the Nasdaq traded company Lumera, which developed one of the first polymer-based optical modulators for optical communication. Dr. Raluca Dinu, who is today CEO of GigCapital2, was part of the founding team and VP of Engineering of Lumera at that time.
Since the last recession, GigOptix became GigPeak and was sold in 2017 for $250 million, in cash, with great returns to investors. Betti-Berutto, Katz and Dinu have utilized their technology and business prowess to form a completely different operation called GigCapital Global, a Private-to-Public Equity (PPE) business and technology group that takes late-stage, high-quality private technology, media, and telecommunications (TMT) companies to the public market.
“Basically, we are a Special Purchase Acquisition Company (SPAC) that pursues tech companies valued at over $500 million to reverse merge with and take public,” Betti-Berutto says.
GigCapital Global is known for its novel IPO-in-a-Box methodology, which is a faster alternative to the traditional IPO process. “We enjoy the full cycle of selecting a successful, late growth TMT company, guiding the process of becoming public, and supporting the management team on the other side of the combination, to grow the company organically or via M&As,” Betti-Berutto says.
Though they made it through one financial crisis intact, Betti-Berutto and his associates know that the current crisis is different from any previous financial crisis. First, there is the dramatic global death toll from COVID-19, which is a reminder that this isn’t about statistics and numbers, but about the suffering and the tragedy of real people. Second, the economic and social impact with a huge increase of unemployment, a consequence of the only treatment for the crisis currently available: social distancing and quarantines. He also notes that there are other social aspects which have been created by the need for social distancing.
“To technologists like me, this crisis gives the opportunity to look at technology solutions and applications with different eyes and from different angles,” Betti-Berutto says. “Products and ideas that are based on remote assistance, human-less or contact-less procedures, probably not fully appreciated until now, are suddenly getting different connotations and interest.”
Betti-Berutto says the pandemic will accelerate the deployment of technologies like virtual reality, robotics, drones, 3D printing, and the use of AI-based cognitive technologies, “which is exciting for us as we seek new technology companies to partner with. The technology background of our team contributes to understanding and identifying the opportunities that these technologies can bring, but also the related challenges.”
GigCapital’s reaction to the crisis was triage. Many of the target companies focused on operative and tactical issues, as how to deal with the quarantine and how to secure money for the immediate future. Simultaneously, GigCapital experienced increased engagements as standard IPOs were hit with pullbacks. Suddenly, GigCapital’s PPE platform became viable for late-growth stage companies to go public fast and reach public market liquidity for further growth.
“We are keeping an eye on several market indicators, which could impact our choices of TMT targets,” Betti-Berutto says. For one thing, the traditional roads to become a publicly-traded company are constricted, especially within the spheres of late-growth stage private companies. Some of these companies that were thinking of going public with a combination with GigCapital2 are reprioritizing, which means that they’re no longer looking to go public at this time.
Further, GigCapital cites a sharp decline in Form S-1 registration statement filings as evidence that many companies that were planning for an IPO are now in a holding pattern. Betti-Berutto says GigCapital’s methodology “will be attractive” for companies ready to go public.
GigCapital Global launched GigCapital1, a $145M IPO in December 2017 (NYSE: GIG), which combined with Kaleyra, S.p.A in November 2019 and converted the company into Kaleyra, Inc. (NYSE: KLR). Next, they launched GigCapital2 (NYSE: GIX), a $175M IPO in June 2019, and they are now in an active search for a suitable target company to combine with. On May 14 2020, GigCapital3 (NYSE: GIK) a $200M PPE fund was raised, focused on companies addressing digital transformation. The group will focus on closing the combinations for GigCapital2 and GigCapital3 in the next months.
“All of us have witnessed the creativity of engineers and people with technical backgrounds coming out with incredible ideas to help others, fight the pandemic crisis, and help the co-existence with its reality,” Betti-Berutto says. “This makes us optimistic for the future since this crisis, even if very tragic and painful, will be able to stimulate in a more altruistic and socially responsible way future technologists and entrepreneurs.”
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