The potential sale of MariaDB to K1 Investment Management for $37 million is a capstone on the failed era of SPAC mergers, which gained prominence for a brief time in venture circles during the last startup boom.
Remember SPACs? Special purpose acquisition companies, also known as blank-check companies, were heavily used in 2021 and 2022 to take a number of venture-backed startups public. The multitude of combinations led to lawsuits, bankruptcies, and a great loss of shareholder wealth.
While some companies that took this shortcut to the public markets were speculative, others were more serious businesses — MariaDB was one such company.
Having raised nine figures over a decade, MariaDB closed a $104 million Series D round alongside a merger with Angel Pond Holdings, a SPAC. The company initially forecasted its equity valuation after the merger to be $973.6 million, with an enterprise value of $672.1 million — however, the SPAC deal ended up removing $263 million from the deal’s value.
As a result, after its first day as a public company, MariaDB’s stock tanked sharply, and currently trades at $0.36 per share, somewhat better than its 52-week low of $0.16 per share on February 2.
MariaDB’s financial performance failed to live up to its investors’ expectations, reporting revenue of $53.1 million and ARR of $50.3 million in 2023, falling behind its projected growth curve. However, in the first quarter of FY 2024, the company showed signs of improvement with an increase in revenue and a reduction in its operating loss and net loss.
Despite these improvements, MariaDB couldn’t go much longer without raising more money, leading to the issuance of a “senior secured promissory note” to RP Ventures worth $26.5 million in October. As a result, K1 Investment Management’s offer to purchase MariaDB is an interesting proposition, given the limitations set on the company by the RP note.
The case of MariaDB serves as a reminder of the exuberance that led to expensive and poorly timed SPAC deals, and underscores the unpredictable nature of software businesses, cautioning investors against overly optimistic future growth assumptions.
