One of the biggest stars in this white-hot corner of Wall Street, Betsy Cohen has Launched nine SPACs and Is still going.
1) You chose to pursue a Bachelor in Philosophy and Doctor in Law but why did you choose such a bachelor when you pursued a career in Banking and Finance?
Well, I will tell you a secret. I started as an undergraduate with major in Mathematics, and somewhere around my second year, I decided that I was not going to be the next Einstein. Mathematics was so important to me, but I thought I had to do something else where I could perhaps accomplish more. For me philosophy, law, and the kind of business that I do are all the same thing: they are problem-solving, they think about paradigms, solutions, and ways in which to approach an issue differently. It is all about thinking and I would say that whether it is Wittgenstein or Marx does not make much difference, whether you are solving the issue of a company that has a need to access capital, or whether you are a judge. All of these are problem-solving exercises and this is how I approach them. I always say that my greatest pleasure is in making something out of nothing and that is what I think I have been doing my whole life.
2) So, you would say that mathematics is at the core of any problem solving, at the core of any business you pursue?
Yes. Numbers talk to me, sometimes they say good things, sometimes they do not. I was able to find a happy home in philosophy because there can be a mathematical core. If I were a little bit younger, I would probably have gone in engineering or computer science, so one of those things where numbers would have continued in a conversation with me. Each time I am in conversation with a company that explains what they are doing, where they are, how do I need to take the next step, for me it is an exercise in finding the right solution for them.
3) Can you tell us about your professional background and more specifically how did you switch from founding a shipping business in Asia and a leasing company in Brazil to representing financial institutions and industry clients?
When I was a law student, we were asked by law firms to come during the second and third year of law studying to spend a summer which was like an elongated interview. At the end of the summer, the senior partner was not yet ready for a woman to be a professional colleague. I disagreed with this mentality and walked out of the office saying to myself that I would never work for anyone else and would only work for myself. That is why each opportunity I have taken along the path has been one in which I could lead the way.
4) Regarding your experience in Commercial and Investment Banking, are there any learnings and takeaways that you took from your career in IB and that are still helping you today?
The key takeaway is while working in such competitive and fast-paced environments, it is important to always be alarmed and focused. I always view each situation in a pessimistic way, so I try to work back from that concern to what I think is a solution that will eliminate most of the worries. The market is continuously changing, and so the appetite of investors, or if you are a commercial banker, the rules and regulations. Success is never known until the end; you really want to go in-depth to figure out what could go wrong and work backwards from there. In terms of going forward, I have always been very curious, energetic and hardworking, a key combination.
5) Being one of the most experienced professionals in the sector, why do you think SPAC’s popularity has increased so much in the last years, even though they exist from much longer? Where do you think this trend is going?
I do not cover all the sectors, so talking about what I know in Fintech, several things come together. It’s not one element that makes SPACs popular, although they look easy and people think they can understand them with great ease, but they are wrong because they are very tricky and hard. Particularly in the technology area, whether it is Fintech or Biotech, it does not make a difference. A key factor in the success of a SPAC is the acceptance of consumers, businesses and science alongside the value the technology brings to society. Another is the growth in the knowledge that has been accumulated for technology platforms. whether it is AI or something else that makes these platforms more effective, efficient and far-reaching than they ever were before. The third one is the existence of volume for companies and institutions that could not otherwise be handled by only human labour where you need to have some method of efficiency that will handle the increased volume. Synthesizing these factors created the opportunity for companies that had ideas to solve these problems to develop their platforms and to grow very quickly because there was an actual real need with real users. Those growth companies are the ones appropriate for a SPAC. The SPAC can get more capital, can do things quicker, and lastly, can structure a transaction in a vastly different way than an IPO.
6) So, are you saying that with the increase of artificial intelligence and technology SPAC will always be more efficient and more used?
It will remain as one of the pathways to the public markets, I’m not saying it’s going to take over but it will be an available pathway alongside what we call, at least in the United States, direct listings of stocks or an IPO. Each company has a different need, a different profile and can choose a different path.
7) Following the surge in SPACs and the decrease in IPOs in the last year, from the perspective of a former banker, how do you think the top Investment Banks and Underwriters will react?
They’re being more cautious now. In 2018 it appeared as if every SPAC that was brought to market would be successful, that’s proven not to be the case so of course there has to be more caution, unfortunately you know, we learn in the years…
8) Among all the incredible companies that were taken public through your SPACs, could you tell us something more about the eToro deal?
eToro is a terrific company, it is the leading, not only trading company ex-US but it is the leading social network trading company and that’s a very different approach to trading. You can contrast it with Robinhood or with Coinbase, which is narrower in terms of its asset choice. eToro was begun to teach new investors how to take the tools of investment and use them wisely, almost 14 years ago. It took them a substantial amount of time to develop their customer base, to determine what their message should be and to build their technology stack, which is fantastic. One of the elements of their technology stack is part of the educational profile of the company, they have so-called popular investors, who can identify within the system because all portfolios are open and an individual investor can identify a portion of their portfolio to trade just as the expert trades. It is both a teaching and learning device, and it has become incredibly popular. It is called copy trading, it has been patented, and it has underneath it a hugely developed native technology platform that allows E-toro to execute simultaneous trades and then distribute them to the individual investors. Furthermore, it has a terrific website with very rich data about every single investor and presents each investor opportunities based on this data. Based on client preferences, E-Toro also created certain products; for example, they created an equivalent of the ETF based on the clients’ interest in climate control. A significant portion of their success comes from learning from their investors and teaching them. It remains to be seen if they can transfer their success into the U.S., the largest market for retail trading since they now only operate ex-U.S.
9) From recent news, there is a lot of talk regarding SPAC regulation. Do you see in the near future a change in the law that could damage SPAC’s potential?
I see regulation that will narrow the number and the kinds of SPACs that are done. Current regulation is very healthy. However, suppose companies can share with investors a forward-looking projection. In that case, I believe these projections must be based on something, and we see several companies that have been introduced in the SPAC market that have no way of projecting their revenues because they have not had any yet. Therefore, I think these kinds of deals will not get done in SPACs but probably in seed rounds, and that this is going to be a positive thing that will benefit the industry as a whole. Remember, however, that over-regulation is not a good thing and can stand in the way of innovation, so I wouldn’t like to see that.
I also think that because of this, knowledgeable sponsors will be in higher demand than novice ones, and I hope that, of course, we’ll stay in this group as we are currently working on our 12th SPAC, so we definitely know how to do it.
10) In a recent interview, you stated that you always try and pursue what is unpopular until it becomes popular. Building on this, is there something, in particular, that isn’t widespread today that you see yourself pursuing soon because you believe it has great potential?
I wouldn’t tell you if I knew. Jokes aside, I think that SPACs have still a way to go and that they’ll change, making them less popular, and I consider that a benefit.
11) Regarding your experience in Commercial Banking and with Fintech Acquisition Corporation, what is the main advice that you would give to young people interested in a career in Finance?
It’s a very personal question; it depends on your risk tolerance. For example, there are secure jobs, and then there are riskier ones from which you learn a lot more but that don’t provide you with financial security. So, you have to decide how much you want to risk at this point in your career, and, personally, I would push to do the most outrageous thing that I could. I, also, firmly believe that doing only Finance limits you, as there are many areas of knowledge which make you think much more creatively about Finance and differentiate you from colleagues who only know about Finance. I love to learn a lot of different things: each story you hear creates the fire for your curiosity. New disciplines give you different ways of seeing old problems, opening doors to newer solutions.
12) “What do you look for during your SPAC selection process?”
Unlike an IPO, during a SPAC you create a partnership, and you don’t just take out a company. You must consider many possible changes happening soon: this said, we always look for someone we can trust, but also for innovation and, most importantly, for good leadership. Without good leadership you can’t get a company to scale in the right way but remember that companies still need to have a good, tested product, a large addressable market and the financial outlook still has to be as good as possible. You can’t have a good company with just good leadership, but you can also have a terrible company if you don’t have one.
13) “What is, in your opinion, the main hallmark of leadership?”
It must be the way in which a hard situation is managed. We have seen it during COVID and this extremely tough year: businesses wiggle a little bit during their journey and those difficulties experienced are as important as the moments of success of the company.
14) “What are the key negotiation issues between a SPAC and the company?”
The main issues are usually technical and related to the structure and super-structure of the deal: lots of negotiation goes on during the process and it all depends on what the parts want after the SPAC and different views of the relationship installed
Bocconi Students Fintech Society