The latest SPAC deal to know about: Valo Health to combine with Khosla Ventures Acquisition

Khosla Ventures Acquisition Co. (NASDAQ: KVSA), a special purpose acquisition vehicle (SPAC), and Valo Health LLC, a technology startup company, have entered into a definitive merger agreement to combine and take Valo Health public.

Valo is a Boston-headquartered technology company that aims to accelerate the drug discovery and development process using its Opal Computational Platform that makes use of human-centric data and artificial intelligence (AI) powered computation. Valo currently has two clinical-stage assets and 15 prioritized pre-clinical assets across cardiovascular metabolic renal, neurodegeneration and oncology fields.

The SPAC is sponsored by affiliates of Khosla Ventures, LLC.  Khosla Ventures manages a series of venture capital funds that make early-stage venture capital investments and brings its rich experience in growing early stage companies to Valo. Khosla Ventures has over $14 billion dollars of assets under management.

Transaction details

The deal values the combined entity at approximately $2.8 billion and the transaction is expected to be closed in the third quarter of 2021. 

The combined company will have a pro forma cash balance of around $750 million including existing Valo cash, the gross private investment in public equity (PIPE) proceeds and the net cash held in the SPAC’s trust.

The fully committed PIPE proceeds of $168.5 million will come from some leading institutional investors including Khosla Ventures, NG MGG Strategic, Caz Investments, Koch Disruptive Technologies, Flagship Pioneering, Public Sector Pension Investment Board (PSP), Invus, State of Michigan Retirement Systems, HBM Healthcare Investments and Longevity Vision Fund.

According to the press release announcing the deal, net proceeds are expected to be used “to accelerate the development of Valo’s proprietary technology platform and further scale its therapeutic and data strategy programs.”

Management’s take on the deal

On the announcement of the merger agreement, David Berry, CEO of Valo, said:

“We see this partnership with KVAC as a unique and fantastic opportunity to bring the future forward to transform and accelerate the discovery and development of life-changing therapeutics. Khosla’s reputation is second to none for building and investing in transformational technology-enabled businesses, and we believe this partnership helps realize our vision – of accelerating the creation of life changing drugs.”

Samir Kaul, Founding Partner and Managing Director at Khosla Ventures, said:

“By bringing powerful computational approaches and human data across the lifecycle of drug discovery and development – aiming to reduce time, cost and risk to programs – Valo offers to potentially change the value curve for a trillion-dollar market segment. Valo fits squarely into the companies we are excited to back and bring our experience to.”