From the September 2006 issue of Entrepreneur

It's no secret that taking your company public has become increasingly difficult in recent years, but blank check companies, also called Special Purpose Acquisition Companies, may crack open the IPO window for growing companies once again.

A SPAC is a newly formed, publicly held company with no operations and no revenue. It is created for the sole purpose of acquiring an operating company. Most of the time, the acquired company receives both capital and publicly traded stock.

"It takes less time to create a blank check shell than to take a company public from scratch," says Perrie M. Weiner, partner and securities attorney at DLA Piper Rudnick Gray Cary in Los Angeles. "It's a perfectly legitimate strategy."

SPACs are typically created by either a management team that will ultimately run the business or an investment group like a hedge fund that will provide liquidity for investments. "This enables hedge funds to invest in private companies," says Weiner.

In either case, SPACs are the perfect vehicle for small companies that have big potential. Etrials Worldwide, a Morrisville, North Carolina, company that provides software and services to the pharmaceutical industry, completed a merger with a SPAC in February. Etrials founder and CEO John Cline says it was a perfect fit for the 7-year-old company. "We needed a stronger balance sheet, transparent financials and capital," says Cline, 49. The SPAC transaction provided all three.

Cline says his search for growth capital led him to discussions with two new blank check companies. Each was hungry for an acquisition in the technology space, and Etrials was an excellent target.

Within just six months of being introduced to a SPAC, Etrials had completed the deal. The $13 million company is now listed on the Nasdaq as ETWC.

Cline says that when Etrials was privately held, prospective customers were concerned about the company's financial stability. These days, Etrials boasts $20 million in cash and is planning to continue growing through acquisition.