Special Purpose Vehicles or SPVs are the use of a legal entity to gather investors into a startup investment, which takes one place on the cap table.

This works well when there are many investors with small-dollar investments.

SPVs bring many advantages to the founder, the VC fund, and the angel group leader.

Here’s a list of advantages:

For the VC fund, the SPV allows for the investment into a deal outside of its fund.

This works well for follow-on rounds, in which case the VC does not want to add more of their fund into it.

For example, the fund can only invest in seed deals, but a portfolio company is now at a later stage and needs more funding.

This also works for the angel group that wants to bring investors into the deal with check sizes below the minimum amount.

Angels often use the SPV to create syndicates for specific deals that fall outside the investment thesis of the group.

Founders find SPVs useful to keep their cap table clean of numerous small investors.

Founders often use SPVs to bring in additional investors after other groups have finalized their investment.

Consider using an SPV in your fundraise.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.