SPVs or Special Purpose Vehicles are legal structures allowing to raise funds faster, providing better control to fund Organizer, empowering angel investors to contribute in smaller chunks, and best of all – generating returns faster.
- SPVs are legal entities used for structuring and administering investment
- A group of investors comes together to support a single Startup
- SPV Hub can simplify the private investment for you through SPVs
What is an SPV?
An SPV, also known as Syndicate is a legal framework or an entity allowing numerous parties to accumulate their money in one place to deploy it as a single entity and achieve a common goal. SPVs are legal entities created with a specific purpose which can be the investment in real estate or financing of a creative project or anything not against law. In Startup Ecosystem, the special purpose is to pool money from a group of investors in one place and to deploy the capital in a single chosen Startup.
Simplifying the terminology for you, think of an SPV as a big bowl. You being an Angel Investor or a Fund Organizer have networked with fellow Angel Investors who would like to invest in a potential Startup. An organizer invites investors to come and fill the bowl with money. A good number of Investors commit to financing, wire their contribution, sign the deal documents and that’s all. You have created a bowl full of money and this bowl represents your SPV Fund. The last step is to give a nice fat cheque (the big bowl of money) to the pre-determined Startup in exchange for equity.
Once the investment is made, the SPV secures its place in the capitalization table of the Startup. The SPV receives equity and further distributes it based on respective contributions. Your dedicated SPV expert at SPV Hub takes complete care of your SPV for its complete lifecycle. The maintenance service provided covers the distribution of wealth, preparation of financials, form D and blue sky filings, and every single post-close activity. If you want to deep into how SPVs are created, then click here. We have drafted the complete procedure for you.
Creating and administering an SPV is not as simple as we make it look. It involves Law & Compliance, SEC (Security and Exchange Commission), Fund Administration, Taxation, State-specific regulations, and much more. Having a reliable partner for SPV management services can make the private investment marketplace a delightful space for you.
An Investor has a lot on his plate. There are so many important decisions to be made and due diligence to be done. Deciding on the structure of the fund is another important decision. The complexity of an SPV depends on its structure. SPV specialists at SPV Hub make sure to keep it simple and secure by offering the finest of all – Delaware Series LLC.
Advantages of creating a Special Purpose Vehicle
Till now, it must be clear that an SPV is a form of a fund. Unlike traditional VC Funds, it doesn’t have a portfolio of the company. Rather, it invests in a single company and that is the special purpose of creating an SPV. Investing in a Startup is an interesting yet dangerous sport. Everyone wants to hold shares of the future Unicorn company.
As an individual Angel Investor, competing with the Sequoia fundraising Series singlehandedly is not an option. The best possibility is to ascertain the potential of a Startup at an early stage and make an investment way before the actual thunder, the time when everyone gets aware of the new unicorn. To have a decent share of the would-be Google or Facebook of the Startup world, one must invest early and fast. Or you can pool money with fellow angel investors. In both scenarios, you need a deal-by-deal investment vehicle – a syndicate.
Special Purpose Vehicles have gained optimum importance in the Startup ecosystem in the past few years. And there are multiple reasons for that. An SPV brings benefits on board for every involved party.
Advantages for Startups
What do Startups need the most while raising funds? Like any business, even Startups prefer less administration work. While raising capital, instead of receiving funds from 100 different angel investors, if a big amount is received through SPV, the administration tasks can be made simple.
When investors put their funds in an SPV, they become a member and receive the equity in proportion to their contribution. Say, around 50 members get on board and invest in a different ratio. At the time of deployment of funds, a single entry will be made, instead of 50 different entries on behalf of all the investors on board through SPV. This results in fewer investors in the Cap table of the Startup.
Advantages for Investors
The rule of the Startup Investing game is simple – Put your money on best, and you win. An SPV empowers Angel Investors to gain an access to high-growth companies. Not only this, but by dispensing a big chunk of money the Angel Investors can secure a larger share and better terms of investment. The founder might not take a $5,000 cheque that seriously but if 50 investors get on board making it a $250,000 cheque, the SPV is definitely going to have an upper hand.
Unlike a VC Fund, while investing in a syndicate the members on board are well-aware of the Startup the SPV is going to invest in. This provides power to make the decision and access to the investment opportunity. Direct investments in a Startup can have higher minimums. But, investing through an SPV, the minimums can be as low as $1,000 or as specified by the fund manager.
SPV Hub for SPV Fund Management
SPV Hub is an online platform created with the sole motive of making fundraising in the private investment marketplace a smoother ride. We have integrated every necessary element to make an SPV simple, secure and dependable for our customers. The platform allows fund managers to have better control and also empowers members on board to keep a tab of their investments.
Coming to the SPV management services – we do all the work from SPV creation to document management and post-close activities.
Being a subsidiary company of Startup Steroid – the only company in Startup Ecosystem today providing every single service needed to build a stronger ecosystem, SPV Hub provides aided benefits of networking.
Book a demo here to learn more about our platform and SPV investment. Don’t worry, we won’t charge for that.
I’m the CEO of SPV Hub. Being a founder/ co-founder (of multiple businesses) and investor (in multiple startups) myself, I experienced the challenges that an investor and a founder face while raising capital and handling multiple deals. So, we created SPVHub to simplify everything related to SPV creation and management.
I am also the co-founder of Startup Steroid.
