Instruments
Special purpose vehicle
Also called SPV, Deal-by-deal vehicle
A single-purpose company or fund formed to pool several investors' money into one line on a startup's cap table, usually run by a lead who charges a fee, carry, or both.
In plain English
An SPV solves a problem for the founder rather than for you. A company raising $500k from twenty angels does not want twenty shareholders, twenty signature pages and twenty people with information rights. An SPV collects those twenty into one legal entity that appears once on the cap table and is managed by one person.
You are therefore not investing in the startup. You are investing in a vehicle that invests in the startup, and your rights run against the vehicle. Whether you can vote, whether you receive information, whether you can exit, and what happens if the lead disappears are all questions about the SPV's constitution — a document that many angels never open.
The economics are explicit and worth doing arithmetic on. A typical SPV charges a setup fee, sometimes an annual admin fee, and carried interest of 10% to 20% on profits. On a small cheque held for eight years, admin fees compound into a meaningful haircut, and the carry applies to your gain, not the lead's.
The structure varies by jurisdiction: a Delaware LLC or series LLC in the US, a Cayman or BVI vehicle for cross-border deals, a Luxembourg or Dutch entity in Europe, a Singapore private limited company in much of Asia-Pacific.
What it means for your cheque
The SPV is often the only way a small cheque reaches a good deal at all, and that access is genuinely worth paying for. A $10,000 allocation in a competitive round does not exist outside a vehicle. Judge the fee against the alternative of not being in the deal, not against a theoretical zero.
What deserves scrutiny is the lead. You are underwriting their judgement, their diligence and their willingness to stay engaged for a decade. Ask what they invested personally, on the same terms, in the same vehicle — a lead taking carry without capital at risk is selling access, not conviction.
Do the arithmetic
What 20% carry and a 2% admin fee cost on a $10,000 allocation
You commit $10,000 to an SPV. There is a $250 setup fee, a 2% annual admin charge on committed capital, and 20% carried interest. The underlying investment returns 5× gross after eight years.
| Committed capital | $10,000 |
|---|---|
| Setup fee | $250 |
| Admin fees over 8 years at 2% | $1,600 |
| Gross proceeds at 5× | $50,000 |
| Gross profit | $40,000 |
| Carried interest at 20% | $8,000 |
| Net to you | $50,000 − $8,000 − $1,850 = $40,150 |
| Effective multiple | 4.0× rather than 5.0× |
A fifth of the upside went to the lead and the administrator. That is the market rate for access, and it is a perfectly reasonable trade — but you should know you are making it.
At the table
What to negotiate
- Ask whether carry is charged on the whole gain or only above a hurdle. Deal-by-deal SPVs rarely have hurdles; ask anyway.
- Establish who pays for the fees — some SPVs deduct from committed capital, meaning less than your full cheque reaches the company.
- Find out how the vehicle handles follow-on rounds. If it cannot participate, your pro-rata rights are effectively worthless.
- Check what happens on an exit involving stock rather than cash, and whether the vehicle can distribute shares in kind.
- Ask what the lead personally invested in this vehicle, on what terms.
Around the world
How this differs by market
Delaware series LLCs are the standard, and platforms have made them close to commodity. Check whether you must be an accredited investor.
LATAMFrequently Cayman or Delaware vehicles even for local companies, which raises questions about your own tax reporting.
EULuxembourg and Dutch structures are common for larger syndicates; UK syndicates often use a nominee arrangement instead, which preserves SEIS/EIS relief where an SPV would not.
APACSingapore vehicles dominate for South-East Asian deals. Local rules on how many investors a private vehicle may have can constrain syndicate size.
Special purpose vehicle: common questions
Do I appear on the startup's cap table if I invest through an SPV?
What happens to my SPV interest if the lead stops paying attention?
Is carry charged even if the deal loses money?
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