A special purpose vehicle (SPV) is a legally separate entity, typically an LLC, created for one investment purpose. In venture investing, it pools multiple investors into one entity that invests in a start-up. section 12.2.2
An SPV changes how an angel syndicate organizes ownership and responsibility:
- The SPV appears as the single investor on the start-up’s cap table, simplifying legal and administrative processes. section 12.2.2
- The lead investor negotiates the deal, forms the SPV, provides capital, and manages associated formalities as an agent for the group. section 12.2.2
- Participating investors are limited partners within the SPV; they hold a stake in the SPV rather than direct equity in the start-up. section 12.2.2
Pooling an angel investment
An angel negotiates a start-up investment requiring more capital than the angel will provide alone. The angel joins with other angels, creates an SPV, and uses that entity to invest jointly. The start-up records the SPV—not every participating investor—on its cap table. section 12.2.2
Figure 12.2 A lead investor’s job is to represent all investors when forming an SVP that will be registered on a start-up’s cap table.
A figure maps the lead investor’s role as representative of the pooled investors and shows the SPV’s placement on the start-up’s cap table. section 12.2.2
