SPV

A Special Purpose Vehicle (SPV) is a single-purpose legal entity created to pool multiple investors into a single investment in a specific company. The SPV is the entity on the cap table rather than each individual investor, used to aggregate angel investors, syndicate participants, or smaller institutional checks into a single line on the cap table. Popularized by AngelList (which built infrastructure for SPV creation and management), it is now widely used across angel syndicates, scout programs, and small institutional vehicles. It is the legal structure that makes syndicated investments practical at scale.

The mechanics:

Creation: lead investor (often a "syndicate lead") creates the SPV as an LLC.

Investor commitments: individual investors commit specific dollar amounts to the SPV.

Investment in company: SPV invests aggregate capital in the target company; receives shares.

Cap table position: SPV is the entity on the cap table, not each investor.

Distributions: when company exits, SPV receives proceeds, distributes pro-rata to LPs minus fees and carry.

Fees and carry: SPV lead typically takes 0-2% setup fee and 10-20% carry on profits.

Why SPVs matter:

Cap-table efficiency: 50 angels pooled into one SPV = one cap-table line, not 50.

Lower minimums for individual investors: SPV allows $5K-$50K individual checks pooled into meaningful investment.

Streamlined deal mechanics: company deals with one entity, not 50 separate investors.

Enables syndicate scaling: makes it practical for syndicate leads to deploy capital across many investments.

Common SPV use cases:

AngelList syndicates: dominant platform for SPV creation. Syndicate leads source deals, individual angels invest via SPV.

Scout programs: VCs use SPVs for scout investments without full fund participation.

Strategic / employee SPVs: company employees pooling into an SPV for secondary purchases.

Family office aggregation: multiple family offices pooling into SPV for specific deal.

Considerations:

Fees and carry: SPV economics include fees that reduce net returns to individual investors.

Decision authority: typically lies with SPV lead, not individual LPs.

Reporting: LPs receive SPV-level reporting; less direct access to portfolio company.

Exit mechanics: SPV distributes proceeds; individual investors don't have direct claim on company.

What founders get wrong: Not understanding SPV economics and authority structure when taking syndicate investments. The right discipline: understand who the lead is, what their economics are, how decisions get made for the SPV.

Related: Syndicate · Angel Investor · Venture Capital Fund · Cap Table · Subscription Agreement

FAQ

What is an SPV?
A Special Purpose Vehicle: a single-purpose legal entity (typically LLC) created to pool multiple investors into a single investment in a specific company. The SPV is on the cap table rather than each individual investor.

Why use SPVs?
Cap-table efficiency (50 angels = 1 line, not 50), lower minimums for individual investors (pool small checks into meaningful investment), streamlined deal mechanics (one entity to deal with), and enables syndicate scaling.

What are typical SPV economics?
SPV lead typically takes 0-2% setup fee plus 10-20% carry on profits. Individual investors net somewhat less than direct investment would yield. AngelList syndicate fees are well-documented and standardized.