What is an SPV?
A Special Purpose Vehicle (SPV) enables multiple investors to pool their funds to make a collective investment in a company. You can think of SPVs like a pie: each investor can buy a slice without putting up the full cost, but founders can sell the whole pie at once, receiving a single lump sum rather than managing multiple transactions. SPVs simplify fundraising by consolidating many investors into one entity, resulting in just one line item on the company’s cap table. This streamlined process allows founders to accept smaller minimum investments (as low as $1,000) compared to traditional direct investments.
How SPVs Work
SPVs are a separate legal entity created for the specific purpose of pooling the investor capital. Cherub structured these entities as LLCs. Once the SPV completes its fundraising, it makes a single investment in the target company with a single wire transfer. On the company’s cap table, the SPV is listed as one entry, making cap table management simpler.
Benefits of Using SPVs
Simplified Cap Table: Multiple investors can be consolidated into one entity on your cap table, which simplifies shareholder management and let's you deal with one single investor rather than numerous individual investors.
Efficient Fundraise: The lead investor takes on the responsibility of managing the group of investors, which means less administrative work for fundraisers, making the process smoother and faster
Increased Investment Potential: SPVs bring together a diverse group of investors who might not have had the capacity to individually invest a larger amount, increasing the pie of potential investors.
Strategic Investors: The lower minimum investment amount of SPVs can attract a ranger of investors with various expertise and networks, which can provide not just capital to founders but also valuable advice, mentorship, and connections.
Cherub offers founders everything they need to run their own SPV. here.