Receiving investment through an SPV: key takeaways from webinar

Navigating the landscape of early-stage investment can be complex, especially when it comes to structuring deals and managing multiple investors. To shed light on this topic, Dealum hosted a webinar on receiving investment through a Special Purpose Vehicle (SPV). The session featured insights from Aleksander, Head of Accelerator at Dealum, and Sebastian from Uniborn, a platform facilitating SPV creation. 

Understanding SPVs

A Special Purpose Vehicle (SPV) is a legal entity, typically a limited liability company, created to pool investments from multiple investors into one entity. This approach streamlines the investment process, simplifies cap table management, and can provide significant benefits to both founders and investors.

Advantages of SPVs

For Founders:

1. Simplified cap table: SPVs consolidate multiple investors into a single entry on the cap table, making future fundraising and management simpler.
2. Efficient fundraising: By pooling smaller investments into one vehicle, SPVs enable founders to raise significant sums without negotiating individually with many small investors.
3. Reduced bureaucracy: SPVs centralize the documentation and administrative tasks, reducing the time and effort required from founders.

For Investors:

1. Lower entry barriers: SPVs allow smaller investors to participate in deals they might otherwise be excluded from due to minimum ticket sizes.
2. Diversified risk: By pooling resources, investors can diversify their risk across multiple ventures.
3. Simplified management: Lead investors handle the administrative aspects, reducing the burden on individual investors.

Setting Up an SPV

Sebastian from Uniborn detailed the setup process for SPVs, which involves:

1. Onboarding the lead investor: The lead investor sets up the terms of the deal and shares the opportunity with other investors.
2. Investor commitments: Potential investors commit their funds to the SPV.
3. Legal formation: The SPV is legally registered, and a bank account is opened.
4. Compliance checks: Know Your Customer (KYC) and Anti-Money Laundering (AML) checks are conducted.
5. Fund collection and transfer: Funds are collected from investors and transferred to the startup’s account.

This entire process can be streamlined and expedited using platforms like Uniborn, significantly reducing the time and administrative burden involved.

Managing SPVs post-investment

After the initial setup and investment, SPVs require ongoing management, which includes annual tax filings and maintaining compliance with local regulations. Uniborn offers services to handle these tasks, ensuring that both founders and investors can focus on their core activities without being bogged down by administrative duties.

Considerations for using SPVs

While SPVs offer numerous benefits, they are not always the best solution for every investment scenario. Factors to consider include:

1. Number of investors: SPVs are particularly useful when there are multiple small investors.
2. Geographic diversity: SPVs can simplify investments from multiple jurisdictions.
3. Investment size: For larger individual investments, direct equity stakes might be more appropriate.

Impact on future fundraising

Aleksander emphasized that having an SPV on the cap table generally does not negatively impact future fundraising. However, transparency and proper documentation are crucial to ensure that future investors can easily understand the structure and beneficiaries of the SPV.

Potential drawbacks to consider

1. Reduced direct control: Individual investors in an SPV have less direct control over their investment.
2. Potential for reduced engagement: Investors in an SPV may feel less connected to the startup, potentially reducing their willingness to offer support or introductions.
3. Additional layer of complexity: For future investors, understanding the structure behind an SPV can add an extra step in due diligence processes.

For those interested in learning more, the full webinar video is available below, providing deeper insights and practical advice on leveraging SPVs for early-stage investments.