Angel investors can use Special Purpose Vehicles (SPVs) to make Venture Capital investments by pooling capital from multiple investors and creating a separate legal entity to make the investment. Here’s how it works:
1. Pooling Capital
The angel investor can bring together a group of investors who are interested in investing in a particular venture. The capital raised from the investors is pooled together to form the SPV.
2. Forming an SPV
An SPV is a separate legal entity that is created specifically for making the investment. The SPV is typically a Pte Ltd. The investors in the SPV become shareholders, and the SPV Directors or Syndicate Lead has the ability to charge an ‘Opportunity Fee’ or ‘Deal Fee’ & a Carried Interest or Carry shares.
3. Making the Investment
The Syndicate Lead or SPV Director will negotiate the investment terms with the startup founder and make the investment on behalf of the SPV. The SPV will own the equity stake in the startup, and the investors will own their share of the SPV.
4. Monitoring the Investment
The Syndicate Lead is responsible for coordinating and monitoring the startup’s progress, and communicating with the investors. The investors have limited liability in the investment, and any returns or losses are shared based on their proportionate share of the SPV.
Conclusion
Using an SPV can be a convenient way for Angel Investors to pool their capital and make Venture Capital investments without having to form a traditional fund. It can also provide a way to limit liability and simplify the investment process for individual investors.
Ready to set up a SPV?
At Auptimate, we make it easy for Angel Investors to design, launch and operate market-leading SPVs online for a fixed, low price. If you’re ready to start your next SPV, hit the “Launch” button at the top of this page. Or get in touch with us at info@auptimate.com and one of our experts will be more than happy to help.