In today’s private markets, syndicate leads face a growing array of structures when backing startups. One strategic decision stands out: direct vs secondary SPVs. Understanding how secondary special purpose vehicles work can be the difference between unlocking high-value deals and missing the window entirely.
Let’s break down the differences, opportunities, and legal frameworks surrounding these two powerful vehicles and help you decide which works best for your next deal.
What Is a Secondary SPV?
A secondary SPV is a special purpose vehicle that buys shares from existing shareholders—like employees, angels, or funds—instead of buying newly issued equity from the company itself. In contrast, direct SPVs invest in primary rounds, injecting fresh capital into the startup.
Common sellers include:
- Early employees seeking liquidity after vesting
- Founders looking to diversify holdings
- Angel investors and early-stage funds offloading appreciated shares
- Growth-stage funds managing concentrated portfolios
Key Differences Between Direct and Secondary SPVs
|
Feature |
Direct SPV |
Secondary SPV |
|
Source of Shares |
From the company directly |
From existing shareholders |
|
Purpose |
Capital for growth |
Liquidity for past investors |
|
Timing |
During funding rounds |
Outside primary fundraising |
|
Structure |
Simple, one SPV |
Often layered SPV setup |
|
Access |
Limited in late-stage deals |
More flexible access to high-demand startups |
In a nutshell, direct SPVs support growth-stage funding, while secondary SPVs enable strategic entry and liquidity events.
How Secondary SPVs Work
In a typical secondary SPV, a syndicate lead sets up a new vehicle to pool capital and purchase equity from existing holders. These may include:
- Employee common stock: Requires exercised options and issuer consent; usually priced at a discount due to lower rank in the capital stack.
- Founder common stock: Sensitive deals that need board approval and strong narrative control.
- Preferred stock from angels or funds: Often more flexible and clean in terms of documentation.
- Large fund positions: Might require multi-SPV layering to handle ticket size and investor tracking
Legal, Compliance, and Tax Considerations
Secondary SPVs must navigate:
- Transfer restrictions and ROFR (Right of First Refusal) clauses
- Securities law exemptions, restrictive legends, or disclosure obligations
- Cross-border tax treatment and reporting requirements
- Tax filing complexity: Especially in multi-SPV setups with pass-through returns
Why Secondary SPVs Matter in 2025
Secondary SPVs are reshaping how capital flows into the most in-demand startups globally. In 2025, these vehicles are no longer just tools for opportunistic liquidity; they’ve become strategic assets for syndicate leads and GPs navigating tighter markets and longer exit timelines.
Just last year, the OpenAI Startup Fund raised approximately $114.2 million across five distinct SPVs, underscoring a deliberate and targeted use of SPVs to access breakout opportunities.
On Forge Global, secondary SPVs made up just 7% of private share trades in 2018—but by early 2025, they account for a staggering 64%. It’s a structural shift in how access to private tech companies is being unlocked.
Rebecca Szkutak, author at TechCrunch noted, “VCs are increasingly buying shares of late‑stage startups on the secondary market as they try to get pieces of the hottest ones — especially AI companies.”
Looking to unlock late-stage deals without waiting for a primary round? Schedule a call and Auptimate will help you set up a secondary SPV—fully compliant, digital-first, and globally scalable.
When to Use a Direct vs Secondary SPV
Use Direct SPVs When:
-
Investing in a company’s active funding round (e.g., Series A)
-
Seeking simplicity and direct issuer interaction
-
No ROFR or shareholder transfer hurdles exist
Use Secondary SPVs When:
-
Targeting companies not currently fundraising
-
Existing shares are available from early investors or employees
-
You want faster DPI and access to mature cap tables
-
Navigating around fundraising round limits
Final Thoughts
Secondary SPVs are not just an investment strategy—they’re a smart, timely response to changing capital markets. For syndicate leads, they provide flexibility, faster potential returns, and access to high-quality equity positions at favorable terms. Knowing when to use direct vs secondary SPVs is now essential for modern fund managers.
Ready to deploy capital faster and smarter? Book a call with us or reach out at info@auptimate.com, and one of our experts will be more than happy to help.
