Anatomy of an SPV 

by Chris Tabb in

The best way to launch an investment company is to properly structure and manage the vehicles used to invest in private assets. This applies to private assets of any kind, including start-ups, real estate projects and secondary opportunities, farmland or art, films, opportunity areas, or nearly any other private asset that has the potential to create value.

Syndicately is the most trusted provider of SPVs. We transform how venture investment vehicles structure and are managed. It's now simpler, quicker, and cheaper to create and manage an SPV today than ever before.

An appropriate description of an SPV is "special purpose vehicle". This is an investment vehicle that is created for a specific purpose. An SPV is an investment vehicle that allows the pooling and investing of capital to purchase a private asset.

Lifecycle Management

Capital-raising SPVs include five main service categories, or areas of expertise, that encompass the entire lifecycle of an entity from start-up through shut-down.

  • Legal
  • Tax
  • Compliance
  • Administration
  • Accounting

This series will explore all five areas of expertise in detail and how they relate to the 17 stages of creating and managing capital-raising SPVs throughout their lifecycle. Each stage will be given its own page. Instead of ranking the steps in order of importance or how much time each takes, the series will be presented chronologically.

The Structure of Choice

The entrepreneurial venture economy has witnessed a rise in investors who are quick to act. These investors include "super angels", leaders with entrepreneurial experience, who are looking to invest in the next generation products and services without being tethered to minutiae or suffering delays.

This demand for speed quickly grew rapidly in the entrepreneurial investment ecosystem. There is a growing need for flexible capital formation services that are not burdened by the administrative and structural requirements associated with venture fund formation.

These developments have boosted the demand for capital-raising SPVs.

Enabling Large-Scale SPVs

Investors have unique advantages when it comes to capital-raising SPVs. Some of the most prominent include deal-by–deal carry and the empowerment of high-volume investment syndicates.

Syndicately's clients see a capital-raising SPV as more than just a legal structure. It is the heart of any quick deal. The Syndicately platform was created to provide everything an SPV organizer needs -- including all legal, tax and compliance and banking, as well as accounting -- to create, close, and manage an investment vehicle.

GPs pay one flat fee for a Syndicately SPV (at closing). While GPs can participate in strategic decisions, the Syndicately Team manages the entire entity's life cycle, including set-up and shutting down. This allows GPs to concentrate on their highest-value expertise, which is finding and supporting quality deals.

SPV Setup and management

It is easy to compare the process of building a house with setting up and managing a capital raising SPV. Both cases have their risks, structuring decisions, administrative costs and requirements, as well as governing rules and regulations.

Risk – Potential homebuyers consider factors such as neighborhood, size, quality, design, materials, and location in the neighborhood when deciding whether or not to purchase and how much they will pay. LPs also consider risk factors like leadership quality, market size and product/market fit.

Structure – The price of a home's construction depends on its size and quality (brick, stucco or sheetrock, windows/wires, etc.). Features, labor, and size. Costs of SPV structures include, among other things, entity type, legal, and administrative fees.

Administration – Homeowners' administration costs include annual taxes, water and gas, electricity, and lawn care. SPV administrative expenses include entity maintenance fees and taxes, K1s distributions, shutdowns, exits, etc.

Rules – These rules are enforced by the government to protect consumers. These include requirements such as electrical and plumbing code requirements, building permit requirements and height restrictions. An array of similar rules are used to regulate SPVs in order to protect entrepreneurs, investors, and the general public.

How to Choose the Right Investment Opportunities for an SPV Structure

SPV structures are best suited to investments in private assets and startups, real estate, secondary opportunities, farmland, art, films, and other types of private assets that have a potential to create value.

Additionally, SPVs are especially useful for investments that are done on a deal-by-deal basis, or for investments made by syndicates with a high-volume of activity.

Understanding the Regulatory Requirements for Creating and Managing an SPV

Regulatory requirements for creating and managing an SPV include ensuring that the entity type is appropriate for the investment activity, filing the necessary paperwork with the appropriate government departments, and ensuring compliance with all applicable laws and regulations. 

Identifying Potential Risks with an SPV Investment

Additional risks to consider when investing via an SPV include the financial and legal risks associated with the particular investments and their respective asset classes, the risk of delay due to administrative and structural requirements, the risk of fraudulent activities, and the risk of lack of liquidity in the event of an emergency. 

Investor Rights in a Capital Raising SPV

Investor rights in a capital raising SPV vary depending on the type of asset and the particular investments associated with it. Generally speaking, investors in a capital raising SPV have the right to receive financial and economic returns from the SPV's investments, to make decisions on the SPV's investments, and to receive information from the SPV regarding its investments and associated risk factors.

Leveraging Technology to Streamline the Setup and Management of an Investment Vehicle

SPV organizers can use technology to improve the process of setting up and managing an investment vehicle by utilizing automated services for entity setup and maintenance, utilizing AI-powered systems for compliance and risk assessment, streamlining the onboarding process for investors, and providing data visualizations for easier monitoring of investments and their performance.

Additionally, technology can provide SPV organizers with more efficient tools for managing administrative tasks such as calculating taxes and distributions, handling invoicing and payments, and setting up and managing banking accounts.

All of these functions are performed by the Syndicately team, managing transactions for SPV clients. We have spent a lot of time and resources on the sometimes complex process of creating and executing capital-raising SPVs.

Now you are ready for the first step of the SPV journey which is to create the SPV entity.

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