For many folks thinking about starting a venture or private equity fund, raising that first fund can see like a daunting task. But for those with access to great dealflow, SPVs can be a fantastic way to start building your virtual AUM and demonstrate to prospective LPs your ability to construct a portfolio and secure allocation. Here is how.
If you have access to great dealflow and a network of LPs, form a simple LLC that you can use as a management company. That management company can become the managing member of any SPV entity that you setup. Think of it like the GP entity of your fund having a stake and role in the Limited Partnership. You can set custom deal terms for each SPV (management fees and carried interest). You can collect these fees for your work and structure them similar to how those fees would work in a future fund.
The above graphic shows you what this can look like, similar to a fund, each SPV represents a portfolio company sourced by the manager. Say each SPV is $2M raised and invested, they you have $6M of “AUM” to start building your portfolio. If you track the performance of your SPVs overtime this can be a great way for a new manager to start to show their ability to source deals, build a portfolio and set their investors up for returns.
At Syndicately, our SPV automation tools and deal portal gives you everything you need to start building a portfolio of SPVs and even includes simple tools to help customize deal terms on an SPV-by-SPV basis, track valuation changes over time and communicate portfolio progress with your investors. Book a demo today or feel free to get started yourself, our team is always available as questions come up.