Insights

How SPVs let smaller investors play institutional games

The elite market of private capital, once exclusive, is now buzzing with opportunities to buy stakes in transformative companies — from GenAI to Web3. Yet, the practical access remains elusive for many investors because of high minimums, complex compliance, and fragmented deal flow.

Special Purpose Vehicles (SPVs) become a key to unlock these institutional-grade opportunities that would otherwise remain out of reach.

An SPV is a legal structure created by the founding organization. It allows that entity and its directors to subscribe other shareholders or LPs into that vehicle. The mechanism permits the aggregation of funds — usually smaller checks — from multiple parties into a single consolidated vehicle, which then acts as a singular counterparty for an investment into a chosen asset.

Why is there a need for SPVs?

In the world of secondary deals, there may be criteria or restrictions in terms of who can participate in the deal or what minimum check size there may need to be. The SPV negates these barriers, allowing a diverse investor base to participate.

An SPV is a legal structure created by the founding organization that allows it and its directors to subscribe other shareholders or LPs into that vehicle.

This access, as we’ve explored in our analysis How Secondaries Open the Buyer’s Market for Elite Tech Assets, is critical for engaging with the desirable innovative companies. Think pre-IPO deals with access to shares before the price spike; Digital Asset Treasuries (DATs), which prefer not to deal with smaller retail investors; secondary fund stakes, and similar exclusive offerings.

Essentially, SPVs bring individual or smaller institutional capital over the minimum thresholds and through the exclusive nature of private deals. They provide access and exposure to otherwise inaccessible opportunities that only regulated parties or those with established networks may reach.

What are the SPVs benefits for sellers?

Sellers, be they a large foundation liquidating assets, a founder diversifying their personal wealth, or a fund needing to return capital to LPs, face administrative hurdles when dealing with multiple individual buyers. The desire not to do all the paperwork for anything less than $250,000 per transaction is a practical reality for them.

With an SPV, the seller interacts with a single counterparty, regardless of how many individual investors are pooled within it. All operational tasks become easier when you only have to do them once; this simplifies logistics, legal documentation, and reduces administrative overhead.

At the end of the day, a roll-up vehicle, like an SPV, enables sellers to access liquidity quickly — its operational efficiency translates directly into a higher probability of being able to sell an asset.

How do buyers win from joining an SPV?

SPV allows investors with smaller checks to aggregate their funds, collectively meeting the substantial minimums of institutional-grade deals worth millions or tens of millions of dollars.

This is where SPVs democratize access, as a large pool of investors contributing, for example, $100,000 each can collectively meet a million-dollar minimum. This collective power allows access to deals reserved for the largest players, broadening the investable universe for family offices, angel investors, and smaller institutional funds.

SPV helps a large pool of investors contributing $100,000 each collectively meet a million-dollar minimum.

Speaking from SecondLane Capital’s hands-on experience, a prime example of SPVs’ critical role in managing high-stakes opportunities emerged during the major foundation’s bankruptcy estate liquidations. Here, the legal mandate to unwind billions in digital assets created auctions for assets like Solana. We leveraged SPVs to secure allocations into various sales, consolidate diverse investor capital, streamline the bidding process for the seller, and ultimately provide our network with a structured pathway to participate in this generational opportunity.

SPVs are a great tool to transform chaotic, large-scale liquidations into well-managed investment avenues.

Ways to structure an SPV for secondary deals

Executing an SPV is a multi-step process that involves legal, regulatory, and administrative detail. It’s not a “middleman” function; the SPV itself is a counterparty in the deal.

The process typically involves these key steps:

Deal identification & capital commitment. SPVs are typically formed after an attractive asset is identified. In case of structuring for elite deals, the SPV isn’t started until there is a minimum capital benchmark reached to justify the formation of the vehicle. For example, securing $500,000 of interest for a $1 million allocation can justify proceeding.
Jurisdiction & entity formation. A suitable legal jurisdiction is identified. The British Virgin Islands are often favored for their robust legal framework.
Onboarding & documentation: This is crucial. It involves collecting all necessary KYC (Know Your Customer) or KYB (Know Your Business) information from every subscriber. This means gathering government IDs, company formation documents, and, for entities with multiple ultimate beneficial owners (UBOs) exceeding a certain percentage, individual KYC for each. Concurrently, subscription agreements are drafted, outlining the fund’s purpose, investment terms, fees, and all legal disclaimers.
Fund administration: Once collected, all documentation is onboarded with a fund administrator. This third party handles legal filings, ongoing administration, and ensures compliance with relevant accounting and regulatory obligations.
Capital collection & execution: Approved subscribers then transfer funds (often via wire or stablecoin like USDC to a multi-sig address controlled by the SPV). Directors manage the payment flow, sending test transactions for approval, then the full amount to the seller, and collecting fees from buyers.
Asset distribution: Upon a liquidity event (e.g., asset vesting, IPO, M&A), the SPV facilitates the distribution of assets in-kind or the proceeds from a sale of shares, back to the LPs on a pro rata basis. For digital assets, this might involve monthly linear distributions or working with a custodian.

Ultimately, the SPV operator’s role in this process involves the operational work: putting all the opportunities and mechanics in place for the subscription and payment flows, and then supporting the regulatory setup behind it.

SPVs are not a 'middleman' function. SPV itself serves as a counterparty in the deal.

The SPV structure itself can be impacted by the type of counterparty the seller wants to engage with. The choice of SPV structure (e.g., Limited Liability Company – LLC, or Limited Partnership – LP) is dictated by the investor base and the nature of the underlying asset. While LLCs are common for U.S.-centric deals, LPs offer global recognition and flexibility, making them a sensible choice for international capital pools.

Some institutional sellers prefer to deal with a regulated entity, which requires registering the SPV as a regulated professional fund, with higher reporting and compliance standards.

Risks and Due Diligence

While SPVs unlock great potential, their execution is not without challenges. The biggest one being compliance: meeting stringent KYC/KYB requirements is foundational.

Another one is avoiding foul play. While SPVs provide structure, vigilance for fraudulent investment schemes necessitates thorough due diligence regarding the asset in view. This means demanding share certificates, prior subscription agreements, and clear evidence to tie the identity of the seller back to their ownership.

Conclusion

By consolidating investor capital and simplifying interactions for sellers, SPVs unlock a world of institutional-grade deals.

Winning in opaque private markets, where ‘informational asymmetry’ reigns, requires knowing about unique investment opportunities — and then meticulous, expert execution of the SPV process. While identifying a good opportunity is half the battle, the other half is flawlessly connecting all the dots for the deal to happen.

The emergence of SPV mechanisms is the cue for the players ready to move beyond the sidelines.