Syndicates Masterclass: Things to Consider

  • Lack of diversification. SPVs are deal-by-deals, so if a company doesn’t make it to a positive exit event, investors in that deal may not see any return on their capital. Communicate with your LPs about diversifying across deals you show them, and even more broadly across venture ecosystem, to increase their probability of a positive return.
  • No voting rights. With the SPV being the official shareholder on the company’s cap table, LPs inside the SPV do not have voting or information rights that direct shareholders sometimes have. LPs need to trust the GP to represent their interests.
  • Fees. Investments in SPVs may be subject to carry and management fees. Many LPs view this as the cost of being able to get access to great deals.