Thread by @ChrisHarveyEsq

1/ A quick primer on #SPVs

First an #SPV in the VC context simply means an entity setup to provide financing to startups or to acquire secondary shares in pre-IPO companies.

SPV #structures:
-LLC (common)
-LP
-Series LLC: Alumni Ventures Group
-Series LP: Assure/AngelList/etc

2/ Traditionally, #SPVs (special purpose vehicles) were used for structured financing transactions. These entities blew up in the 2009 financial crisis.

Today, it's very common to see SPVs on a Silicon Valley startup cap table. For example, in @Uber's #IPO there were 100+ SPVs.

3/ Founders & employees are more active as operator angel investors. The broad swath of Silicon Valley CEOs invest. As a bridge between solo angel investor & full time GP, SPVs close that gap. They offer a chance for future GPs to test the waters. See @jmj @briannekimmel, et al.

4/ SPV investors want speed, simplicity & low cost. Nobody wants to pay $50K+ to a law firm to setup a simple SPV.

So, what are your options?

• @AngelList @assure—$5K-8K+ setup fees, 0-5% carried interest, low GP commit

• Fund/SPV focused firms (eg @AcceleronLaw, @fund_law)

5/ What are the disadvantages of an SPV?
-Lack of customization/LPs on platform
-Little to no management fees
-Limited check sizes & pro rata rts. On a competitive deal, no chance no-name SPV takes Sequoia’s 15-20% allocation.
-Difficult to scale
-Shadow investors (bad actors)

6/ Cool things on the horizon:
-Price & speed competition among top platforms
-The “rolling close” #Series LLC/LP model. Law is brand new. Most lawyers have never even heard of it.
-#Superangels / operator-led #investor groups competing against VCs/LPs
-Employee-led syndicates

One additional disadvantage of SPVs (public/pre-IPO issue), is the anonymous nature/lack of contractual control of SPV investors can cause unintended consequences.

See @matt_levine's very insightful article re: Uber/Lyft shorts hedging against #IPO price. bloomberg.com/opinion/articl…