Private market investing has changed dramatically over the last decade. Angel investors, venture capitalists, family offices, and even institutional allocators are increasingly looking for precision, flexibility, and transparency when deploying capital. One structure has quietly become foundational to this shift: the Special Purpose Vehicle (SPV).

Once considered a niche legal construct, SPVs are now widely used across venture capital, private equity, private credit, real assets, and secondaries. In this article, we’ll explain what an SPV is, how it works in practice, and—most importantly—why investors increasingly rely on SPVs instead of traditional fund structures.

What Is a Special Purpose Vehicle (SPV)?

A Special Purpose Vehicle (SPV) is a standalone legal entity created for a narrowly defined objective—most commonly, to make a single investment.

In private markets, an SPV typically pools capital from multiple investors and invests that capital into one company or asset. Rather than dozens of individual investors appearing directly on a startup’s cap table, the SPV invests as one consolidated shareholder.

Structurally, SPVs are usually set up as:

• Limited Liability Companies (LLCs), or

• Limited Partnerships (LPs)

They are designed to be bankruptcy-remote, legally distinct, and limited in scope. This separation is not incidental—it is the core reason SPVs are useful.

Why SPVs Became Essential in Modern Investing

The growth of SPVs closely tracks the expansion of private markets. According to industry estimates, global private market assets under management surpassed $13 trillion, with venture capital and private equity accounting for a significant share. As deal volume increased, so did the need for structures that could move faster than traditional funds.

Traditional funds are powerful, but they come with constraints: multi-year capital lockups, blind-pool risk, regulatory complexity, and uniform economics applied to very different deals. SPVs emerged as a way to preserve institutional discipline without sacrificing flexibility.

Today, SPVs are no longer a workaround—they are core infrastructure.

Investing Without Running a Full Fund

Launching and operating a traditional venture or private equity fund is expensive and time-consuming. Legal formation, regulatory compliance, ongoing reporting, audits, and investor relations can cost hundreds of thousands of dollars annually. For many investors, that overhead simply does not make sense—especially when deal flow is episodic rather than continuous.

SPVs offer a more efficient alternative.

Instead of raising a blind pool of capital upfront, investors can raise capital deal by deal. Each SPV is formed only when a specific opportunity exists, allowing capital to be deployed with intention rather than obligation. This model is particularly attractive in early-stage venture, where opportunities are unpredictable and conviction varies significantly across deals.

The rise of angel syndicates and solo capital allocators is closely tied to this structure. Many of today’s most active early-stage investors operate without a formal fund, using SPVs to invest alongside trusted networks when the opportunity justifies it.

Alignment Through Transparency

One of the most important advantages of SPVs is alignment.

In a traditional fund, investors commit capital before knowing which specific companies will receive it. Performance is measured across a portfolio, and individual outcomes are often obscured by aggregate returns. SPVs invert this dynamic.

Each SPV corresponds to:

• One company or asset

• One valuation

• One set of terms

• One risk profile

Investors opt in with full context. They know exactly where their money is going, why the deal exists, and how success will be measured. For managers, this creates clearer accountability. For investors, it builds trust.

As private market participants become more sophisticated, this level of transparency is increasingly expected—not optional.

Risk Isolation and Legal Protection

SPVs are also powerful risk-management tools.

Because each SPV is a separate legal entity, risk is contained. If an investment underperforms or faces legal or regulatory challenges, exposure is limited to that single vehicle. Other investments remain insulated.

This structure is particularly valuable in areas such as:

• Early-stage venture, where failure rates remain high

• Private credit, where downside protection is critical

• Cross-border investing, where jurisdictional risk varies

• Regulated or complex assets

From a legal standpoint, SPVs function as firewalls. Investors’ liability is typically capped at their committed capital, and managers reduce the chance that one problematic deal could impact an entire investment program.

Flexible Economics That Match the Deal

Private market deals are not uniform—and SPVs recognize that reality.

Unlike traditional funds, which apply the same management fees and carry structure across all investments, SPVs allow economics to be tailored per deal. This is critical in practice. A highly competitive secondary transaction may justify lower fees in exchange for speed and access, while a proprietary early-stage opportunity may warrant higher carry due to sourcing and operational involvement.

SPVs also make it easier to accommodate:

• Strategic investors with custom terms

• Side letters for large allocators

• Deal-specific waterfalls and distributions

This flexibility ensures incentives are aligned with the actual value being created, rather than forced into a one-size-fits-all fund model.

Tax Efficiency and Reporting at Scale

Most SPVs are structured as pass-through entities, meaning income and losses flow directly to investors rather than being taxed at the entity level. This avoids double taxation and aligns with investor expectations in private markets.

Historically, however, this came with operational friction. Managing capital accounts, distributions, and tax documents across dozens of investors was burdensome and error-prone.

Modern platforms have largely eliminated this pain.

Platforms like Allocations provide end-to-end SPV infrastructure, including automated allocations, investor dashboards, and tax-ready reporting. As a result, SPVs are now viable not just for large checks, but for repeat, smaller investments without increasing administrative overhead.

Unlocking Secondary and Late-Stage Opportunities

SPVs play a critical role in the fast-growing private secondary market. As startups stay private longer, demand for liquidity from founders, employees, and early investors has surged. Estimates now place annual private secondary transaction volume at over $100 billion, and growing.

These deals often require:

• Fast execution

• Clean ownership structures

• Aggregation of multiple buyers

SPVs are uniquely suited to meet these requirements. They allow capital to be pooled quickly, shares to be acquired efficiently, and ownership to be consolidated into a single entity that is easy for companies to work with.

Without SPVs, many of these late-stage opportunities would remain inaccessible to smaller investors.

SPVs as Core Private Market Infrastructure

A decade ago, SPVs were viewed as cumbersome. Entity formation was slow, banking was fragmented, and investor onboarding was largely manual. That perception has changed.

Today, SPVs benefit from modern infrastructure that integrates formation, compliance, onboarding, banking, and distributions into a single workflow. This operational efficiency has transformed SPVs from an occasional tool into repeatable infrastructure for professional investors.

As private markets continue to expand and specialize, SPVs have become the preferred structure for deploying capital with precision and control.

Final Thoughts

Special Purpose Vehicles are no longer a tactical workaround—they are a strategic foundation of modern private investing.

By enabling deal-by-deal access, improving alignment, isolating risk, and reducing operational friction, SPVs offer the best of both worlds: the flexibility of angel investing and the discipline of institutional finance.

As private markets evolve, SPVs—powered by platforms like Allocations—are increasingly becoming the default way sophisticated investors participate in high-quality private opportunities.