SPVs are fast, flexible, and shifting the landscape of private markets enabling more access and democratization. A decade ago, SPVs would have been inaccessible for many fund managers and investors due to extremely high costs and the time consuming process involved with formation and fund administration.
But with platforms like Allocations, SPVs have become accessible and cost effective for a much broader range of investors. Allocations aggregates the entire process from entity formation, bank account set-up, annual tax filing, and distributions (and everything in between) into a simple and automated SPV solution. Today, Allocations serves thousands of clients with unique use cases and custom SPV requirements. Investment platforms and banks are now adopting this technology by utilizing Allocations’ platform to power SPVs for their networks.
SPVs are transforming the co-investment and private markets ecosystem by democratizing access. Here’s how 5 different groups are powering their SPVs through Allocations:
- Investment Platforms
- Angel Groups
- Micro VCs & Solo Capitalists
- Family Offices
Allocations is helping investment platforms launch streamlined private market tools for their networks.
Investment platforms like daba, Aqua, and Axevil are using Allocations to spin up deals for their investors. SPVs are a perfect solution for these platforms to bring on investors writing diverse check sizes, and further enabling democratization, while retaining cleaner cap tables.
Venture capitalists investing through SPVs is no new use case. VCs have been using SPVs for years to make investments into private companies. This is the most traditional use case of SPVs.
However, until recently the cost to set up an SPV could be north of $200K, making it only accessible to larger, more established VCs. Over the past few years, thanks to platforms like Allocations, the cost to set up an SPV has drastically decreased (on average ~$8k).
The decrease in cost has enabled access to a larger range of VCs including emerging managers. SPVs have become a popular vehicle for emerging managers to:
- Invest quickly into deals / Move with speed
- Accept small and large check sizes from multiple investors
- Get started quickly / Get setup quickly and move on to the next deal
- Focus more time on adding value
Size also plays a big role in the shift of SPV investing. Over the past few years, check sizes have gotten smaller, further leading to the democratization of private investments.
There are 2 main differences between a VC and Micro VC. Micro VCs typically:
- Invest in seed stage companies
- Invest smaller check sizes
Investing in early stage companies can carry more risk, but the smaller investment size for larger equity makes it worthwhile for many of these groups.
Allocations powered SPVs are a great fit for such Micro VCs due to:
- Speed early stage companies move extremely fast. SPVs are a quick and efficient way for Micro VCs to get into deals quickly
- Diversification Micro VCs invest smaller amounts of capital, across several deals, providing for a magnitude of diversification. It also allows for their investors to write smaller check sizes across multiple SPVs
- Cost efficiencyMicro VCs raise and invest smaller amounts and therefore need a vehicle that is cost effective.
Angel groups are communities of early stage investors who come together to build relationships, source deals, and bring other investors into deals. We often see angel groups being crucial investors for many start up companies and entrepreneurs.
Allocations’ founder Kingsley Advani founded Allocations Angels in 2017 with the goal of empowering the next generation of angel investors. Kingsley quickly witnessed how powerful SPVs can be for angel groups to get deals done swiftly and cost effectively.
We’ve seen an enormous increase in angel groups using SPVs to pool their capital. Angel investors typically write smaller check sizes, so pooling their capital in an SPV allows investors to participate in numerous deals and diversify their investments.
Angel groups are utilizing Allocations powered SPVs to:
- Allow more investors to participate with smaller check sizes
- Move quickly to get into early stage deals
- Keep the cap table clean for founders
Family offices, whether single or multi-family offices, are set up with the intention to preserve capital for the HNWIs and UHNWIs. Throughout time, family offices have actively allocated a portion of their portfolio to alternative assets and private markets. Many family offices have created multi-generational wealth through choosing the best off market co-investment opportunities.
Allocations powered SPVs provide family offices:
- More co-investment opportunities
- Diversification: family offices want to write smaller check sizes into a portfolio of investments
- Streamlined back end work done by Allocations
The increased adoption of SPVs is increasing access, democratizing private markets, and ultimately contributing to increased economic freedom.
Connect with our team to learn more about SPVs and how you can get started today: allocations.com/contact
Disclaimer: The information provided in this document does not, and is not intended to, constitute legal, tax, investment, or accounting advice; instead, all information, content, and materials available are for general informational or educational purposes only and it represents the personal view of the author. Please consult with your own legal, accounting or tax professionals.