SPV

A Special Purpose Vehicle (SPV) is a standalone legal entity — typically an LLC or limited partnership — created for the sole purpose of making one investment. Investors wire capital into the SPV; the SPV buys shares in the target company; the company sees only one name on its cap table rather than dozens of individual investors.

SPVs are the dominant structure for retail and institutional participants who want pre-IPO exposure but cannot buy shares directly (due to transfer restrictions, minimum sizes, or company ROFR policies). The SPV operator charges a carry — commonly 10–20% of profits — plus a management fee, which can meaningfully erode returns on smaller deals.

Illustrative example: a target company's minimum direct transfer is $250,000, but an SPV manager aggregates 50 investors at $5,000 each, raising $250,000 total. The company sees one entity as the transferee. Investors hold SPV membership interests, not shares.

The gotcha: you own the SPV, not the company. At liquidation (IPO, acquisition, or wind-down), the SPV operator must distribute proceeds — and that process can introduce delays, tax complications, and fees not present in direct share ownership. Verify the SPV's operating agreement, the operator's track record, and any lock-up terms before investing.