There's no doubt about it: Special purpose vehicles (SPVs) are having a moment. When Uber went public in 2019, more than 100 SPVs dotted its cap table, allowing investors to gain exposure to the ride-hailing giant without actually owning its stock. Since then, SPVs have only grown in popularity, as more and more investors seek alternative ways to invest in promising startups.
A special purpose vehicle (SPV) is a legal entity created for a specific purpose. Typically, they're partnerships, joint ventures, or limited liability companies (LLCs) that allow investors to pool their money together for a common investment goal. SPVs are often used to invest in startups, real estate, or other high-risk, high-reward opportunities that may not be suitable for traditional investment vehicles.
One notable example of an SPV investment is the menopause solutions brand that formed a special purpose vehicle in conjunction with three female investors to raise capital and educate women on the topic. The SPV allowed the brand to raise funds from a group of investors who were passionate about the company's mission, while also giving them a way to educate women on the topic of menopause.
Another recent example is robotics venture studio Carnegie Foundry, which announced the closing of a lead investor in Carnegie Capital Partners LLC, a recently launched SPV that will invest in the studio's portfolio companies. The SPV structure allows investors to gain exposure to the studio's startups without having to invest directly in each individual company.
Despite their many benefits, SPVs also come with their fair share of challenges. For one, they can be complex and expensive to set up, requiring legal and accounting expertise. Additionally, they may not be suitable for all types of investors, as they often require a high minimum investment and may not provide the same level of liquidity as traditional investment vehicles.
Kelley Arena, founder of Golden Hour Ventures, and Halle Kaplan-Allen, director of revenue at Sydecar, discuss investing opportunities for SPVs in the cannabis industry. They note that while there are many opportunities for SPV investments in the space, there are also unique challenges, such as regulatory hurdles and the stigma associated with the industry.
One of the top administrators of SPVs, however, is closing shop. This move may indicate that the market for SPVs is becoming overcrowded, or it may simply be a sign of changing market conditions.
Zelira Therapeutics secured an additional $3.3 million investment into the HOPE special purpose vehicle, bringing the total amount raised to $11.9 million. The SPV was created to invest in the development of cannabis-based medicines for a range of conditions.
French startup Roundtable has also raised a $3.2 million funding round from a group of 100 business angels on its own platform. The company's SPV structure allows investors to pool their money together to invest in promising startups in a variety of industries.
Overall, SPVs have become an increasingly popular way for investors to gain exposure to high-risk, high-reward opportunities, particularly in emerging industries like cannabis and robotics. While they may come with their fair share of challenges, they also offer unique benefits that traditional investment vehicles may not provide. As the market for SPVs continues to evolve, it will be interesting to see how investors and entrepreneurs alike adapt to this new investment landscape.
