Guide
What an SPV Actually Is
How special purpose vehicles work, the fee layers, the difference between holding an LLC interest and holding shares, and what happens to your position at IPO.
Most individual capital that reaches a late-stage private company reaches it through a special purpose vehicle. If someone has offered you access to a named private company, this is almost certainly the structure — whether or not they described it that way.
The Mechanics
A sponsor forms an entity, typically a Delaware LLC. Investors contribute capital and receive membership interests in the LLC. The LLC buys and holds one position in one company.
The company's cap table shows one holder — the LLC. Your name is not on it.
Why companies prefer this
A cap table with fifty individual holders creates administrative burden, complicates future rounds, and can trigger shareholder-count thresholds that force public reporting obligations. One LLC solves all three. Many late-stage companies will approve an SPV transfer where they would refuse fifty individual ones.
Why sponsors prefer it
It is the only practical way to aggregate individual capital into a position large enough for a company to accept — and it carries fees.
What You Actually Own
You own an interest in the vehicle. You do not own shares. This determines four things:
Voting rights
None. The LLC votes, or more commonly the sponsor votes on the LLC's behalf, and your operating agreement almost certainly delegates that authority.
Information rights
Whatever the sponsor chooses to pass through. If the company provides quarterly updates to holders, the LLC receives them; whether you do is a matter of the operating agreement.
Exit timing
The sponsor's decision, within whatever constraints the document sets. You generally cannot force a distribution and generally cannot sell your interest without sponsor consent.
Your net return
Not the company's return. The company's return, minus fees, minus carry, minus whatever the layer structure costs.
The Fee Stack
Management fee
Typically 1 to 2 percent of committed capital, annually, for the life of the vehicle. On a seven-year hold at 2 percent, that is roughly 14 percent of your capital before the company has done anything.
Carried interest
Typically 10 to 20 percent of gains above a return threshold. Standard for the asset class, but check whether there is a hurdle rate and whether carry is calculated on realized or unrealized gains.
Setup & administrative costs
Legal formation, fund administration, tax preparation, and annual filings — sometimes charged separately, sometimes bundled into the management fee.
The embedded spread
The one that is hardest to see. If the sponsor acquired shares at $90 and offers interests at an implied $100, the $10 is a cost to you that appears nowhere in the fee disclosure. Ask directly what the sponsor paid and when.
Layering
Some vehicles hold interests in other vehicles rather than in shares. An SPV in a named company may be a feeder into another SPV, which holds the position — with a fee layer at each level.
Two or three layers of 2-and-20 will consume most of a good outcome. Before committing, ask for a structure diagram showing every entity between your capital and the underlying shares, and the economics at each one. A sponsor who cannot produce this quickly is not a sponsor you want.
Lock-Ups and What Happens at IPO
The listing is not your liquidity event. Two constraints stand between them.
1. The company lock-up
Following an IPO, pre-listing shareholders are typically restricted from selling for 90 to 180 days. The LLC holds the shares, so the LLC is locked up, so you are locked up.
2. The vehicle's own terms
Your operating agreement governs what happens next. Establish in advance:
- The specific lock-up expiry
- Whether you receive shares in kind or cash proceeds
- The distribution timetable after lock-up expiry
- Whether carry is calculated at distribution or at some earlier mark
Lock-up expiry is itself a risk.
Expirations frequently coincide with concentrated selling as insiders reach liquidity simultaneously. CoreWeave appreciated substantially post-listing and then drew down 51 percent from peak as the lock-up cleared. [MAY-26] If your distribution lands in that window, your realized price is not the price you watched during the lock-up.
If you held SpaceX through an SPV: your position converted according to your vehicle's terms at the June 12 listing. Ask your sponsor for the specific lockup expiry and the distribution mechanics.
Questions Before You Sign
- How many entities sit between my capital and the shares?
- What did the sponsor pay per share, and on what date?
- What is the total fee load over an assumed seven-year hold?
- Is carry calculated on realized gains, and is there a hurdle?
- Do I receive shares in kind or cash at distribution?
- What is the lock-up per the governing document?
- What are my information rights, in writing?
- Can I transfer my interest, and to whom?
- What has this sponsor done before, and what happened?
- What happens if the sponsor becomes insolvent?
When an SPV Is the Wrong Answer
If the company has listed. Post-IPO, the shares trade on an exchange. Anyone offering private exposure to a listed company through a special vehicle is offering something that no longer needs to exist.
If you want category exposure. A fund gives you diversification for a comparable fee load. An SPV concentrates everything in one name.
If the fee stack exceeds two layers. The arithmetic rarely survives it.
If the sponsor will not disclose the structure. This is not a negotiating position; it is disqualifying.