SPV vs. fund — when to pick which
Choose an SPV / syndicate when
- You're new to leading. Building a track record is your job for the next 18 months.
- Your deal flow is irregular — 4–8 deals a year, not 25.
- You don't yet have $30M+ in committed LP capital.
- You have a domain edge (operator, ex-founder, vertical specialist) but no fund infra.
Graduate to a fund when
- You have 12+ deals across 3+ years with one breakout outcome on paper.
- Your LPs are asking why they're paying SPV fees per deal instead of an annual MGMT.
- You want to reserve for follow-ons (SPVs typically can't follow-on cleanly).
- Your sourcing demands speed — needing fund money in 24h is hard with SPV mechanics.
The SPV mechanics
- Vehicle: usually an LLC (US) or a private company / LLP (India). Special-purpose, single deal.
- Carry: 10–20% on profits, paid to the SPV lead.
- Setup fees: $5–8K typically. AngelList, Allocations, or local equivalents.
- LP cheques: $5K – $500K. Median in 2026 is $25K.
- Allocation: what the founder gives you (usually 5–15% of the round).
The 14-day SPV process
- Day 1–3: Conviction call with founder. Negotiate allocation. Sign letter of intent.
- Day 4–7: Deal memo to LPs. 5-page max. SPV vehicle setup in parallel.
- Day 8–10: LP commitments collected. Use a Google Form or PocketFund's investor sub-account.
- Day 11–13: Subscription docs signed. LP wires received.
- Day 14: Wire to founder. SPV closes.
The 30-LP rule. Most US accredited-LP SPVs cap at 99 LPs (3(c)(1)) or 250 (3(c)(7) — qualified-purchaser tier). Stay under 30 active LPs per SPV at the start; the admin overhead at 100+ LPs is brutal until you have ops support.
The deal memo template
5 pages. Same structure every time so LPs learn to scan.
- Summary — company, stage, ask, your allocation, your conviction in one line.
- Why this — your thesis fit, market, why now.
- Why this team — founder background, why they win.
- What's hard — top 3 risks, how the founder is mitigating.
- Mechanics — vehicle, fees, your carry, timeline, how to commit.
LP communication post-close
Quarterly updates per portfolio company. Forward the founder's monthly investor update + your one-paragraph commentary. Annual K-1 or equivalent for tax. Don't go silent — silence is when LPs lose confidence.
Common SPV mistakes
- No follow-on plan. When the founder's Series A is announced, your LPs ask "are we participating?" — and SPV mechanics make this hard. Plan reserve SPVs upfront.
- Hidden fees. Every SPV platform charges differently. Disclose all costs to LPs upfront.
- No legal check. Cross-border SPVs hit tax surprises (GST, withholding, FATCA). Engage local counsel before SPV #1, not SPV #5.
- Carry confusion. American (deal-by-deal) vs. European (fund-level) waterfalls — pick one, document it, don't switch.
Using PocketFund sub-accounts for SPV ops
The sub-account feature lets a syndicate lead operate the SPV as a sub-persona under their main account: separate thesis, separate portfolio, separate team. LPs can be granted view-only access to the SPV's deal flow. Read the for-investors page for setup.