Special-Purpose Vehicles: can they get your startup where it needs to go?

Hi,

In today's edition, I talk about special-purpose vehicles (SPVs) as a fundraising hack. Also,?

?? - Social Snapshot- Bolt's $14B valuation: All hype or the next Stripe killer??

?? - Small SAFE checks add up

??? - Podcast #48 w/ Alex Pattis - deploying $75M via syndicates

?? - Free startup resource- Term Sheet Negotiation Playbook

Welcome to issue #87, and may your cap tables be clean and your investors plentiful!

Also, feel free to comment and let me know how you feel about Fundraising Demystified. Any topic you'd like me to discuss? Let me know!

Social Snapshot

My take on Bolt.com's latest valuation. All hype or the next Stripe killer??

Also: Why are startups beating Google in AI? Scott Graffius on X

Recipe for an awesome welcome email series. Lou Mintzer on LinkedIn

ICYMI: SPVs with Alex Pattis

I'm on summer break this week, but in the theme of SPVs (below), check out my chat with Alex Pattis, entrepreneur and investor, who raised $75M over 300 deals by launching a syndicate.

Check It Out

Data Corner

Small checks do add up

Sharing this inspiration courtesy of Peter Walker , Head of Insights at Carta: small checks are a big deal.? While those big checks steal the spotlight, small checks can be game-changers in your SAFE round.

About 30% of checks in $1M rounds were under $25K this year, and here’s why that matters. These small investors are often your first believers, providing crucial early momentum and valuable networks. They might even turn into strategic advisors, adding way more value than just cash. Startups thrive when small investors get a seat at the table, and the data shows that many founders agree.?

Get more insight into the checks making up $1M safe rounds here.

SPVs: The Fundraising Hack You Didn't Know You Needed

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So, you've heard about startups raising millions in minutes, but your fundraising feels more like a slow crawl through molasses. Enter the Special Purpose Vehicle (SPV) – the fundraising hack you didn't know you needed. Is it the right call for your venture?

What’s an SPV, Anyway?

An SPV is essentially a shiny new car with one purpose: to get you where you need to go, which, in this case, is to the land of funding. It’s a legal entity, usually an LLC, created to pool money from a group of investors.

Think of it as a fundraising carpool. Instead of knocking on every investor’s door individually (and losing your voice in the process), you get them all into one vehicle and hit the gas.

But why would you, a savvy founder, choose an SPV over traditional fundraising? Let me break it down for you.

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1. Speedy Gonzales Fundraising

Perspective: You’re trying to close your seed round, but the process is moving at the pace of a tortoise with a limp. Traditional fundraising can feel like trying to get through airport security on a Friday afternoon – slow, tedious, and full of obstacles. SPVs, on the other hand, are your express lane. They let you gather a group of investors quickly, without the usual back-and-forth of negotiations and term sheets. You set the terms, you set the timeline, and investors either jump in or miss out. No fuss, no muss.

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2. Keep Control, Stay Sane

One of the biggest fears founders have is losing control of their company. When you’re raising money the old-school way, you might end up with a cap table that looks like a jigsaw puzzle, with a bunch of? investors holding tiny pieces of your company. SPVs allow you to keep things neat and tidy. The SPV acts as one investor on your cap table, regardless of how many individuals contributed. This means you keep more control over your company while still getting the cash you need.

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3. Friendlier Investor Relationships

Let’s be real: fundraising can sometimes feel like speed dating. You’re trying to convince a bunch of people to invest in you after a 30-minute conversation, and it can get awkward fast. With SPVs, you can bring in a lead investor to manage the vehicle, handling all the awkward conversations for you. It’s like having a wingman at the bar – they do the heavy lifting, and you just have to show up and be charming.

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4. Access to a Broader Investor Base

SPVs aren’t just for the high rollers. They democratize access to your round, letting smaller investors join in on the action. It’s like opening up VIP access at a concert – more people can enjoy the show, and you still get to headline. Plus, these smaller investors often bring more than just money to the table. They can become your biggest advocates, spreading the word about your startup and helping you grow in ways you didn’t expect.

The Catch?

Of course, it’s not all rainbows and unicorns. SPVs do come with some legal and administrative costs, and setting one up requires a bit of paperwork. But let’s be honest – if you’re already navigating the wild world of startup fundraising, this is just another form to sign. And trust me, the benefits far outweigh the minor headache.

In the crazy world of startup fundraising, SPVs are like finding a secret door to the finish line. They’re faster, simpler, and let you keep control of your company. So, the next time you’re thinking about raising capital, consider hopping in an SPV and zooming past the competition. After all, why walk when you can drive?

Free Fundraising Resources

This week, we share our playbook for setting up your data room to make you investor-ready.

- Playbook for Negotiating Term Sheets -?Download it Here