How an SPV works, in plain English

What it is

An SPV - special purpose vehicle - is a small company created to hold one single investment. It exists for that deal alone: no other business, no staff, no history.

How it works, step by step

1. The organisers find a deal and agree terms with the startup.
2. An SPV is set up for that deal, and investors are shown the documents.
3. Each investor subscribes - their money goes into the SPV.
4. The SPV buys the shares and appears as one shareholder on the startup's register.
5. Each investor owns a slice of the SPV proportional to their cheque.
6. If the investment is eventually sold or listed, proceeds flow back through the SPV to investors.

What it costs

Across SPVs generally, there are two costs to understand. First, setup and admin costs for creating and running the vehicle, usually a modest fixed amount built into the deal. Second, carry: the organisers' share of profits, typically around 20%, paid only after investors get their own money back. No profit, no carry. The exact numbers for any deal are always in that deal's own documents - read them before subscribing.

The risks

An SPV concentrates everything in one company, and most startups return little or nothing. Shares in an SPV are illiquid: there is usually no way out early, and a typical hold runs 7 to 10 years. You also rely on the organisers to administer the vehicle honestly and competently. Only money you can genuinely afford to lose belongs in a deal like this.

Who can take part

In the UK, offers like these can only be made to people who self-certify as high-net-worth or sophisticated investors under financial promotion rules. That certification happens directly with the organiser, never through a website.

From first call to close

A typical deal runs two to six weeks: documents are circulated, investors ask questions, subscriptions are collected, the SPV completes the purchase, and each investor receives their share certificates and confirmation. Then the long wait begins.