Venture capitalists are racing to invest in the most promising AI startups, driving up share prices and making it increasingly challenging for many to secure a stake in these companies. However, a growing number of small investors, including family offices and high-net-worth individuals, have found a workaround to gain access to sought-after startups like Anthropic, Groq, OpenAI, Perplexity, and Elon Musk’s xAI—through special purpose vehicles (SPVs).
The Role of SPVs
Special Purpose Vehicles enable multiple parties to pool their resources to acquire shares of a single company. Typically, investors with direct access to shares of these startups form SPVs and sell a portion of their allocation to external investors, often charging significant fees while retaining a share of profits, known as carry.
While Special Purpose Vehicles are not new, there is a rising trend successfully acquiring shares from prominent AI companies. Early backers of these startups often exercise their pro-rata rights to maintain their percentage ownership, creating opportunities for SPVs to purchase shares.
The terms and fees associated with SPVs vary widely, creating a buyer-beware scenario. Some charge as high as 2% of the total investment and retain 20% of the profits. Additionally, some are built on top of existing ones, further complicating the landscape.
For example, FTX auctioned off shares of Anthropic as part of its bankruptcy proceedings, making them available. The sale flooded the market with shares, prompting brokers to create SPVs to acquire them.
Opportunities and Risks
SPVs offer small investors the chance to participate in primary rounds of fundraising alongside major investors. However, investing through SPVs comes with high risk, as backers do not receive direct information about the companies. Some warn against blindly investing in SPVs, citing the risks and opaque nature of these investment vehicles.
Experts advise caution when using Special Purpose Vehicles (SPVs) to access shares of coveted AI companies, due to the associated risks and lack of transparency that they pose. As the SPV market continues to evolve, investors must carefully evaluate opportunities and weigh the potential rewards against the risks involved.
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