After 9 years and dozens of deals, my playbook for SPVs looks nothing like it did when I started. Forget the theory. Here are 7 real-world lessons that have made me millions.
I’ve been an angel investor for nine years now. I’ve seen it all. The good, the bad, and the ugly. I’ve made some great investments, and I’ve made some terrible ones. I’ve learned a lot along the way. And one of the things I’ve learned the most about is Special Purpose Vehicles, or SPVs.
When I first started, I thought of SPVs as just a way to pool money from a bunch of smaller investors to invest in a startup. A simple, clean, legal structure. That’s the textbook definition, right? Well, the textbook is wrong. Or at least, it’s incomplete. SPVs are so much more than that. They are a powerful tool that can be used to create alignment, reduce risk, and increase returns. But they can also be a source of conflict, confusion, and frustration.
It took me a while to figure this out. I had to learn the hard way, by making mistakes and seeing other people make mistakes. But now, after all these years, I think I finally have a good handle on SPVs. And I want to share what I’ve learned with you. Here are the seven most important things I’ve learned about SPVs after writing checks for nine years.
1. SPVs are about people, not just money.
This is the most important lesson I’ve learned. When you’re putting together an SPV, you’re not just pooling money. You’re bringing together a group of people. And those people are going to have different goals, different expectations, and different levels of sophistication. It’s your job as the SPV lead to manage those people and make sure everyone is on the same page.
I learned this lesson the hard way back in 2016. There was this super-promising AI logistics startup out of Stanford, let's call them 'LogiBot'. The founders were brilliant, the tech was solid, and I knew I had to get in. In my rush to close the deal, I pulled together an SPV with the first people who said yes. Big mistake. I had a couple of seasoned operators from my MovieLaLa days alongside first-time angel investors who'd just sold their dental practice. The operators wanted to be in every strategy meeting. The dentists just wanted a quarterly email telling them they were rich. It was a mess. I spent more time managing my investors than I did helping the founders. It was a nightmare, and it taught me that an SPV isn't a spreadsheet of names and numbers; it's a team. You have to recruit it like one.
I eventually managed to sort things out, but it was a painful experience. And it taught me a valuable lesson: when you’re putting together an SPV, you need to be just as focused on the people as you are on the money. Make sure everyone understands the risks and rewards. Make sure everyone is aligned on the strategy. And make sure you have a clear communication plan in place.
2. The SPV lead is the most important person in the deal.
This is a corollary to the first lesson. The SPV lead is the person who is responsible for managing the SPV and representing the investors. This is a huge responsibility. The SPV lead needs to be someone who is experienced, trustworthy, and has a good track record. They also need to be a good communicator and a good negotiator.
I’ve seen a lot of deals go south because of a bad SPV lead. I’ve seen SPV leads who were inexperienced and made rookie mistakes. I’ve seen SPV leads who were untrustworthy and put their own interests ahead of the investors. And I’ve seen SPV leads who were just plain incompetent.
On the other hand, I’ve also seen a lot of deals succeed because of a great SPV lead. A great SPV lead can add a ton of value to a deal. They can help with due diligence, negotiate better terms, and provide valuable advice and support to the company. They can also help to keep the investors informed and engaged.
So if you’re thinking about investing in an SPV, make sure you do your homework on the SPV lead. And if you’re thinking about leading an SPV, make sure you’re up for the challenge.
3. The economics of the SPV matter. A lot.
When you’re investing in an SPV, you’re not just investing in the underlying company. You’re also investing in the SPV itself. And the economics of the SPV can have a big impact on your returns. There are two main economic terms you need to pay attention to: the management fee and the carried interest.
The management fee is a fee that is paid to the SPV lead for managing the SPV. It’s typically 2% of the total amount raised. The carried interest is a share of the profits that is paid to the SPV lead. It’s typically 20% of the profits after the investors have gotten their money back.
These fees can vary from deal to deal, so it’s important to read the fine print. I’ve seen deals with management fees as high as 5% and carried interest as high as 30%. I’ve also seen deals with no management fee and no carried interest. It all depends on the deal and the SPV lead.
My personal philosophy is that the SPV lead should be compensated for their work, but they shouldn’t be getting rich off the fees. I’m generally comfortable with a 2% management fee and a 20% carried interest. But I’ve also been known to negotiate for better terms, especially on larger deals.
4. SPVs can be a great way to get into hot deals.
One of the biggest advantages of SPVs is that they can give you access to deals that you wouldn’t be able to get into on your own. A lot of the best deals are oversubscribed, which means there’s more money trying to get in than the company is willing to take. When this happens, the company will often give preference to larger investors.
This is where SPVs come in. By pooling your money with other investors, you can write a larger check and increase your chances of getting into the deal. I’ve used SPVs to get into a number of hot deals over the years. In fact, some of my best investments have been through SPVs.
Of course, there’s no guarantee that you’ll get into every deal you want to. But SPVs can definitely improve your odds.
5. SPVs can also be a great way to diversify your portfolio.
Another advantage of SPVs is that they can help you to diversify your portfolio. When you’re investing in individual startups, it’s hard to build a diversified portfolio. You need to have a lot of capital, and you need to be able to find a lot of good deals.
SPVs make it easier to diversify. Because you’re investing smaller amounts in each deal, you can spread your money across a larger number of companies. This can help to reduce your risk and increase your chances of hitting a home run.
I’m a big believer in diversification. I think it’s one of the most important things you can do as an angel investor. And SPVs are a great tool for achieving diversification.
6. Follow-on investing is where the real money is made.
This is a lesson that I learned a little later in my career. When I first started, I was so focused on finding the next big thing that I didn’t pay enough attention to my existing investments. I would make an investment, and then I would move on to the next deal. I didn’t realize that I was leaving a lot of money on the table.
The truth is, the real money in angel investing is made on the follow-on rounds. A follow-on round is when a company raises more money from its existing investors. These rounds are often done at a higher valuation than the initial round, which means you can make a lot of money if you participate.
I’ve made some of my best returns on follow-on rounds. I saw this firsthand with an early investment in a fintech company. I got in the seed round at a $5 million cap. The company did great, and 18 months later, they were raising a Series A at a $20 million valuation. The founders gave me my full pro-rata rights. I didn't just take it; I fought for more allocation in the SPV. Some of my LPs had gotten cold feet, so I bought out their shares and doubled down. That decision alone turned a good investment into a 10x home run for me. The real money isn't just in picking the right company; it's in having the conviction to go big when it's working.
SPVs can be a great way to participate in follow-on rounds. A lot of SPVs will have a provision that allows them to invest in follow-on rounds. This is a huge advantage, because it allows you to double down on your winners.
7. Don’t be afraid to say no.
This is the last and final lesson. And it’s probably the most important one. As an angel investor, you’re going to see a lot of deals. And a lot of them are going to be bad. It’s your job to separate the good from the bad. And that means you’re going to have to say no. A lot.
I know it’s hard to say no. You don’t want to hurt anyone’s feelings. You don’t want to miss out on the next big thing. But you have to be disciplined. You have to have a clear investment thesis, and you have to stick to it.
I’ve said no to a lot of deals over the years. And I’ve never regretted it. In fact, some of my best investment decisions have been the deals that I didn’t do.
So don’t be afraid to say no. It’s one of the most important things you can do as an angel investor.
Conclusion
So that's it. Nine years, hundreds of deals, and a lot of scar tissue later, these are the rules I live by when it comes to SPVs. They're not just financial vehicles; they're a reflection of your judgment, your network, and your conviction. Get them right, and you can build a powerful engine for wealth and impact. Get them wrong, and you'll be stuck in a swamp of emails and hurt feelings. The choice is yours. Now go build something.
Frequently Asked Questions
Which item on this list has the highest impact?
It depends on your stage and context, but in my experience, the items near the top of the list tend to have the broadest applicability. That said, sometimes the less obvious items create the biggest breakthroughs for specific situations.
How do I know which items apply to my situation?
Start by honestly assessing where your biggest bottleneck is right now. The items that address that specific constraint will give you the highest return on your time and energy.
Are these recommendations still relevant in 2026?
Absolutely. While specific tools and tactics change, the underlying principles remain consistent. I update my thinking regularly based on what I'm seeing in the market and across my portfolio companies.