Once your investors are onboarded, the SPV is ready to fulfill the purpose for which it was created: To invest in the asset by signing the purchasing agreement and wiring funds to the target company.
This step, which culminates in purchasing an ownership in a specific asset, is the fundamental reason you set up your capital-raising SPV. It’s the reason you took the trouble to hire a registered agent, create all the documents required for you to become a legal entity, register with the IRS and get an employer identification number (EIN), open a bank account and bring together a band of committed investors. Signing the purchase agreement requires mostly Legal expertise while wiring funds requires SPV Administration expertise.
Once all of these investors have been onboarded—all the documents have signed and the funds wired—it is time to use those funds to go purchase the asset, or portion of the asset on behalf of your aggregated investors. The nuts, bolts, and nuances of “purchasing an asset” depend on the type of asset. When investing in a startup—the most common reason that investors form an SPV—the purchase agreement is laid out, negotiated and signed by the manager of the SPV. When the terms have been agreed to by both parties, the SPV entity then purchases equity by wiring the funds to the company.
A QUICK RECAP
At this stage in the life cycle of your capital-raising SPV, it may be worthwhile to sum up where you have come so far in your journey, and what lies immediately ahead. Thus far:
- The entity has been legally set up and a registered agent put in place.
- The foundational documents have been signed.
- Investor funds have been wired and aggregated.
- The purchase agreement for the asset (or shares in that asset) has been signed.
- The capital has been sent to the startup company, i.e. the investment has been made.
We’re done with the process for which the entity was created--purchasing the specified asset--right? The truth is that it is done in part, but not in full. We have completed the crucial first step of making the investment. Yet two steps remain to make your capital-raising SPV a fully formed, bona fide entity:
- STEP 8: Preparing individualized capital account statements for all of your investments
- STEP 9: Building a cap table
You are now ready to take the next step in your entity’s journey: GET ALL OF THE SPV INVESTORS THEIR ACCOUNT STATEMENTS.