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Profile of SPVs in the U.S. Southeast Region

Oct 31, 2022 10:30:00 AM | Assure Analytics

 

This post is part of a series of SPV market profiles for U.S. regions between the coasts. It’s intended to provide a set of SPV benchmarks for specific areas of the country that can inform organizers and investors in those geographies. It builds on the market-wide standards detailed in Assure Analytics’ State of the SPV report earlier this year. Find details on the Mountain region here.

The U.S. Southeast has been defined as Alabama, Florida, Georgia, North Carolina, South Carolina, and Tennessee.

Southeast SPVs - Regional Map

The Southeast U.S. has received a lot of attention for its burgeoning role in the startup and financial ecosystems.

From the much-hyped Miami market (the epicenter of the supposed VC flight from Silicon Valley and home to crypto mania), to Atlanta (an emerging global hub for fintech) and Raleigh-Durham (a research powerhouse and growing choice for financial institutions), the Southeast region contains many strong, as well as up-and-coming, cities in the financial markets. Not to mention, many of the top-ranked cities for foreign business are located in the Southeast.

And so far this year, the Southeast has bucked the nationwide trend in startup funding, actually seeing a quarter-to-quarter increase in deal value to $6B in Q2 (a 20% increase from Q1).

So how does the Southeast compare when it comes to SPVs? The following charts provide more granular insight into SPV activity in the U.S. Southeast region, including deal sizes and terms.

Organizer Types

SPVs in the Southeast are concentrated among Syndicate Funds, Individuals, and (to a lesser extent) VC firms. Compared to other regions, Individual organizers are especially over-weighted, accounting for 34% of SPVs in the Southeast versus 19% in the rest of the U.S.

Chart Showing SPV Organizer Type Prevalence in the Southeast U.S.

SPV Size

SPVs raised in the Southeast tend to be larger than those raised by organizers elsewhere.

The median Southeast SPV collects $745K compared to $440K in other regions. Similarly, the average Southeast SPV raises $2.2M, versus about $1.9M elsewhere.

The fact that Southeast SPVs are larger than other regions is particularly noteworthy given the makeup of organizers in the Southeast (which as discussed above are dominated by individuals and Syndicate Funds). Across the U.S., individuals and Syndicate Funds tend to fall into the smaller end of the SPV size spectrum, yet in the Southeast it appears these organizers are gathering larger-than-typical amounts of capital. Given deal sizes in the Southeast lean smaller than traditional hubs like the San Francisco Bay area and New York, it’s possible that these larger Southeast SPVs are being deployed into multiple assets. Southeast SPVs could also be more likely to lead (or fully fund) the round of investment they're participating in, resulting in higher SPV sizes.

Bar Chart of Typical Number of Investors in SPVs in Southeast U.S.

Investor Participation

The median Southeast SPV raises from 13 investors and the average from 31. For reference, in other geographies the median SPV raises from 11 investors and the average from 23 – significantly less than the Southeast standard.

Southeast SPVs are using more investors to round out their fundraising.

SoutheastSPVs-InvestorCount

Although the median Southeast SPV raises larger checks from each investor ($48K) than the rest of the U.S. ($33K), there appear to be fewer outlier investor allocations in the Southeast. While the average SPV across the U.S. collects $319K per investor, in the Southeast that figure is just $105K – this points to a bunching of Southeast SPVs around the $50K to $100K per investor mark.

Typical SPV Capital Per Investor,  in Southeast U.S., Bar Chart

Southeast SPVs tend to set higher investment minimums than the rest of the U.S., but generally avoid exceptionally high minimums.

The median investment minimum in the Southeast is $25K, greater than the $10K median for other regions, but the average only increases to $44K, versus $95K throughout the U.S.

This means that although the “typical” Southeast SPV is less accessible than in other regions, the majority of Southeast SPVs are still very accessible to investors – the region lacks SPVs at the upper extreme of investment minimums ($100K+).

Typical Investor Minimums per SPV,  in Southeast U.S. - Bar Chart

Asset Deployment

The median Southeast SPV deploys capital into its first asset just 42 days after forming the vehicle. This is slightly slower than other regions, where the median is 36 days.

SoutheastSPVs-DeploymentSpeed

Southeast SPVs are more likely to be multi-asset than in other regions: 36% have purchased multiple assets compared to 25% of SPVs in the rest of the U.S.

Asset Composition within SPVs in Southeast U.S.

Like everywhere, Southeast SPVs lean heavily into traditional startup purchase agreements (SAFEs, Convertible Notes, Stock/Secondary sales), but have a larger presence of other agreement types (a third of SPVs versus 16%). These other purchase agreements encompass everything from real estate to crypto tokens to collectibles, suggesting many of the individual organizers in the Southeast are using SPVs to allocate to the private markets beyond startups.

SoutheastSPVs-PurchaseAgreements

Management Fees

Although management fees are rare across the U.S., Southeast SPVs are exceptionally unlikely to charge a management fee: just 4.5%. This means most of the organizer’s compensation for forming the SPV comes in the form of carry if the investment is successful. 

When Southeast SPVs do charge a management fee, the average fee is 4.9% over the lifetime of the SPV and the median is 1%. This compares to an average of 3% and a median of 1.9% for SPVs in other regions.

Management Fee Prevalence in SPVs  in Southeast U.S.


Subscribe to Assure Analytics to get updates as we release more data-driven articles and reports. This post is part of a series exploring SPVs between the coasts; the next article will look at SPVs in the Great Lakes-Midwest.

 

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