ASSURE ANALYTICS INSIGHTS
Posted by Assure Analytics ● Jul 11, 2022 3:55:34 PM
From Syndicate Funds to VCs to Family Offices and Beyond
In the recent State of the SPV report, Assure Analytics set forward a benchmark for SPV use across the entire special purpose vehicle ecosystem. The first-of-its-kind report identified norms for SPV size, number of investors, prevalence of management fees, investment minimums, investment timeframes, and more.
However, an SPV and its terms vary widely depending on the type of organizing entity leveraging the structure. Venture capital firms use SPVs differently than real estate funds, who use SPVs differently than angel groups or family offices.
Recognizing these valid differences, in the latest session of Assure Structured Live, we highlighted several key SPV terms for different organizer segments: specifically, Syndicate Funds, Angel Groups, VC firms, and Family Offices (FOs). This article is intended to outline several of the key findings from that presentation. For more detail, watch the full session on-demand here.
Syndicate Funds are a growing area of private investing that emphasize deal-by-deal choice for their investor networks (as opposed to blind-pool vehicles). Naturally, Syndicate Funds stand out for high SPV volume, raising vehicles of a standard size but from more investors.
In 2021, the median Syndicate Fund SPV raised a total of $413K from 18 investors. This compares to a market-wide norm of $422K but from 33% fewer investors (12). Further, while the typical organizer that raised an SPV in 2021 had a historical SPV cadence of three vehicles per year, the median Syndicate Fund organizer raising in 2021 had a historical cadence 2X higher at 6 SPVs per year.
Other characteristics of Syndicate Fund SPVs to note: they rarely charge management fees, they typically invest in just one asset (i.e. one startup), and frequently raise the SPV’s capital without an anchor investor.
Angel Groups typically use SPVs to bundle multiple checks from individual angels into a single position on a cap table. They tend to invest earlier than other investors (such as VCs or Family Offices). Accordingly, Angel Groups typically raise smaller SPVs than the market norm, but from significantly more investors.
The median Angel Group SPV in 2021 raised $267K from 20 investors. The average Angel Group SPV, meanwhile, raised from even more investors, at nearly 50. (Note the high average is driven largely by international Angel Groups – learn more here.)
Angel Group SPVs also congregate around single asset investments (84%), leaning heavily into preferred stock, SAFEs, and convertible notes. Moreover, it’s exceptionally rare for them to charge a management fee. On the other hand, they deploy capital slightly faster than market norms, with the median deploying capital 29 days after forming compared to 35 market-wide.
For greater detail on how Angel Groups use SPVs, check out our recent brief on Angel Groups & SPVs.
VCs use SPVs for a range of use cases: some VCs manage their core funds via a multi-asset SPV structure, but more commonly they use SPVs to take advantage of pro rata rights or to offer sidecar investments to their LPs. Venture capital firms raise slightly larger SPVs but from a standard number of investors, meaning the investors backing VC SPVs tend to write larger checks.
The median VC SPV in 2021 raised $664K from 12 investors.
Other characteristics of VC SPVs: they’re more likely than other organizer segments to charge management fees but still only do so 11% of the time, they frequently raise capital with a large anchor investor providing at least 20% of the SPV’s capital, and they lean heavily into preferred stock deals (aligning with the perception that SPVs are often used to maintain pro rata in later stage startups).
For more insights on how VCs leverage SPVs, check out the first piece in our newest series exploring VC sidecars, which leverages US-wide venture capital fundraising data provided by DifferentFunds.
Family Offices use SPVs for a wide range of assets, from startups to direct lending to art and everything in between. In some cases, they use SPVs to syndicate specific deals with a close network of coinvestors; in other cases, they use SPVs as a sole investor to help manage accounting and liabilities. Family Offices stand out for raising larger SPVs, with the 2021 median collecting $1.5M and the average nearing $4.5M. They also tend to raise more per investor than other organizer types: the average Family Office SPV holds $467K per investor, compared to $122K market-wide.
Family Office SPVs also generally avoid management fees, they frequently invest via preferred stock but also leverage other agreement types, and they are a bit slower to deploy capital (with the median purchasing its first asset 45 days after forming vs 35 for the market).
Lastly, FOs aren’t as concentrated in single-asset SPVs as other organizer segments. This is likely due to Family Offices maintaining a broad portfolio of asset classes and using SPVs for more than just startup investments.
For a deeper dive into market-wide SPV terms, including some not discussed here, download Assure Analytics’ State of the SPV report. And for more data-driven insights on the private markets and SPVs, follow Assure Analytics here.
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