Brian Nichols is the co-founder of Angel Squad, a community where you’ll learn how to angel invest and get a chance to invest as little as $1k into Hustle Fund's top performing early-stage startups.

Let's say you hear about an amazing startup raising money. The founders are solid, the traction is real, and your investor friend who has great judgment is putting money in.

There's just one problem. The minimum check size is $50K and you've only got $10K to invest.

Enter the SPV.

A Special Purpose Vehicle (SPV) is basically a group investment where multiple people pool their money to invest in a single company. You put in $10K, nine other people put in $10K each, and boom, you've got a $100K check that gets you access to the deal.

SPVs are becoming a permanent part of the startup investing landscape. At Angel Squad, we use SPVs regularly to give our members access to Hustle Fund's deal flow. Members can invest alongside us in vetted companies with check sizes as low as $5K-$10K instead of the typical $25K-$50K minimums these startups require.

But should you invest through one? Let's break it down.

How SPVs Actually Work

Think of an SPV as a mini investment fund built for exactly one purpose: to invest in one specific company.

Someone (usually called the lead investor or GP) finds a promising startup, negotiates the terms, and then rallies other investors to join. Those investors become limited partners (LPs) in the SPV.

The SPV is typically structured as an LLC or LP. You buy units in the SPV, and the SPV owns shares in the startup. On the startup's cap table, they see one line item for the SPV, not 50 individual investors. This keeps things clean.

The typical flow looks like this:

• Lead investor sources deal and negotiates terms
• SPV is formed with specific investment thesis
• LPs commit capital (usually $5K-$25K minimums)
• SPV invests in the startup
• Lead manages relationship with startup
• When the startup exits, profits flow back to LPs based on their ownership

Simple in theory. Messier in practice.

Something to Consider

Most people don't realize this when they invest through an SPV: you have basically no rights.

You're not on the startup's cap table directly. You don't get voting rights. You don't get pro-rata rights to invest in future rounds. You can't join board meetings. You're not getting monthly updates from the founder unless the SPV lead decides to share them.

All your access to the company flows through the lead investor. If they stop communicating, you're in the dark. If they make decisions you disagree with, tough. You gave up your governance rights when you joined the SPV.

For most angel investors, this is fine. You're making a small bet on a company you believe in, and you're happy to let someone else do the heavy lifting.

But if you're the type of person who wants to be actively involved, who wants to advise the founders, who wants to leverage your expertise, an SPV might frustrate you. You're paying for convenience, but you're also paying for distance.

The Good Scenarios for SPVs

Despite the limitations, SPVs solve real problems. They work well in these situations:

Access to deals you couldn't access otherwise. Maybe you're not an accredited investor yet, or you don't have the minimum check size, or the round is oversubscribed. An SPV organized by someone with better access gets you in the door.

Learning without huge financial risk. If you're new to angel investing, putting $5K-$10K into a few SPVs lets you learn how startup investing works without betting your entire portfolio. You'll see how deals get structured, how companies report progress (or don't), and how exits happen.

Diversification when you don't have much capital. Instead of writing one $50K check to one company, you can write five $10K checks across five different SPVs. More shots on goal. Better odds that one of them works out.

As Elizabeth Yin, Managing Partner at Hustle Fund, puts it: "For Hustle Fund we tend to do a very good job of diversification across many different dimensions. Whether it's geography, founder archetype, industry." This thinking applies just as much to individual angel investors building their portfolios through SPVs.

Investing alongside smart people. If the lead investor has a strong track record and deep expertise in a particular space, riding their coattails can be a smart move. You're essentially outsourcing due diligence to someone who knows what they're doing.

Follow-on investments when the main fund is tapped out. VCs often create SPVs to put more money into their best portfolio companies when their main fund has already hit concentration limits. These can be great opportunities because the VC has insider information and knows the company is performing well.

How to Evaluate an SPV Opportunity

Before you commit money to an SPV, ask these questions:

Who's leading it? What's their track record? Have they invested in successful companies before? Are they respected in the startup community? Do they have relevant expertise?

This matters more than you think. When you invest in an SPV, you're betting on both the company and the lead. A great company with a terrible lead can still be a bad investment if they don't communicate or manage the relationship properly.

What are the terms? What's the valuation? What instrument are you investing on (SAFE, priced equity, convertible note)? What fees will you pay? When are those fees due?

Why does this SPV exist? Is the lead passionate about this company? Or are they just trying to fill their allocation? Is this an opportunistic follow-on investment in a winner, or a first check into an unproven company?

How will communication work? Will you get quarterly updates? Annual updates? No updates? How will you find out if the company raises more money or gets acquired?

What happens in different exit scenarios? Walk through the math. If the company gets acquired for $50M, what does your $10K turn into? What if it's $200M? What if the company dies and you get nothing?

Should You Invest Through SPVs?

It depends on what you're trying to accomplish.

If you're brand new to angel investing, SPVs are a relatively low-risk way to get started. You can learn the mechanics without committing huge amounts of capital. Just make sure you're investing with experienced leads who have a track record.

If you're an experienced investor with significant capital, you might find SPVs frustrating. You're giving up control, paying fees, and not building direct relationships with founders. At a certain point, you're better off just writing checks directly.

If you're somewhere in the middle, SPVs can be a useful tool in your portfolio alongside direct investments. Maybe 20-30% of your angel portfolio comes from SPVs in companies you couldn't access otherwise, and the rest is direct investments where you have more involvement.

The key is to be intentional. Don't just invest in every SPV that gets forwarded to you because it sounds exciting. Pick your spots. Invest with people you trust. Do your own diligence even if the lead has already done theirs.

How to Find Good SPV Opportunities

The best SPV opportunities usually come through your network. Someone you know and respect is putting together a deal and invites you to participate.

If you're not in those networks yet, this is how to get there:

Join communities where deal flow happens. Angel Squad is obviously one option, but there are also various regional angel groups.

Follow GPs who regularly create syndicates on platforms like AngelList. You can join their deal flow and get access to companies they've sourced and diligenced.

The main thing is to be patient. Good SPV opportunities take time to find. Don't rush into the first one that comes along just because you're eager to invest. Wait for deals that make sense for your strategy and budget.

The Bottom Line

SPVs are a tool, not a strategy.

They can give you access to companies you couldn't invest in otherwise. They can help you learn and diversify. They can connect you with experienced investors who do the heavy lifting.

But they also come with fees, limited rights, and potential conflicts. You're one step removed from the company. You're dependent on the lead investor to manage the relationship and communicate effectively.

For the right deals and the right leads, SPVs make a lot of sense. For everything else, you might be better off investing directly or just skipping the deal entirely.

If you're trying to figure out how SPVs fit into your broader angel investing strategy, Angel Squad gives you the chance to invest alongside Hustle Fund through curated SPV opportunities. Every week we host virtual events where you can see how we evaluate deals, meet founders who are raising, and get access to investment opportunities with low minimums. We'll help you figure out what actually makes sense for your situation, without the usual VC BS.