SPV Process Guide: How Pre-IPO Investments Are Structured

Most individual investors do not buy shares in a private company directly. Instead, they invest through a Special Purpose Vehicle — an SPV — that pools capital into a single holding. Understanding the structure is as important as understanding the company.

What an SPV is

An SPV is a legal entity created for one purpose: to hold a stake in a single company on behalf of its investors. When you commit, you are buying an interest in the vehicle, and the vehicle owns the shares. This lets many investors participate through one line on the company's cap table.

How the process typically works

• The vehicle is formed and the target allocation is confirmed.
• Investors review terms, subscribe, and complete identity and accreditation checks.
• Capital is called and the vehicle purchases the shares.
• The vehicle holds the position until a liquidity event, then distributes proceeds.

Terms worth reading closely

• Management fee and any carried interest, and how they affect net returns.
• What information rights the vehicle passes through to investors.
• How the position is valued between now and exit.
• What happens if the company stays private longer than expected.

A well-run SPV offers access and simplicity; a poorly understood one can quietly erode returns through fees and terms. Reading the structure carefully is part of underwriting the investment, not a formality after it.