You found an investment you like.

Maybe it is a startup raising its next round. Maybe it is a secondary opportunity. Maybe it is a private company, real estate transaction, or another alternative investment.

Now you have a decision to make:

Do you simply invest your own money directly, or do you create an SPV and invite other investors to participate with you?

There isn’t one correct answer.

Sometimes the simplicity of investing directly is exactly what you want. Other times, organizing an SPV can turn a relatively small personal investment into a much larger opportunity—and potentially the beginning of an investment business.

The right answer depends on what you are trying to accomplish.

What Does It Mean to Invest Directly?

A direct investment is exactly what it sounds like.

You personally—or through an entity you already control—invest directly into the portfolio company or asset.

If you invest $50,000 into a startup, for example, you own the securities associated with that $50,000 investment.

There are no other investors for you to manage and no separate pooled investment vehicle sitting between you and the portfolio company.

That simplicity creates some significant advantages.

The Benefits of Investing Directly

1. Speed

Direct investing can be extremely fast.

You make the investment decision, complete the portfolio company’s documents, send your money and you’re done.

Leading an SPV requires additional steps. The vehicle needs to be established, documents prepared, investors invited and onboarded, commitments collected and money aggregated before the SPV can complete its investment.

If you have an allocation that needs to close immediately and you already have the capital available, investing directly will generally be the faster route.

Sometimes speed is all that matters.

2. No SPV to Manage

This may be the biggest advantage of going direct.

When you invest directly, you are responsible for your investment.

When you lead an SPV, you become responsible for an investment vehicle and its investors.

That can mean dealing with:

• Entity setup
• SPV documents
• Investor onboarding
• KYC/AML
• Accreditation
• Banking and money movement
• Securities filings
• Accounting and recordkeeping
• Tax returns and K-1s
• Investor communications
• Distributions
• Membership transfers
• Ongoing administration
• Eventual wind-down

Some of those activities can continue for years.

If you don’t want to run an SPV, don’t run one. Write your check and move on to your next investment.

3. Direct Ownership and Investor Rights

When you invest directly, you sit directly on the portfolio company‘s cap table.

There is no SPV between you and the investment.

That means whatever information rights, voting rights, pro rata rights, inspection rights or other benefits are associated with your investment belong directly to you.

There is an important caveat: your investment may not be large enough to receive any special rights.

A company may be willing to provide certain rights to an investor writing a $1 million check that it won’t provide to someone investing $25,000.

And that leads directly to one of the primary reasons investors organize SPVs.

Why Lead an SPV Instead?

An SPV—Special Purpose Vehicle—allows multiple investors to pool their capital into a single vehicle that makes an investment in an identified asset. Advantages of Using SPV as an I…

Instead of asking:

How much can I personally invest?

The question becomes:

How much can I invest with my network?

That changes the economics of the opportunity.

1. Make a Larger Investment

Suppose you have access to a $1 million allocation in a company you really like.

You personally want to invest $50,000.

Going direct means investing $50,000.

Organizing an SPV could mean investing the entire $1 million.

You might contribute $50,000 yourself and bring another $950,000 from investors in your network.

That is one of the fundamental powers of the SPV structure: you are no longer limited by the size of your personal checkbook.

You can aggregate capital from multiple investors and participate in opportunities at a scale that might otherwise be impossible.

My experience with SPVs over the years has also been that this can be particularly useful for newer investment managers. Investors aren’t necessarily being asked to commit capital to an unknown portfolio of future investments. They can evaluate the specific transaction in front of them. Advantages of Using SPV as an I…

2. Earn Economics for Organizing the Investment

If you invest $50,000 directly, your economics generally come from what happens to your $50,000 investment.

An SPV creates another possibility.

As the organizer, you may be able to earn carried interest and/or fees for sourcing, structuring and managing the opportunity.

Imagine that instead of investing $50,000 directly, you organize a $1 million SPV.

Your personal investment might still be $50,000. But you have now sourced and organized a $1 million transaction.

Depending on how you structure the SPV, you may participate in the economics generated by the broader investment—not simply the return generated by your personal capital.

That can be a powerful distinction.

My original analysis of SPVs identified deal-by-deal carry as one of the significant economic characteristics of the structure. Each SPV stands on the performance of its particular investment rather than having its economics blended across an entire portfolio of companies. Advantages of Using SPV as an I…

3. Build an Investor Network and Track Record

Writing your own check doesn’t build much of an investment organization.

Leading an SPV can.

Every SPV gives you an opportunity to identify a deal, evaluate it, present it to investors, execute the transaction and ultimately demonstrate how the investment performs.

Do that repeatedly and something important begins to happen.

Deal → Investors → Execution → Track Record → Trust → Next Deal

Your investors learn how you evaluate opportunities. They see how you communicate. They experience how you manage investments. And you begin developing a network of people who may want to participate in your next opportunity.

I wrote about this dynamic years ago: successful SPVs can help organizers build trust with both existing and prospective investors. Advantages of Using SPV as an I… As that credibility develops over multiple transactions, investors may become increasingly comfortable moving quickly when the organizer presents another opportunity. Advantages of Using SPV as an I…

One SPV can lead to another.

And another.

Eventually, what began as bringing a few people into a deal can become a repeatable investment business.

4. Gain Access to Larger Opportunities

There’s another potential advantage to aggregating capital.

Check size matters.

Imagine a company has a heavily oversubscribed financing round.

You call and say:

I’d like to invest $25,000.

Now imagine calling and saying:

I can bring $1 million.

Those are very different conversations.

An SPV can allow an investor with a relatively modest personal check to become the organizer of a much larger investment.

That larger check can potentially help an organizer gain access to allocations, develop stronger relationships with founders and sponsors, participate in future transactions, and potentially negotiate rights that wouldn’t be available with a smaller individual investment.

An SPV doesn’t guarantee any of those things. But aggregating capital can fundamentally change the position you occupy in a transaction.

So, Should You Invest Directly or Lead an SPV?

I think the decision can be surprisingly simple.

Invest directly when your priorities are:

Speed. You want to make the investment and close.

Simplicity. You don’t want responsibility for an investment vehicle or other investors.

Direct ownership. You want to sit directly on the cap table and control whatever rights accompany your investment.

Consider an SPV when your priorities are:

Investing more. You have access to an allocation larger than you want—or are able—to fund personally.

Earning economics. You want the opportunity to earn carry or fees for sourcing and organizing the investment.

Building a network and track record. You want to develop relationships with investors and potentially organize future transactions.

Increasing your access. You want to aggregate capital and potentially participate in opportunities at a scale greater than your individual investment would allow.

Neither approach is inherently better.

They accomplish different things.

The Historical Problem With SPVs

There is one obvious problem with the SPV side of this comparison:

SPVs require work.

That has always been the tradeoff.

You gain the ability to aggregate capital, earn economics, build an investor network and potentially increase your access.

But somebody still has to create and run the SPV.

Historically, that could mean lawyers, fund administrators, spreadsheets, emails, PDFs, bank accounts and a surprisingly large amount of manual work.

I wrote about this problem years ago. SPVs became dramatically more useful as technology and specialized administration reduced the time and expense required to establish them. Advantages of Using SPV as an I…

Today, software can take that evolution much further.

Sally Changes the SPV Side of the Equation

This is exactly why we built Sally.

Sally is SPV software built by SPV operators.

Instead of building a large administrative team around every SPV, Sally uses software to handle the repeatable work of launching and administering the vehicle.

Formation. Documents. Investor onboarding. KYC/AML. Accreditation. Banking and money movement. Securities filings. Reconciliation. Investor records. Distributions. Transfers. Tax coordination. Wind-down.

The objective is simple:

Make running an SPV easier, faster, smoother and more affordable.

The decision between going direct and organizing an SPV shouldn’t come down to whether you’re afraid of the administrative work.

It should come down to what you’re trying to accomplish with the investment.

If you want to write your check, own the investment directly and move on, go direct.

If you want to aggregate capital, make a larger investment, build an investor network, potentially earn economics and turn individual deals into something bigger, an SPV may be the better tool.

And if you choose the SPV route, Sally was built to make everything that comes next a whole lot easier.

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This article is for educational purposes only and does not constitute legal, tax, securities, investment, or financial advice.