SPVs aren’t free

There are costs involved with setting up and managing an SPV:

Filing fees with the State of Delaware.
“Blue Sky” state filing fees.
The costs to send out distributions and issue tax statements (often a decade in the future) for exit events and shut downs.
The cost of sourcing compelling startup deals and creating the investor information.

Blue Sky Fees? Sounds cool, but aren’t.

Make a note of “Blue Sky Fees.” Blue Sky fees are state regulatory fees. Each state has its own fee, and the fees owed depend on where the investors in the SPV live. This means it is impossible to know what an SPV is going to cost until all the investors are known. SPV organizers can provide a best guess (usually $4500-$8000), but it’s going to just be a guess until the SPV is closed.

Also note that if you invest directly in a founder's cap table, the founder needs to pay Blue Sky fees on your investment. So, there is no getting around this BS (BS=Blue Sky—what did you think we meant?).

Who Pays?

All of these costs are split pro-rata between the investors on the SPV. The more money invested in the SPV, the lower % of the total investment amount those costs consume. Most SPV platforms (AngelList and Play Money included) cap SPV fees passed on to investors at 10%.

What this means to you? If an SPV hits its maximum 10% in fees, your $1000 investment becomes $900 invested in the company.

And yes, this could mean that there will be SPVs that don’t garner sufficient investor interest to cover all these fees. In this case, there are two options. The SPV can be cancelled or the SPV organizer (or founder) can pay the fees that aren’t covered by the 10%.

SPV Fees