We view the decision to use or not use an Special Purpose Vehicle in your raise as a business decision that the company should make based on their circumstances.
If that happens, we’ll talk to you toward the end of your campaign, and work with your investors to instead invest directly and re-execute their offering documents.ĭoes SeedInvest have a preference as to whether we use an SPV for our raise? We get it – you can’t read the future, and we aren’t going to force you to keep an Special Purpose Vehicle if only one or two investors come in through the SPV. What if we set up an SPV, but only one or two investors invest in it? For investors investing directly, the Company has the obligation to do so, and you should consult with your lawyers on your obligations. Typically, however, “Blue Sky Filings” refer to a company’s obligations under state law to file notice of their offerings if offering their securities in a particular state.įor investors investing through the SPV, the fund manager takes care of the applicable Blue Sky filings. Those state laws are commonly referred to as “Blue Sky Laws”, and are designed to protect investors against fraud. Here, CA and AZĪlthough the Security Exchange Commission (the “SEC”) is the main enforcer of securities laws in the United States, every state also has its own set of securities laws. Special Purpose Vehicles with 10 investors who are from NY, CA, and AZ would cost ~$2,385. Therefore, there are no Blue Sky pass through costs added to the base SPV fee. This is because New York does not charge any Blue Sky filing fees. SPV with 10 investors, all of whom are from NY would cost $2,110. The SPV manager passes through the associated costs of filing in those states. Other states, like Arizona and California do have filing fees. Some states, like New York, do not have a Blue Sky filing fee. The variability arises because the SPV Manager passes through the costs of making the applicable Blue Sky filings, described below. The Special Purpose Vehicle costs $2,110 to set up. Special Purpose Vehicles – Pros & Cons: Pros & Cons of using Special Purpose Vehicles *Although this table doesn’t represent all the benefits or drawbacks of using an SPV, these are what we believe to be the most pertinent for many companies to consider when deciding whether to utilize one in connection with their raise. In the context of raising capital, a SPV (usually structured as LLC) can be used as a funding structure, by which all investors (or investors under a given investment threshold) are pooled together into a single entity. A Special Purpose Vehicle (SPV) is a legal entity created for a specific purpose.