When you are a startup founder, raising funds requires both strategic insight and practical considerations.
One tool that has been gaining traction in this space is the Special Purpose Vehicle (SPV). To briefly recap its advantages:
By using a founder SPV, you:
- Save Time: Both for this investment round and for all future communications with your investors. And your time as a founder is one of your company’s most valuable assets.
- Save Money: On cap table management software and in legal fees for any cap table operation.
- Prepare for the Future: VC funds overwhelmingly prefer investing in companies with an uncluttered cap table.
- Leverage Diversity: Engage more operator investors, even if they're offering smaller checks, ensuring you don't miss out on high-value contributors.
While all these benefits hold immense value, our focus today narrows down on one particular advantage: the tangible financial savings an SPV can deliver. Let's demystify this with a comparative analysis.
Direct investment: a lifetime cost perspective
Consider a scenario where you're raising €300,000 from 30 investors, and they all feature directly on your cap table:
- Cap Table Management: An annual rate of €20 per investor for cap table management software over an 8-year period totals €4,800.
- Initial Closing: Documentation and signature collection amount to roughly €7,875, considering 45 minutes per investor and a legal fee of €350 per hour.
- Subsequent Closings: For three additional rounds, you're looking at an expense of €10,500, assuming the same legal hourly rate, and a reduced time of 20 min per investor for correspondence and signatures.
Cumulatively, you're facing costs amounting to €23,175 lifetime. And this does not even take into account the costs related to the ongoing operations requiring your shareholders' consent (e.g. general meeting, amendment of your shareholder agreement), which can quickly add up over a period of 8 years.
The SPV route: a leaner approach
Now, let's transpose this to an SPV framework:
- SPV Establishment: A singular expense of €6,000 excl. tax/ €7,200 incl. tax (for a French SPV as an example, see our pricing page for details).
- Cap Table Management: With just the SPV on your cap table, the 8-year cost is a mere €160.
- Initial Closing: This reduces significantly to €263.
- Subsequent Closings: An economical €350 for all three rounds.
In total, the SPV route costs just €7,973 for the lifetime of your startup.
The arithmetic is clear: by leveraging an SPV, you can potentially save a substantial €15,000 over the lifetime of the company.
The SPV pays for itself with your first closing, and it’s only profits from then on.
Beyond savings, the benefits in terms of streamlined operations and enhanced investor appeal make the SPV approach an option worth serious consideration.
As you plan your fundraising, bear in mind the tangible savings and strategic advantages an SPV can offer!