Why invest in start-ups through an SPV?

Long reserved for venture capital funds and the most established business angels, start-up investing is becoming more democratic and more professional. It is now possible to invest in young French Tech ventures with a relatively accessible entry ticket and considerably lighter formalities. Among the structures that have enabled this shift, the SPV (special purpose vehicle) holds a prominent place: it offers many advantages, both for investors and for the start-ups themselves.

What is an SPV?

An SPV (special purpose vehicle, or véhicule ad hoc) is an investment vehicle created for a specific purpose. Unlike an investment fund, which follows an often very broad investment policy and a horizon of several years, the SPV has a targeted object: investing the funds raised from several investors in one or more specific start-ups. These targets may be at the pre-seed stage or more mature (Series A, B or C).

The mechanism is simple to understand:

• The investor becomes a shareholder of the SPV by subscribing to the shares it issues.
• The SPV itself becomes a shareholder of the target start-up(s).
• The investor therefore holds, indirectly, shares in the target start-up(s).

In the event of success, when the SPV exits the target start-up(s) (sale, IPO, buyout), the investor will be able to realize a capital gain pro rata to their participation. The SPV thus acts as an aggregator: it brings together a multitude of investors within a single legal entity.

What are the benefits of investing in start-ups through an SPV?

For the start-up

Using an SPV makes fundraising easier and less costly, and helps maintain a concentrated capitalization table, without having to coordinate dozens of small investors during the collective decisions and events that punctuate the company's life.

Easier fundraising: founders negotiate with a single counterparty, the SPV's representative, rather than with dozens of investors with differing requirements. This centralizes negotiations and saves time, and therefore money, at a moment when speed of execution is crucial for a young company.

A clean capitalization table: since all investors are grouped within the SPV, the start-up counts only one additional shareholder in its capitalization table. Management of shareholding and corporate life (decision-making, distributions, future operations) is thereby simplified, and communication between founders and investors made considerably smoother.

Attractiveness for subsequent rounds: a clear and readable cap table reassures the institutional investors who will step in during later fundraising rounds. A fragmented shareholding structure, by contrast, can slow down or complicate future financing rounds.

For investors

Thanks to the SPV, investors can invest collectively and take part in fundraising rounds that are sometimes significant, in start-ups with strong growth potential.

Financing companies with strong growth potential: the SPV makes it possible to take part in a sometimes sizeable round while committing only a measured portion of one's capital, the minimum ticket generally being more accessible (on the order of 500 euros relative to the market). Investors can thereby diversify their portfolio by multiplying SPVs, and thus the opportunities as well as the probabilities of achieving a successful exit.

More weight in negotiations: by investing collectively, investors have far greater bargaining power than they would have alone with a small ticket. They can thereby obtain rights (information, preference, anti-dilution) generally reserved for major investors.

Access to expertise and a network: for investors less familiar with the start-up ecosystem, the SPV provides access to the network and the skills of the vehicle's initiators, who are often more seasoned. The lead investor carries out the sourcing, due diligence and follow-up, which pools the analytical work for the benefit of all.

Simplified monitoring: rather than managing each participation individually, the investor has a single point of contact and consolidated reporting at the level of the vehicle.

And for more professional investors

Venture capital investors sometimes use this type of SPV to invest in start-ups that would not fit the investment policy of the fund(s) they manage or in which they are committed.

The SPV is also an excellent way to build a track record as a venture capitalist, in order to attract the attention of future subscribers who may, depending on the performance demonstrated, wish to subscribe later to a larger fund.

Furthermore, the investors behind the opportunity can be compensated in several ways, in particular:

• performance-based compensation, through a mechanism close to carried interest, typically allowing them to receive 20% of the capital gain generated upon exit from the investment;
• where applicable, compensation for their role as a manager of the vehicle, when they take on its management.

This structuring aligns the interests of the SPV's initiator and the investors: the former is fully compensated only if the operation creates value for the latter.

What about the drawbacks?

An SPV is a company that is inserted between the start-up and the investors. Adding this layer can have tax consequences if the structuring is not done carefully. Good engineering, however, makes it possible to neutralize them, in particular by complying with the conditions of the parent-subsidiary regime (régime mère-fille) or the long-term capital gains regime (régime des plus-values à long terme).

Under certain conditions, individual investors (those who do not invest through a company) may also be eligible for incentive schemes for investment in SMEs, such as the IR-PME income tax reduction (Madelin scheme). It is nevertheless advisable to verify in advance the compatibility of the SPV's structure with these benefits, as their application is not automatic.

Two other points deserve attention:

• No individual decision-making power: investors do not directly exercise their rights within the start-up; they express themselves at the level of the SPV, whose representative carries the collective voice.
• Liquidity to anticipate: like any investment in unlisted assets, the horizon is long term and liquidity is not immediate. It is precisely on this point that tokenization brings an innovative answer, as detailed below.

Why invest in an SPV with Equisafe?

Equisafe supports start-ups during their fundraising and when bringing key people into their capital (issuance of BSA, share subscription warrants, or BSPCE, founder share warrants), by digitalizing and automating the creation of these financial securities as well as their tracking, all in a secure manner thanks to the blockchain. Equisafe thus offers its clients a capitalization table updated in real time and a more immersive shareholding experience.

With its SPV offering, Equisafe enables you to set up a vehicle within a reduced timeframe, thanks to an efficient procedure and partnerships with recognized legal professionals.

Automatic generation of documentation: based on the answers provided on the platform, Equisafe generates all the documents required for the SPV's registration (bylaws, beneficial owners declaration) as well as for its fundraising rounds (subscription forms, minutes of the collective decisions of the shareholders and of the president).

End-to-end administrative management: capital calls from investors, regulatory identity verification (KYC, Know Your Customer / AML, Anti-Money Laundering), electronic signature of the legal documentation, allocation of fees among investors pro rata to their investment, registration of the securities on the blockchain, and management of the securities throughout the SPV's life via an intuitive, paperless interface personalized for each shareholder. Equisafe handles the entire operational chain.

Institutional-grade security, in two respects:

• Legal security: the SPV offering has been structured with partner lawyers in order to provide maximum legal robustness to our clients.
• Technological security: ownership of the shares issued by the SPV is guaranteed by the blockchain. Since the Blockchain Ordinance of 8 December 2017, it has been possible to record the shares of unlisted companies in a shared electronic recording device (DEEP, dispositif d'enregistrement électronique partagé). The SPV's shares are therefore issued and then tokenized, that is, recorded in a tamper-proof manner on the blockchain.

Tokenization on EVM chains: Equisafe relies on EVM-compatible blockchains (Ethereum Virtual Machine), a proven and interoperable industry standard. This technology guarantees the traceability, integrity and auditability of each security, while opening the way to programmable and automated management of the rights attached to the shares.

A mastered regulatory framework: Equisafe conducts its activity in compliance with the applicable European and French frameworks, in particular the requirements of the AMF (the French financial markets authority) and the MiCA regulation governing digital assets. This native compliance, built in from the platform's design, gives founders and investors alike the security of a regulated environment.

Possibility of a secondary market: subject to the provisions of the bylaws and, where applicable, the shareholders' agreement (pacte d'associés), the Equisafe platform allows investors to transfer their shares to third parties. Tokenization technically facilitates these transfers and constitutes a powerful lever for bringing liquidity to shares that are traditionally illiquid, thereby addressing one of the main obstacles to investing in unlisted assets.

In summary, the SPV is a powerful tool for democratizing start-up investing, pooling resources and cleanly structuring shareholding. Equisafe, its lawyers and its legal partners support you at every step: structuring, formation and management of the vehicle throughout its life, with the security and compliance of an institutional-grade market infrastructure.