Investors are increasingly turning to special purpose vehicles (SPVs) to gain access to shares of hot AI companies like Anthropic, Groq, OpenAI, Perplexity, and Elon Musk’s X.ai. While SPVs have been used by smaller investors for years, they are now being utilized by family offices and high-net-worth individuals to invest in the biggest names in AI.
The appeal of SPVs lies in the fact that early backers of sought-after AI startups often exercise their pro-rata rights, allowing them to maintain their percentage ownership by buying more shares each time the company raises funds. This creates an opportunity for SPVs to be formed, where multiple parties pool their money to share an allocation of a single company. These SPVs are then sold to external investors, often with significant fees attached.
VCs may offer access to SPVs to their existing limited partner investors, or they may use brokers to reach a larger pool of potential investors. This can result in multiple SPVs for the same AI startup, each with different terms and fees. Ken Sawyer, co-founder of Saints Capital, notes that fees and carry can vary widely, with some sponsors charging as high as 2% of the total investment and keeping 20% of the profits.
In some cases, SPVs are formed on top of other SPVs, creating a complex layering structure. For example, Menlo Ventures raised a $750 million SPV to invest in Anthropic, and some funds who invested in it then resold a portion of their allocation to other investors, charging additional fees on the second-layer SPV.
Investors looking to invest in Anthropic have many options due to shares being auctioned off as part of FTX’s bankruptcy. The FTX estate sold nearly $900 million worth of Anthropic shares. Glen Anderson, CEO at Rainmaker Securities, states that brokers created SPVs to buy Anthropic shares in response to the flood of shares on the market.
SPVs can also be formed in association with primary rounds of companies that are still in fundraising mode, allowing smaller investors to participate alongside major investors. Elon Musk’s X.ai, for example, raised capital through SPVs in its latest $6 billion round, with upfront fees and additional charges.
While SPVs offer a way for investors to access shares of hot companies, they come with high risks. Unlike venture funds, SPV backers do not receive direct information on the companies. Some investors caution against blindly investing in SPVs, highlighting the opaque nature of these vehicles and the potential for excessive fees.
In conclusion, SPVs provide an avenue for small, unknown investors to invest in the hottest AI startups. However, investors should proceed with caution and be aware of the risks associated with SPVs, including varying terms and fees and a lack of direct information on the companies.
