Founder's Guide to Special Purpose Vehicles

For startups, raising capital from many angels, customers, partners, influencers, and smaller VCs is one of the best ways to increase your odds of success. It's also one of the fastest ways to create cost, complexity, and risk that slows you down later.

That's why the startup ecosystem has started using legal entities to contain the complexity of involving many investors. These entities are generally referred to as "vehicles".

Used well, they can save your startup time, money, and maybe even save a future financing or acquisition:

"It felt like we were managing one check instead of 50. Founders looking to simplify their logistics while raising money from a lot of great angels should use [them]."

— Shrav Mehta, Founder and CEO, Secureframe

But used poorly, they can tie the startup and the founder to unnecessary fees, hidden risks, and administrative burdens.

This guide breaks down what these vehicles are, why companies use them, and the tradeoffs between the different options.

---

What Is a Special Purpose Vehicle?

A special purpose vehicle (SPV) is a legal entity formed to make one investment. The typical SPV "lifecycle" is:

1. A VC finds a startup to invest in, so they open an SPV.
2. Investors contribute capital to the SPV.
3. The SPV invests that pooled capital into your company.
4. In exchange for the capital, the SPV holds one SAFE, note, or share issuance.
5. On your cap table, you see one line item for the vehicle (instead of dozens of individual investors).
6. Investors in the SPV hold an interest in the vehicle (not the actual shares in your startup).

---

Why Founders Prefer Vehicles Instead of Direct Checks

For startups, taking direct investments from many investors appears straightforward, but creates several challenges:

• Cap table clutter. 20+ small shareholders signals “messy” to future VCs.
• Slower rounds. Every investor signature is another delay in closing.
• M&A friction. Buyers don’t want to add many rows to their own cap tables.
• Governance headaches. More investors means more approvals for key actions.
• Missed opportunities. Founders sometimes skip strategic investors just to avoid the mess.

"We signed over 30 SAFEs to raise initial funds. We feared chasing down all of those investor signatures in future financings."

— Marie Schneegans, Co-Founder, Markprompt

"The potential lead in my round brought up that my cap table looks crowd-funded."

— Anonymous Founder

Vehicles solve these problems by "containing" many investors in one row on the cap table, keeping your cap table clean while still letting you include the investors you want.

---

The Options Founders Have for These Vehicles

When founders consider using a vehicle, they generally have four options:

1. Do nothing (take direct checks, skip the vehicle)

• How it works: Each investor invests directly in your company.
• Pros: No intermediary, no upfront costs.
• Cons: Messy cap table, higher costs, slow diligence, hard governance.
• Best for: Very small rounds (1–3 investors).

2. Find a VC or 3rd party to lead an SPV into the company

• How it works: A VC or GP (general partner), external to the startup, sets up and manages the vehicle.
• Pros: Clean cap table, professional structure.
• Cons: The general partner now controls an entity on your cap table, and you see less of the capital because they charge investors fees (can be 2% management fee and 20% carry).
• Best for: Large, value-add investor groups you wouldn't have access to without the VC, where you’re comfortable with a GP being in the mix.

3. Use a vehicle created by a law firm or "entity-only" SPV provider

• How it works: A law firm or certain SPV providers form an entity and transfer ongoing responsibility to the startup.
• Pros: Consolidates investors to one line item. Typically lower upfront costs.
• Cons:
  • Service often ends after vehicle creation or document execution. Ongoing tax and compliance (K-1s, filings, distributions) become the founder's responsibility or require hiring additional third-party services.
  • Limited investor experience—basic document signing, inconsistent accreditation verification, minimal support.
  • No formal advisor to the vehicle. Responsibility and potential conflicts remain with the founder.
• Best for: Limited scenarios where founders willingly accept ongoing responsibilities and risk.

4. Vehicles started and led by the company (Roll Up Vehicles).

• How it works: The startup creates the vehicle (without needing a VC to get started or lead it) while a software platform (like Rollups) handles filings/administration, provides investors with a seamless online investment experience, and manages tax compliance (K-1 preparation and distribution).
• Pros:
  • Clean cap table with one line item.
  • Turnkey solution for a one-time fee only due when you're done raising.
  • Full-service investor onboarding (white glove assistance, accreditation/KYC, and tax).
  • Platform-advisor included. The platform's advisor, not the founder, is responsible for making material decisions for the vehicle so the founder is not exposed to undue risk and conflicts.
• Cons:
  • Must source your own investors.
• Best for: Any round with 5+ angels where you want a clean, low-risk structure.

---

Cost & Risk: Side-by-Side Comparison

Here's how a $500K raise from 20 angels compares:

Structure	Capital Invested	Capital Reaching Company At Close	Entity Risk for Founder	Long-Term Risks
Direct checks	$500K	$500K	N/A (no entity)	Slower rounds, harder M&A
Traditional SPV	$500K	~$485K (after investors pay SPV admin fees and 1% management fee to GP)	Low (GP assumes role)	GP tied to your company forever
Law firm / Entity-only SPV vendor	$500K	~$400–450K (fees billed hourly + separate annual compliance + 3rd-party tax services)	High (no advisor- responsibility flows back directly to founder)	Founder stuck managing tax, filings, disputes
Roll Up Vehicles (company-led vehicle)	$500K	$500K (flat fee paid by company, only at close)	Low (platform-provided advisor assumes role)	Minimal ongoing risk

Final Thoughts

Investment vehicles have become an essential tool for startup fundraising. They solve real problems that founders face when raising from multiple investors - from cap table complexity to administrative overhead.

The key is choosing the right structure. Each option comes with different tradeoffs in terms of control, cost, and complexity. Here are some key questions to ask while picking a solution:

1. Do you formally advise the entities you create to de-risk this for me and my startup?
2. Who handles K-1s, tax filings, and compliance? Are you outsourcing this? What are their fees?
3. What will my costs be in year 2? Are there any hidden fees?
4. What is the investor experience like?

For founders who have used Roll Up Vehicles, the feedback has been consistently positive:

"Everything just worked. Our investors loved the simplicity, and I loved that I could bring in the right people without creating a cap table nightmare."

— Zain Rizavi, Co-Founder & CEO, Cimento AI

"The Rollups team provided excellent service in the RUV process — professional, fast, and reliable. In moments when founders feel lost, they brought clarity."

— Kristie D'Ambrosio-Correll, CEO & Co-founder, Dacora Motors

"RUVs made it easy for our UK-based company to raise $1M+ from investors, regardless of where they were."

— Jonas Templestein, Founder/CEO, Iterate.com

"We used AngelList RUVs to get great people onboard without the typical admin overhead of a large cap table. Incredible experience for founders & investors."

— Alexis Rivas, Co-founder and CEO, Cover

"We signed over 30 SAFEs to raise initial funds. We feared chasing down all of those investor signatures in future financings. Our investors were happy to execute the Rollup, saving us ~$20k and ~2 weeks."

— Marie Schneegans, Co-Founder, Markprompt