Special Purpose Vehicles and how founders can use them

For founders raising money during the early stages of their startup, it can get difficult juggling between building, hiring and raising funds. While the first two are not going to get any easier (if it easy, why do it?), fundraising can.

With Roll-Up Vehicles (RUVs), founders who already have investor interest can go from collecting commitment to getting money in the bank within a few weeks.

RUVs have found popularity over the last few years as they make the process more efficient, allowing founders to keep their cap table clean and focus on more pressing matters.

What are Roll-Up Vehicles?

They are a kind of Special Purpose Vehicle (SPV) that doesn’t require any one investor to take up the role of “leading” the round with special responsibilities.

For the uninitiated, an SPV is a legal entity created by a company for a specific purpose or project. In startup parlance, they are a way to raise money from a syndicate of investors.

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However, SPVs are not unique to startup investing and have in fact, over decades, been used by companies to isolate certain assets, as well as to form joint ventures. Since these vehicles have their own specific assets and liabilities that don’t appear on the parent company’s balance sheet, any risk involved therefore doesn’t legally carry to the parent company either.

But why do founders need them?

More is Less

When you are just starting up, you will meet operators who you want invested in what you are building, and not all of them will have the individual cheque size that you are looking for. What do you do? Get 50-odd investors on your cap table at tiny cheque sizes?

That’s where RUVs are so helpful.

You can bring in all those investors into a single vehicle, which then becomes the entity that invests in your startup.

A single line on the cap table while you get funded by 50 different investors, imagine that.

This is incredibly useful as operator investors add more than mere money to your startup, as they all come with their own set of individual expertise, and the ability to open their respective networks up for you whenever you need them.

Having them onboard means they have skin in the game, and want you to succeed!

Time is Money

Getting individual investors to commit, sign documents and wire you the money can take up way more of your time than you can possibly afford. This becomes especially difficult in the early days when you have to be on top of everything, and singlehandedly determine which way your business would go.

When you form an RUV with Infinyte, you get a single link to share with all your potential investors and everything else is taken care of.

But, there are restrictions

All investors who invest in startups, through a Roll-Up Vehicle or otherwise, must always fulfil certain accreditation criteria that make them Eligible Angel Investors. By definition, that means:

For an individual investor, one needs to have net tangible assets of at least INR 2 crore excluding the value of his/her principal residence and who:

has early stage investment experience, or
has experience as a serial entrepreneur, or
is a senior management professional with at least 10 years of experience

A body corporate (LLP, Company) needs to have a minimum net worth of INR 10 crore to qualify.
For an AIF, registered under SEBI AIF Regulations, 2012 (‘SEBI AIF Regulations’) or a Venture Capital Fund (VCF) registered under the SEBI (Venture Capital Funds) Regulations, 1996

Investors cannot invest in an RUV through a joint account, partnerships, proprietorship, or trust entities.

How can I use an RUV to raise funds?

If you are a private company who fulfils the requisite criteria, we can help.

In a series of simple steps, you can go from having investor interest to money in your bank. Get in touch and we’ll take it from there.