🎨 The Art of Running a SPV (v2)

Running a Special Purpose Vehicle is a high-wire act. You're caught between founders who need quick answers and investors who need time to decide if they want to participate in the investment. Capital isn't committed until it is. Timelines shift. Allocations change. Everything's negotiable until it isn't.

This isn't science—it's art. But there are best practices that separate great SPV operators from syndicate leads who flame out after their third deal.

The Two-Front Battle

Traditional VCs have it easy (okay after they go through their own fundraising battle). Their capital is already raised. They decide how much to invest, sign the docs, and wire the money from their bank account to the company.

Syndicate leads? You're simultaneously fundraising AND investing. You're promising founders you'll deliver (and/or providing transparency into your process) while scrambling to rally your LPs. You're telling LPs they need to move fast while hoping the founder gives you the necessary time. It's no wonder most SPV managers quit—the expectations rarely match reality.

The key to survival: ruthless expectation management on both fronts.

Talking to Founders: The First Conversation Sets Everything

When you're securing an allocation, educate the founder immediately on the SPV process. Don't assume they understand how SPVs work—most don't.

Here's what I tell them upfront:

"I'll prepare a deal memo presenting your company to our LP network. Could range from 1,000 words to a full investment thesis. I'll need about two weeks to nail down our final commitment amount, but I can move faster if the round demands it. Some LPs will have questions—I'll batch them so I'm not bothering you constantly, but ideally will answer them without needing to relay to you. Beyond that, I handle everything. You won't need to wrangle capital or manage investor communications."

The critical message: No capital is guaranteed until it's wired. Set this expectation early. It makes difficult conversations later infinitely easier.

The Check-In Cadence

Standard operating procedure: two updates over two weeks.

Week 1: Initial outreach to LPs. Gauge interest. Get initial commitments.

Week 2: Issue closing call. Firm up commitments. Provide the founder with a final number.

Some founders want more communication. Some want less, so it’s important to align when securing the allocation to provide the right amount of communication requested.

I’m not saying i’d recommend this, but it sure is great when you can under-promise and over-deliver. Whether its the amount of time to close or the amount of capital raised, this really can make a great impression on the founder of you being a man/woman of your word and executing your SPV well. 

When to Communicate More

Two scenarios demand increased founder communication:

1. Competitive rounds. If multiple investors are circling, provide near real-time updates. Founders will cut loose the SPV that feels uncertain or lacks communication. You can lose allocations mid-process—I've had this happen unfortunately. There was a miscommunication about having allocation secured and us waiting to see if more capital would come in, only to get an email from the founder that the round was now closed and we are not getting allocation. A rare case here, but nonetheless it resulted in the loss of an allocation.

2. Tight deadlines. If the founder needs frequent updates to finalize their cap table, agree on a cadence and stick to it. They're juggling multiple investors; your transparency makes their life easier, and by keeping them informed it will increase the chances of getting your full allocation as they can account for you before whatever other allocation requests come in.

When You Can't Raise Enough

This is where that upfront education on SPV process pays off.

Call/email/text the founder immediately. Don't wait. Don't hope it'll magically work out (even though it’s technically possible).

Explain why the interest level was lower than initially expected. Take responsibility where appropriate. After hundreds of SPVs, I have a pretty good understanding of which deals will perform—but sometimes I still misjudge and can be pretty off. Give them honest feedback about why LPs passed or why you believe you raised less capital than expected. They deserve it.

An alternative option: Co-syndicate the deal to get external support to fill the allocation. Partner with another syndicate lead to pool your networks and capital. You'll split economics, but closing the deal beats not getting a deal done and letting down a founder.

When You Raise Too Much

Good problem to have—but also need to optimize capital.

The moment you sense you have a good shot at oversubscribing your requested allocation, alert the founder. Can they accommodate more capital? Your odds are best if you move quickly (less time for them to allocate to other investors) or if you bring value to the table.

In competitive rounds, there might be zero wiggle room. LPs understand (most of mine do) a portion of their capital sometimes gets returned when oversubscribed... It happens.

Pro tip: Get a sense early whether the founder could potentially accept additional capital. Don't over-promise, but gauge flexibility.

Founder reality check: Many founders make rounds sound more urgent than they are. "Need to know by Friday" often has elasticity. But don't count on it—every founder wants to close quickly and get back to building.

Talking to LPs: Managing the Moving Target

Timelines change. Allocations change. Capital commitments change. Welcome to the syndicate lead life :)

Driving Urgency (When It's Real)

Our standard timeline is 1-2 weeks for LPs to evaluate a deal, but we've spent years educating our LP base. When you're starting out, expect more pushback, questions, and challenges to hit that timeline.

Many of our LPs have other jobs etc., so they are not always prioritizing deal review. The educational piece of timeline is so important for LPs to understand, in turn so GPs can get deals done.

Two legitimate urgency drivers:

1. Your SPV is filling fast → Signal that other LPs are moving quickly. Creates healthy/legitimate FOMO. It’s informative and should only use this if additional allocation isn't guaranteed so that LPs are aware.

2. The round is closed or oversubscribed → The company is waiting on you. This urgency is founder-driven, which makes it completely legitimate. Use it to drive LPs in the evaluation stage to make a decision. 

Manufacturing fake urgency can damage a reputation and catch up to you. You can probably get away with it 1-2 times, but if it becomes a habit, it's a very bad look in my opinion, and not a great LP experience. 

When You Can't Raise Enough (LP Edition)

Be honest. Not every deal works.

Tell committed LPs there wasn't sufficient interest to proceed. Explain why—and be specific. Usually it has nothing to do with deal quality. Maybe the sector's out of favor. Maybe check sizes didn't align. Maybe the timing was off. Generally speaking we see very early stage (pre-seed and seed) being increasingly tougher deals to get done, so sometimes the deal is just too early.

Specificity builds trust, even in failure.

When You Raise More Than You Can Invest

Transparency wins again.

You raised $300K but only got $200K of allocation. Explain to LPs why two-thirds of their commitment is being accepted and one-third is being returned. Most will or should understand—oversubscription can be a good sign. 

Some LPs won't love it, which is understandable too. Clear communication prevents this from becoming a relationship-killer.

When Your Allocation Gets Revoked

Sometimes you're mid-process on running an SPV and your allocation gets revoked. How you handle it will define your reputation with your LPs.

First, understand why it happened. The founder may have closed the round faster than expected, received institutional interest that took priority, or reduced their raise size. Or there were execution issues on your end—you didn't hit your minimum commitment, took too long to gather commitments, or failed to communicate progress effectively.

Own it if it's your fault. Did you miscommunicate timelines? Over-promise and under-deliver? Miss critical deadlines? If so, acknowledge it directly to your LPs. Explain what went wrong, what you've learned, and what you're doing to prevent it next time.

If it's not your fault, explain that too. The round may have become oversubscribed, a lead investor filled the allocation, or the company decided to take less capital. These situations are frustrating but not uncommon, and experienced LPs understand that these factors take place from time to time. 

Transparency is the only option for long-term trust. Send a clear update as soon as you know the allocation is gone. Explain what happened, whether it was within your control, and what you're doing next. How you handle setbacks reveals your character as a syndicate lead—communicate openly and take responsibility where appropriate.

The Bottom Line

Running SPVs can be much harder than it sounds as every deal is a balancing act between founder expectations and LP demands. You're managing two simultaneous negotiations where neither party has full information and everything can change at any moment.

This is art, not science. Every deal is different. Every LP has different expectations.The syndicate leads who succeed are the ones who embrace (or fight through) the chaos, communicate relentlessly, and never stop learning from what doesn't go as planned.

Having thick skin and bouncing back after losses is part of the syndicate lead role unfortunately. 

If you enjoyed this article, feel free to view our prior posts on adjacent topics 

• How We Closed 14 SPVs in One Month

• Are VCs the New Bankers

• VC Scouts: Why Waiting for Lead Investors Maximizes Syndicate Success

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✍️ Written by Zachary and Alex