What are SPVs?

As an investor, finding the right investment can be tricky. From vetting the business model and founding team to digging into financials and user traction, there are many things to take into consideration before pulling the trigger on an investment. Another thing to consider is how the investment is structured. For venture capital, one common investment structure you’ll see is the special purpose vehicle (SPV).

Equity crowdfunding was first legalized in May 2016 with the passage of Regulation Crowdfunding (Reg CF), which Wefunder’s co-founders lobbied Congress for back in 2012. We have since referred to that set of laws as “flawed” in a variety of ways - most notably, investment limits ($1M per year) that limit the viability of Reg CF as a fundraising tool for later-stage and capital intensive businesses. Another critical but much less talked about problem with the original rules was that the legal structures they required made it much more complicated for companies to grow and raise more money after raising under Reg CF.

On January 14, 2021, the SEC adopted some really exciting changes to equity crowdfunding that will go into effect on March 15th (note: it’s possible that President Biden’s Regulatory Freeze will delay this date until later in March)! Those changes include increasing the limits of what companies can raise via Regulation Crowdfunding (Reg CF) from $1.07M to $5M, and Regulation A+ from $50M to $75M, as well as extending COVID relief measures for an additional 18 months.