In this episode of Venture Declassified, hosts Jacob Schpok, Ben Pidgeon, and Mike Kelly unpack the inner workings of Special Purpose Vehicles (SPVs) and their role in managing follow-on investments. Drawing from recent real-world scenarios, the trio explores how SPVs are structured, how pro rata rights work in practice, and what happens when not all investors are on board for additional funding rounds.

Ben shares a current “pay-to-play” situation, explaining how failing to participate in a follow-on can push investors down the preference stack—or even convert them to common shares—dramatically impacting potential returns. The conversation dives deep into mechanics like preference stacks, pari passu arrangements, capital calls, and how SPVs track ownership across multiple rounds. Mike adds perspective on structural differences between manager-led and member-managed SPVs, and why understanding your voting rights and obligations matters.

They also highlight the nuances of running internal “waterfalls” within an SPV to distribute returns fairly among investors in different rounds. From the realities of last-minute investor dropouts to the importance of clear governance, the hosts offer a candid look at the operational and relational challenges that come with managing pooled investments.

The discussion wraps with practical guidance for angels considering joining or creating their own SPV—covering fee structures, deal economics, and minimum check sizes. Whether you’re investing through an angel group or setting up an SPV with friends, this episode delivers a grounded, experience-based look at protecting your position, avoiding unnecessary dilution, and making informed follow-on decisions.

Key Topics

• Defining SPVs and their role in pooled startup investments

• Handling last-minute investor dropouts and capital call gaps

• Fee structures, hurdle rates, and carried interest models

• Governance considerations and voting rights within SPVs

• Risks and benefits of forming your own SPV with peers

• Minimum check sizes and factors influencing deal participation

Connect

Mike Kelly

• LinkedIn

• Website

• Developer Town

Ben Pidgeon

• LinkedIn

• VisionTech

Jacob Schpok

• LinkedIn

• Elevate Ventures

Hear more interviews and stories like this one at www.VentureDeclassified.com

The information provided on the show is not intended to be investment advice and should not be relied upon as such. The investors on today’s episode are providing their opinions based on their own assessment of the businesses or topics presented. Those opinions should not be considered professional investment advice. If they start up pitched as a part of this episode, it is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell, subscribe for or buy any securities.