How to Create an SPV for Friends and Family Rounds: A Simple Approach

 

When you’re just starting, friends and family are often the first to believe in your idea. Their early support is valuable, but managing multiple small investments can become complicated quickly. As more people want to contribute, your cap table grows, and so does the administrative load.  

That's where a Special Purpose Vehicle, or SPV, is helpful. Rather than taking individual checks from each individual, you can set up an SPV to capture all the money in one account and treat it as one entry on your company books. It simplifies the process, maintains relationships, and keeps you organized as you grow and expand. 

Let's go through the steps of building an SPV for your friends and family round in the most straightforward manner possible. 

Understanding the Basics  

An SPV is a distinct legal entity formed expressly for one purpose—usually, to invest in one thing. In the case of early-stage fundraising, it serves as middleman between your startup and your investors. 

When you Create An SPV, your friends and family contribute money to this entity. The SPV then makes a single investment into your startup. On your cap table, you’ll see just one investor—the SPV—no matter how many people are behind it.  

This structure keeps things neat while giving your supporters a way to be part of your journey.  

Why It’s Worth Considering  

Most founders associate SPVs with large venture capital rounds. But applying one in a friends and family round has its benefits. 

The most apparent benefit is maintaining a clean cap table. When your company moves on to raise seed or Series A funding, investors will want to see a clear, organized ownership structure. A long list of tiny individual investors is something that can raise an eyebrow.  

Beyond organization, using an SPV creates clarity and efficiency. Expectations, timelines, and terms can be handled uniformly. It helps maintain transparency and protects your relationships from unnecessary confusion.  

Steps to Create an SPV 

Setting up an SPV doesn’t require a legal degree, but it does involve a few structured steps. You’ll start by forming a legal entity—usually a Limited Liability Company or LLC. This entity will act as the Special Purpose Vehicle (SPV) that pools funds and invests in your startup.  

Selecting where to register your SPV comes next. Most founders use Delaware because it has a history of being business-friendly, though registering elsewhere is an option as well. Once you've decided on the location, you'll submit simplified formation papers and draft an operating agreement, which lays out the structure of how the SPV will be operated. 

After that, you’ll open a bank account under the SPV’s name. This is where your friends and family will send their investment amounts. You’ll also need to prepare a simple agreement that spells out what investors are contributing, what they’ll receive in return, and how decisions will be made.  

The SPV then invests the collected funds directly in your company, becoming the official investor. This means you’ll only have one new shareholder to manage on paper, even if you had 10 or 15 people chip in.  

Keeping Things Legal 

Although this is a personal round, it’s still essential to comply with basic legal and tax requirements. In the United States, you’ll need to make sure the investment falls under an accepted exemption with the Securities and Exchange Commission.  

Most early-stage founders file under Rule 506(b) of Regulation D, which allows you to raise money from a limited number of non-accredited investors as long as you don’t publicly advertise the round. If your friends and family are not all accredited, this rule may be your best path.  

It’s also essential to keep clear records. Everyone should receive the same documentation, understand what they're signing, and be informed about the structure of the SPV. Even though they may be close to you personally, this is still a financial arrangement and needs to be handled professionally.  

Should You Use a Platform?  

If the process feels overwhelming, some platforms can help you create an SPV with less hassle. These services handle the formation, documentation, and collection of funds for you. While there’s a cost involved, many founders find it worth it for the peace of mind. 

Alternatively, if you're comfortable handling the steps yourself, you can work directly with a startup lawyer who can help set everything up correctly.  

Conclusion  

Choosing to create an SPV for your friends and family round might feel like an extra step, but it can save you time and complications later. It simplifies your startup’s early structure, protects your relationships, and prepares you for future funding rounds with a cleaner cap table.  

Early support from people who trust you is something to be grateful for. Treating that support with the structure it deserves shows professionalism and long-term thinking.  

If you’re planning your first raise, take the time to understand how to create an SPV. It’s one of the simplest ways to make sure your startup starts on the right foot—organized, clear, and ready for growth.