Sequoia Capital’s managing partner, Roelof Botha, has raised alarms about the resurgence of special purpose vehicles (SPVs) in the venture capital landscape. He cautioned that less experienced investors could face significant losses as these investment structures gain popularity.
Botha highlighted that SPVs allow a lead investor to sell access to shares of a startup to other investors, who are actually purchasing shares of the SPV, often at inflated prices. This arrangement means that the startup’s valuation must increase substantially for the SPV investors to see any return on their investment.
The warning comes in light of a volatile venture capital market that saw a major downturn in 2022. Many startups continue to struggle, with 2025 anticipated to be another challenging year.
SPVs are particularly prevalent in the artificial intelligence sector, where startups are attracting massive funding. Recent SEC filings indicate that at least nine SPVs have been linked to the AI company Anthropic since 2024. Additionally, Figure AI’s efforts to raise $1.5 billion reportedly involve numerous SPVs.
This trend extends beyond a few companies, as nearly all major AI firms are engaging in SPV offerings. The association with well-known venture capital firms can mislead investors, who may believe that a deal is sound simply because a prestigious firm is involved, even if the underlying companies are struggling to secure traditional venture funding.
Botha’s message is clear: potential investors should approach SPVs with caution and consider the risks involved.
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