The Practical Guide to Setting Up a Secondary SPV

What is a Secondary SPV?

A secondary SPV is a special purpose vehicle created to purchase equity from anyone other than the company directly; for instance, early investors, founders, or employees. Fund managers use these vehicles to generate liquidity for their LPs when primary fundraising has slowed but demand for access remains strong.

Why Secondaries Are Gaining Momentum

Secondary deals have become an increasingly attractive strategy in venture capital, particularly among emerging managers. With a frozen IPO market, extended exit timelines, and fluctuating private company valuations, LPs are seeking more liquidity from their existing portfolios, while GPs are exploring creative ways to access highly sought-after companies without relying solely on primary rounds. Secondary SPVs offer a path to deploy capital into vetted startups, often at a discount. They also provide liquidity to early shareholders without having to wait for an exit via M&A or IPO.

Because secondaries involve buying shares in companies that are further along in their lifecycle, investors are often closer to a potential exit (like an acquisition or IPO), so they may see returns faster than they would with an early-stage primary investment. This allows investors to receive returns more quickly and helps managers improve their DPI (distributions to paid-in capital), a key metric LPs closely track when assessing fund performance and credibility.

Who This Guide Is For (And Who It Is Not For)

This guide helps emerging managers who are considering the role that secondaries play in their investment strategy. Whether you’ve led dozens of SPVs or are evaluating your first secondary opportunity, this guide will help you navigate deals with quick timelines and complex structuring. We will walk you through the tactical, regulatory, and operational decisions involved in setting up a secondary SPV, so you can move quickly, minimize friction, and run a clean, LP-approved process.

Institutional secondaries platforms or buyers of entire fund portfolios won’t find this guide relevant. It is focused on venture-stage secondaries executed through SPVs, especially those run by lean teams that value efficiency and flexibility.

Types of Secondary Transactions

Understanding the types of transactions you may encounter and how they are typically structured can help you navigate regulatory hurdles, issuer restrictions, and investor expectations more effectively.

1. Early Employee Common Stock

This is one of the most common seller categories in secondary SPVs. These sellers often hold small to mid-sized blocks of common stock acquired through employee stock options grants. Many employees seek liquidity after years of holding illiquid assets with paper gains. These transactions tend to trade at a discount due to their subordination in the capital stack and often require issuer approval or option exercises to transfer.

2. Founder Common Stock

Founders may sell a portion of their holdings, often during late-stage rounds, to diversify their personal investments or manage risk. These transactions are sensitive: they require board approval and careful messaging to avoid signaling misalignment with the company’s long-term vision.

3. Angel Investor Preferred Stock

Angel investors who participated in pre-seed or seed rounds often hold early preferred shares that have appreciated meaningfully by the time a company reaches Series B or later. These early backers frequently pursue secondary sales to realize gains or rebalance their portfolios. Because angels are individuals rather than institutions, they often have more flexibility in terms of timing, pricing, and deal structure, making them common counterparties for secondary SPVs.

4. Early-Stage Fund Positions

Early-stage funds (that invest at the pre-seed, seed, or Series A) often see their positions grow significantly as companies appreciate in value over time. In some cases, a single investment can come to account for a large percentage of a fund’s net asset value. To manage portfolio concentration or generate liquidity for their LPs, fund managers may choose to sell part of their position through a secondary transaction. These preferred stock sales allow the fund to lock in gains while maintaining exposure to future upside, and are attractive targets for SPV leads and syndicate buyers.

5. Growth Fund Positions

Growth-stage funds that make large investments (often $50 million or more) in late-stage rounds may decide to sell secondary positions for reasons like portfolio rebalancing, fund lifecycle timing, or shifts in investment strategy. When these institutions offload large blocks of preferred stock, the resulting secondary transactions can be substantial, often requiring multi-layer SPV structures to accommodate capital deployment and investor tracking. While rare, smaller SPVs may participate in these larger deals by pooling capital through layered vehicles.

Key Considerations Before You Launch

Early and thorough due diligence is a crucial part of the secondary SPV process. It’s essential to pressure-test the deal from all angles: the seller’s eligibility, the company’s transfer policies, investor interest, and any legal or tax risks that could stall your timeline or compromise compliance. Here’s what to evaluate upfront.

Confirming Seller Eligibility and Cap Table Visibility

Start by understanding who’s selling and what they actually own, including whether they’re directly on the cap table and if they have the legal right to transfer their shares. Secondary deals involving employees, founders, or angels often reveal mismatches between what sellers believe they can sell and what they’re contractually allowed to transfer.

Lack of cap table visibility is one of the most common causes of secondary deal delays. Before you spin up an SPV, confirm that the seller’s position is valid, transferable, and free of issues that could block the sale. If the shares are subject to option exercise or vesting cliffs, or if the seller’s name doesn’t appear on the stock ledger, you may face friction later in the process.

Understanding Pricing Mechanics and Transfer Rights

Pricing in secondaries isn’t always straightforward. While some deals involve a simple share price agreement, others require navigating preferred stock waterfalls, convertible instruments, or last-round valuation benchmarks. Make sure you understand the security type, its liquidation preferences, and any dilution mechanics that may affect investor outcomes.

Equally important is the company’s transfer policies. Most startups maintain some level of control over secondary transactions through rights of first refusal (ROFRs), resale restrictions, co-sale rights, or board approval requirements. These provisions can delay or block a deal, even if you and the seller agree on terms. Getting clarity on these rights early will help you set realistic expectations with investors and avoid unexpected surprises during the process.

Legal, Compliance, and Tax Implications

Secondary deals are subject to legal and regulatory considerations that vary based on structure, jurisdiction, and investor type. U.S.-based transactions involving common stock tend to be more straightforward. In contrast, cross-border deals, IRA investments, or SPVs structured as pass-through entities can introduce added complexity.

Investor classifications also shape how you must structure and manage a secondary SPV. For example, deals involving ERISA-subject investors require careful compliance. Sydecar helps you stay on track by automatically monitoring investor status and enforcing the 25% ERISA participation cap. If participation nears the limit, the platform alerts you, helping you avoid delays and maintain compliance without extra administrative work. ERISA investors can still participate, as long as the total participation remains under the cap.

Some securities come with additional requirements based on how they were originally issued or transferred. You may need to account for factors such as securities law exemptions, restrictive legends, or disclosure obligations depending on the specific asset. Understanding these nuances early reduces the risk of delays later in the process.

Buyer Appetite: What Today’s Investors Care About in Secondaries

Before investing, most LPs want clarity on the seller, the company, and the pricing rationale. In secondaries, buyers are often more focused on visibility and trust than upside projections. If you’re syndicating the deal, prepare to answer questions like:

• Why is the seller exiting?
  
  

• What’s the last primary round valuation?
  
  

• Is this common or preferred?
  
  

• Have you confirmed transfer rights?
  
  

LPs are increasingly comfortable with secondary exposure, but only when the structure is clear and the diligence holds up. Especially in layered or otherwise opaque deals, buyers will expect well-prepared memos, cap table summaries, and realistic timelines. Managing these expectations upfront improves close rates and builds trust for future allocations.

Structuring Your SPV

Once you’ve sourced a secondary deal, the structure of your SPV can either accelerate or derail your ability to close it. The right approach depends on several factors: the type of seller, the underlying security, company-imposed restrictions, and the expectations of your investors.

Entity Choice: Why Structure Follows Access

In secondaries, structure isn’t always a choice; it’s often dictated by the access available. If you're working with multiple layers between you and the underlying asset (e.g., acquiring LP interests in another SPV), a pass-through entity like an LLC may be the only viable structure. These entities enable flexibility in managing ownership visibility, distributions, and allocation tracking, which is critical in deals where investor transparency is limited.

Sydecar data shows that 73% of secondary transactions on our platform are structured through multi-layer SPVs. The high percentage of layered structures suggests that many secondary buyers don’t have direct access to the underlying asset and must instead purchase through intermediaries, pooled vehicles, or brokered allocations.

Among the known security types in multi-layer SPVs, preferred stock makes up the largest share at 35%, followed by common stock at 13% and convertible or SAFE notes at 3%. The remaining 49% of layered deals involve security types that were not explicitly disclosed at the time of investment. The dominance of preferred stock in multi-layer SPVs likely reflects the nature of who holds these securities. Unlike common stock, which is typically issued to founders and employees, preferred stock is allocated to investors, especially angels, early-stage funds, and growth equity firms. These holders are more likely to sell through intermediaries or pooled vehicles, making layered SPV structures a natural fit. Additionally, preferred shares often come with economic and governance rights that make them more attractive to secondary buyers, which is why they appear more frequently in these types of deals.

Timeline Considerations: How Fast Can You Close?

Speed matters in secondaries. Sellers may need liquidity quickly, and buyers often face pressure to secure allocation before it’s rerouted. If you're navigating board approvals, multiple seller negotiations, or layered deal structures, closing timelines can stretch unless you have the right infrastructure in place.

For someone encountering their first secondary deal, especially one that comes together quickly, having a clear, ready-to-go operational path can be the difference between winning and missing the allocation.

At Sydecar, we’ve seen just how quickly a well-structured deal can come together. In Q1 2025, the median secondary SPV on our platform raised approximately $795,000 from 8 investors in just 18 days. Such a timeline is only possible when the manager is prepared, the structure is clear, and the platform infrastructure eliminates friction at every step.

Seller Coordination and Multiple Price Points

Secondaries often involve non-standard ownership scenarios, such as option holders with different strike prices, founders liquidating in stages, or angels with blended cost bases. You may need to coordinate with sellers who have different expectations, share classes, or pricing agreements, all within a single vehicle.

A well-structured SPV allows you to clearly track each seller’s contribution and allocate proceeds accordingly. Sydecar’s platform supports these configurations with multi-seller support and allocation tracking at the investor level.

Handling Multiple Sellers in a Single Vehicle

In today’s secondaries landscape, it’s common for a single SPV to acquire shares from multiple sellers, each with their own documentation, timelines, and ownership history. This adds administrative complexity, especially if the deal includes both primary and secondary components or requires a blend of equity types.

Layered SPVs are often used in these scenarios to shield investors from complexity while ensuring a clean cap table for the target company. Whether you're consolidating multiple employees into a single purchase or blending an early-stage fund exit with a founder sale, your SPV structure needs to flex accordingly.

Best Practices for Execution

Executing a secondary SPV successfully requires precision, transparency, and speed. From setting pricing to closing the deal, execution is where LP trust is earned or lost. Here’s how experienced managers across the Sydecar platform approach this phase.

Pricing Strategy and Investor Memos

Pricing in secondaries is nuanced. Michele Schueli of ARMYN Capital categorizes opportunities into two distinct types: high-demand tender offers and mispriced assets from sellers seeking fast liquidity. In both cases, his pricing strategy relies heavily on understanding the company’s fundamentals and its position in the preference stack.

Ana Levine of E1 Ventures layers in macro and sector-specific analysis. Her team tracks indicators such as public comparables, interest rates, and AI market dynamics to assess whether pricing reflects long-term value or short-term volatility. This helps E1 explain to LPs why a deal is worth pursuing, even in noisy markets.

Regardless of your strategy, a well-structured investor memo should:

• Clarify who the seller is and what is being sold
  
  

• Note the share class and its position in the capital stack
  
  

• Contextualize price relative to the last primary round
  
  

• Flag any transfer restrictions or risks
  
  

• Provide a clear rationale for investor participation
  
  

Setting Up Investor Expectations

E1 Ventures and ARMYN Capital share a similar ethos when it comes to investor relations and communications. Ana and Michele both operate in markets where allocations are scarce and timelines are short. For Ana, building relationships with founders and brokers ensures that when LPs are brought into a deal, the offering is credible and well-positioned. Michele is particularly diligent about communicating where a security sits in the preference stack, especially when navigating layered transactions.

Using Data Rooms and Structuring Investor Updates

Even in fast-moving deals, a centralized data room is essential. At a minimum, include:

• The deal memo
  
  

• Seller confirmation and ownership details
  
  

• Transfer documentation and any side letters

Post-close, send investors a summary of final terms, timing expectations, and any material updates. 

Wire and Closing Workflows

Wire execution is often the last-mile risk in secondaries. A delay here can cost access. Sydecar’s embedded banking and capital call tools help automate investor onboarding and wiring. Ana uses the platform to move quickly on complex transactions, while Michele credits Sydecar with eliminating operational friction so his team can focus on sourcing and structuring deals, not chasing down wires.

Operationalizing with Sydecar

Once the deal is structured and LPs are in, execution moves from strategic to operational. This is where your infrastructure matters most. Sydecar is designed to take on the heavy lift so you can stay focused on the deal itself.

What Sydecar Handles (and What You’ll Still Need to Manage)

Sydecar automates many of the most time-consuming and error-prone parts of running a secondary SPV. On the platform, you can:

• Spin up a legally compliant SPV in minutes
  
  

• Send out off-the-shelf subscription documents automatically
  
  

• Collect investor signatures and capital via integrated banking
  
  

• Manage multi-seller contributions and allocations
  
  

• Track documents, timelines, investor commitments, and send reminders in one place
  
  

• Save time on tax season prep with built-in reporting, including automated K-1 delivery
  
  

That said, there are still a few things that managers need to bring to the table:

• Validating the seller’s ownership and transfer eligibility
  
  

• Negotiating price and terms
  
  

• Preparing investor materials and responding to diligence questions
  
  

• Confirming the underlying cap table and rights structure (where possible)
  
  

In short: Sydecar gives you the rails, but you’re still the conductor. The better prepared you are, the faster your deal will move.

Fees and Timeline Transparency

Sydecar charges a one-time, per-deal fee that includes SPV formation, document management, banking, compliance, and investor onboarding. This transparency helps you avoid the layered costs often associated with other platforms, especially those that take a percentage of carry or charge hidden annual fees.

Platform Features Designed for Secondary Deals

Sydecar includes features specifically designed to streamline secondary transactions:

• Multi-seller support: Combine multiple sellers into one SPV while tracking allocations individually.
  
  

• Layered SPV support: Set up pass-through entities or multi-tier vehicles depending on the deal structure.

For managers conducting secondaries, especially those that are layered or time-sensitive, Sydecar reduces operational drag, allowing you to focus on securing the deal rather than administrative tasks.

Secondaries are no longer a niche strategy. They’re a core part of how emerging managers win allocation, build LP trust, and drive faster returns. However, executing a secondary SPV presents its own set of challenges, including seller constraints, complex structures, tight timelines, and high LP expectations.

Here’s what to keep in mind:

• Know your seller and their rights. Cap table visibility and transfer permissions are essential.
  
  

• Price with context. Use sector benchmarks, security terms, and investor expectations to shape your rationale.
  
  

• Communicate clearly and early. A well-structured memo and consistent LP updates go a long way.
  
  

• Use tools built for the job. From layered structures to multi-seller tracking, Sydecar is designed to help you move fast, stay compliant, and close cleanly.

Whether you're in the research phase or you already have a secondary deal lined up, we’re here to help. Book a consultation with our team today.