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Why do startups use SPVs?

Startups use SPVs to ensure their future growth and follow-on financings won’t be at risk. Having too many individual stockholders can make venture capitalists skeptical, require companies to go public before they're ready, and make gathering stockholder approvals a challenge. 

With an SPV, founders can have an unlimited number of smaller investors grouped into one large entity, with voting power directed by a Lead Investor.

For more info on how SPVs solve some tricky legal issues in structuring investments, see here.

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