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The Growing Trend of Special Purpose Vehicles in the SPV Market

In a chaotic SPV market, venture capitalists are selling shares of popular artificial intelligence startups such as Anthropic and xAI to tiny investors. Venture capitalists are eager to invest in cutting-edge artificial intelligence startups and are willing to pay extravagant share prices in order to secure coveted positions on their capitalization tables. Despite this, the majority of people are unable to enter into such arrangements at all. Small, unknown investors, such as family offices and high-net-worth people, have discovered their own means to acquire shares of the most successful private startups, such as Anthropic, Groq, OpenAI, Perplexity, and Elon Musk's X.ai (the company that is responsible for Grok).

Special purpose vehicles, also known as SPVs, are being utilized by them. These vehicles allow several parties to pool their funds in order to share an allotment of a single firm. Generally speaking, special purpose vehicles (SPVs) are established by investors who have direct access to the shares of the businesses they are investing in. These investors then sell a portion of their allocation to external backers, frequently charging substantial fees while keeping some profit share, which is referred to as carry.

Smaller investors have relied on special purpose vehicles (SPVs) for years, so the concept is not new. However, there is a growing trend of SPVs effectively obtaining shares from the most prominent brands in artificial intelligence.

When it comes to investing at their lower levels, these investors are discovering that the most popular artificial intelligence firms, with the exception of OpenAI, are not all that difficult for them to purchase. This is due to the fact that early investors in highly sought-after artificial intelligence firms are keen to utilize their pro-rata rights and construct the special purpose vehicle (SPV), fund it by raising money from other people, and in most cases charge additional fees.