Certificate of Formation (Certificate of Organization, CoF, CoI)
A document filed with state authorities, typically the Secretary of State or Division of Corporations, to establish a limited liability company (LLC) or limited partnership (LP). As required by state LLC laws, the certificate generally includes the LLC’s purpose, principal place of business, and the names of its initial members or managers. In most states, […]
CFO (Chief Finance Officer)
The senior executive responsible for overseeing and managing the financial activities of a company, including financial planning, risk management, record-keeping, and financial reporting.
Charter (Certificate of Incorporation, Articles of Incorporation)
A legal document that establishes the formation of a corporation. Issued by a federal or state government, the charter converts a business entity, such as a partnership or sole proprietorship, into a legally recognized corporation. The charter typically includes the corporation’s name, principal office location, date of incorporation, the types and amounts of stock to […]
Close
To finalize an SPV, meaning the organizer uses the funds received from investors to purchase an asset. Upon completing the purchase, the SPV executes a purchase agreement and is listed on the relevant company’s or project’s capitalization table. The closing of an SPV triggers several required actions, including countersigning SPV fund documents, generating capital account […]
Close Date
The date on which a closing event occurs, triggered by the earliest of the following, as defined by the Federal Securities and Exchange Commission: (1) the use of investor funds, either through signing investment documents (entering into a contract to invest in a portfolio company) or wiring funds to a portfolio company or other issuer; […]
Closing (Multiple)
The process of new investors and/or additional capital investing in the same portfolio company or asset through the same legal entity during the same round of financing. SPVs will often have multiple closes by raising additional funds after an initial investment is made into the target company or asset.
Conversion Price
The price at which a convertible note or SAFE converts into equity. It is typically the lower of either (1) the price paid per share in the most recent equity round, adjusted for a discount rate, or (2) the valuation cap divided by the total shares of fully diluted equity.
Convertible Note (Convertible Promissory Note, Convertible Debt, Convertible Loan)
A short-term debt instrument that converts into equity at a later date, typically used by early-stage companies to raise capital without immediately issuing ownership equity. In a convertible note, the investor lends money to the company with the intention of converting the loan into equity rather than receiving cash repayment. Commonly used by seed-stage startups, […]
Counsel (Lawyer, Legal Counsel, Advocate, Attorney)
A professional who practices law, applying legal knowledge, procedures, and experience to address specific legal issues or advance the interests of clients. A lawyer is licensed to practice in a particular jurisdiction after passing the required state bar examinations. In the context of an SPV, counsel typically provides assistance with fund documents, purchase agreements, securities-related […]
CPA (Certified Public Accountant)
A designation granted by the American Institute of Certified Public Accountants (AICPA) to individuals who pass the CPA exam and meet the required work experience. CPAs are recognized for their expertise in income tax preparation but may also specialize in areas such as auditing, bookkeeping, fund accounting, forensic accounting, managerial accounting, and information technology. CPAs […]
Crowdfunding
A method of raising capital by soliciting small contributions from a large number of individuals to invest in a portfolio company. Special Purpose Vehicles (SPVs) are often used to aggregate these smaller investments into a single, larger investment amount for the purpose of making the investment. Read more: https://www.investopedia.com/terms/c/crowdfunding.asp
Deal
A term used to describe a specific investment opportunity in an asset, such as a portfolio company’s share offering or a real estate project. “Doing a deal” typically involves various steps, including due diligence, fundraising, and the formation of an SPV. Deals often utilize an SPV to pool investor capital in order to meet allocation […]
Debt (Liability, Financial Obligation)
An amount of money borrowed by one party from another, with the agreement to repay it at a later date, typically with interest. A convertible note is an example of a debt instrument. SPVs often invest in convertible notes or other debt instruments as the assets they acquire.
Delaware (State of Delaware)
Delaware is the most commonly selected jurisdiction for the formation of Special Purpose Vehicles (SPVs), primarily due to its well-established legal framework, particularly the Delaware Limited Liability Company Act (Delaware Act). The Delaware Act is widely regarded as the statute of choice for sophisticated ventures organized as LLCs, especially for deals involving parties from multiple […]
Discount
In finance, a discount refers to the condition where the price of a bond or security is lower than its par or face value. The discount is the difference between the price paid for the security and its par value. In the context of a convertible note, the discount refers to the percentage reduction applied […]