If you're building a co-investment collective, one of the earliest (and most important) decisions you'll face is how to legally structure your investments. Do you set up a Special Purpose Vehicle (SPV) for each deal? Or do members put capital directly into the target company?

The answer depends on the size of your collective, the types of deals you're pursuing, and how much operational complexity you're willing to manage. Neither option is universally better. But choosing the wrong one can create problems with your cap table, investments and even your regulatory standing.

This guide breaks down both structures in plain language so you can make the right call for your syndicate.

But first, let’s start with an important question.

What is an SPV?

A Special Purpose Vehicle is a separate legal entity (usually a limited liability company or limited partnership) created for a specific purpose, to pool capital from multiple people and make a single investment as one unit.

Think of it as a container. Your collective members put money into the SPV. The SPV then makes the investment into the target company. On the company's cap table, the SPV appears as one line item, not 15 or 50 individual names.

The SPV is managed by a lead (usually the collective manager or syndicate lead), who handles the relationship with the target company, coordinates reporting, and manages distributions when there are returns.

According to VC Beast, the average SPV size ranges from $100K for smaller angel syndicates to $5M or more for established leads. Borderless have made it significantly easier to set up and administer SPVs, but we’ll talk more about that later.

Now that we know what an SPV is, let’s answer another important question.

What is direct investing?

Direct investing is exactly what it sounds like. Each member of your collective puts their money directly into the target company, in their own name. Every individual appears on the company's cap table as a separate shareholder.

The structure is straightforward. There's no intermediary entity, SPV formation costs or carried interest. Each person has a direct relationship with the company they've backed.

For very small groups, direct investing can work well. But as collectives grow, the limitations become clear.

How the two structures compare

Let's walk through the key differences across the dimensions that matter most to collective managers.

• Cap table impact

This is one of the biggest practical differences. If your collective has 30 members and everyone puts capital directly into a startup, that's 30 new names on the company's cap table. Most founders and later-stage investors dislike this. According to Carta, an SPV consolidates many small contributors into a single entity on the cap table, which simplifies governance for the startup and makes your syndicate more attractive to founders.

With direct investing, each member needs to sign individual agreements with the company, and the founder needs to coordinate with each person separately for follow-on decisions, exit documentation, and more.

• Minimum investment thresholds

Direct investing often comes with higher minimums. Many startups set a floor of $25,000 to $50,000 (sometimes $100,000) for direct investors, because every additional cap table entry creates administrative work. Through an SPV, individual members can participate with smaller amounts (often $1,000 to $10,000) that get aggregated into a single, larger cheque.

For diaspora collectives where members may want to start with $1,000 to $5,000, this difference is significant. An SPV structure means more people can participate in opportunities that would otherwise be out of reach due to the minimum investment.

• Liability protection

SPVs, particularly when structured as LLCs, provide limited liability to members. Your exposure is capped at the amount you contributed. If something goes wrong with the investment, your personal assets are protected. With direct investing, the liability picture depends on the specific agreements you sign with the target company, and there may be no protections for personal assets.

• Costs and fees

This is where direct investing has a clear advantage. There are no SPV setup costs, no administration fees, no carried interest. You put money in, and returns are yours.

SPVs carry costs. Setup fees (typically $2,000 to $10,000), potential annual administration fees, and carried interest for the lead (usually 15% to 20% of profits). According to Angel Investors Network, the practical minimum viable SPV size is around $50,000 to $100,000, because below that threshold, the fixed costs eat too heavily into potential returns.

For smaller collectives running deals under $50,000, the fee drag from an SPV may not be the best option.

• Governance and decision-making

With an SPV, the lead investor typically has broad authority to make decisions on behalf of all members, including follow-on decisions, accepting acquisition offers, and managing distributions. This is efficient, but it requires a high level of trust in the collective lead.

With direct investing, each member has their own relationship with the company and can exercise their own rights. This is more democratic but much harder to coordinate, especially at scale.

• Cross-border complexity

For diaspora collectives operating across multiple jurisdictions (UK, US, France, Nigeria, Kenya, Ghana), structure matters even more. According to Tech in Africa, regional SPVs (often registered in jurisdictions like Mauritius or Delaware) allow investors to manage multiple African assets more efficiently, improving liquidity and simplifying exits. Cross-border direct investing is more complicated, as it requires each individual to navigate different regulatory requirements in their own jurisdiction.

So now, let’s look at which situations it is best to use an SPV in.

An SPV is likely the right structure for your collective if:

• Your collective has more than five to ten members participating in a single deal. The cap table benefit alone justifies the structure.

• You're pooling smaller individual contributions into a meaningful total. If members are contributing $1,000 to $5,000 each, an SPV let’s you write a combined cheque that the startup will actually accept.

• You want to present a professional, institutional front to founders. According to African Business, nearly half of African angel investors now participate through syndicates, and founders increasingly prefer dealing with a single entity rather than dozens of individual investors.

You're investing across borders. The legal and tax efficiencies of a well-structured SPV are significant when your members are spread across the UK, US, and African markets. This is a problem we built Borderless to solve. If you’d like Borderless to help your investment collective in this area, fill this form and we’ll be in touch with you.

• You want liability protection for your members. The LLC structure of most SPVs limits each person's exposure to their capital contribution.

Now, let’s explore situations where direct investing is probably the better decision.

Direct investing may be the better fit if:

• Your collective is small (three to five members) and each person is writing a cheque of $25,000 or more. The simplicity of direct investing outweighs the structural benefits of an SPV at this scale.

• You want to avoid fees entirely. No setup costs, no carry or administration overhead. “Carry”, in this case, refers to Carried Interest, which is the share of profits that a person managing an investment for a group of people takes as a reward for finding and running the deal, but only after investors have gotten their money back.

• Your members want direct shareholder rights and a personal relationship with the company.

• You're making a one-off deal with no plans to do repeated syndicated investments.

The African context: why structure matters more here

For diaspora collectives focused on African opportunities, the structural decision carries extra weight. Millions of dollars has been channelled into hundreds of early-stage African startups through investment networks and syndicates.

This trend reflects a broader shift. According to a Techpoint Africa report from March 2026, the African angel ecosystem is moving toward more professionalized structures, with syndicate-based investing becoming the norm rather than the exception.

For diaspora investors, the challenge is real. There are different legal systems, currency restrictions that can slow down profit repatriation, and compliance requirements that vary by jurisdiction. A well-structured SPV can manage much of this complexity on behalf of members, while direct investing leaves each individual to navigate it alone.

A note on regulation

Whatever structure you choose, regulation matters. If you're operating a collective that pools money from members and deploys it into investment opportunities, you may be subject to financial regulation depending on your jurisdiction.

At Borderless, all investment funds are held in segregated accounts, and every collective goes through a verification process.

Regardless of whether you use an SPV or direct investing, make sure you understand the regulatory requirements in your operating jurisdiction. Getting the legal structure right from the start protects both you and your members.

So which one should you choose?

There's no one-size-fits-all answer, but here's a simple framework.

If you're managing a growing collective with 10 or more members, doing repeated deals, and operating across borders, an SPV structure will almost certainly serve you better. The upfront costs are worth the long-term benefits in governance, scalability, and founder relationships.

If you're a small group of experienced investors making occasional direct deals with meaningful individual cheques, direct investing keeps things simple and cost-effective.

Many established syndicates use a hybrid approach. SPVs for larger, more complex deals and direct investing for smaller, simpler ones. The key is matching your structure to the specific deal, the size of your collective and the regulatory environment you're operating in.

The most important thing is not to default to the “easiest” option. Choose the structure that protects your members, keeps your operations clean and positions your collective for growth.

If you're building a collective and want infrastructure that handles the structural complexity for you, Borderless offers a structured, compliant, and transparent platform with all the tools you need to onboard members, manage investments, handle payments, and run your collective end-to-end.

Get started with Borderless here.

Disclaimer: Don't invest if you're not prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Read more.