Every Legion Equity deal is structured around a Special Purpose Vehicle (SPV). This article explains what an SPV is, why Legion uses them, and how the lifecycle works.
What is an SPV?
An SPV (Special Purpose Vehicle) is a separate legal entity created for a specific purpose. In Legion's case, that purpose is to hold equity in one specific portfolio company.
On Legion Equity, each SPV is a Delaware LP (limited partnership) formed specifically for that deal. Delaware has the most developed corporate law in the US and is a standard jurisdiction for SPVs.
When you invest in a deal on Legion, you're investing in the SPV. The SPV then uses the pooled capital to invest in the portfolio company. You own a share of the SPV, which owns equity in the company.
Why this structure?
Investor base management. GPs can manage who is in their investor base for each deal: every transfer of an SPV interest requires GP approval.
Holder limits. Each SPV is generally limited to ~100 beneficial owners. This is the main structural constraint on SPV size, and it keeps the SPV under SEC 12G filing thresholds (which would otherwise trigger ongoing reporting obligations at 2,000+ holders).
Regulatory clarity. SPVs operate under SEC Regulation D exemptions (currently 506(b) for the MVP). The structure is well-understood by regulators and the legal industry.
Industry standard. This structure is used by major platforms like AngelList. The legal frameworks and templates are mature.
The 10-step lifecycle
Every deal on Legion Equity follows the same lifecycle:
Deal sourcing: GP secures allocation in a portfolio company
GP onboarding: KYB, Bad Actor questionnaire, Legion verification (1-2 weeks)
LP marketing: deal published to qualified LPs; two-way opt-in
SPV formation: Delaware LP, EIN, bank account, operating agreement
Capital call: approved LPs send funds via wire, ACH, or USDC (5-10 business days)
Close: PPM, subscription agreements, founder confirmation, term sheet finalized
Token issuance: LPs receive tokenized SPV interests (within days of close)
Secondary trading (if applicable): RFQ model, GP approval required
Exit: IPO, M&A, or tender offer triggers waterfall distribution to LPs
Wind-down: final K-1s, accounting, SPV dissolution (1-3 months after exit)
Hold periods between close and exit are typically 3-10+ years.
What tokenization means for you
The "tokenized" part of your SPV interest is the on-chain representation of your ownership. It's the mechanism, not the product. Practically, it gives you:
Faster settlement on secondary trades: same-day vs weeks on traditional platforms
Automatic enforcement of transfer restrictions through smart contracts
Built-in GP approval: every secondary trade requires on-chain GP consent
A clearer audit trail of ownership transfers
You don't need to understand blockchain to use the platform. The tokens don't change any legal rights; they're just a more efficient way to track ownership.
Key terms
GP: General Partner. The fund manager or deal lead.
LP: Limited Partner. The investor.
PortCo: Portfolio Company. The startup the SPV invests in.
Capital call: When LPs are asked to send their committed funds.
Carry: The GP's share of profits on a successful exit (set per deal).
Management fee: Annual fee charged by the GP for managing the investment.
K-1: US tax form (Schedule K-1) reporting your share of the SPV's income, deductions, and credits.
NAV: Net Asset Value. The current estimated value of the SPV's holdings.
Waterfall distribution: The order in which proceeds are distributed at exit (return of capital → preferred return → carry split).
Fee structure
Fees are set per deal by the GP and disclosed in the deal documents (PPM and LPA) before you invest:
GP carry: set per deal
Management fees: set per deal
Secondary trading fees: details being finalized; no fees during the bootstrap phase
No platform fees during the initial phase
You'll always know what you're paying before you commit.
Need more help?
Questions about a specific SPV, your position, or deal mechanics are best handled through chat. Find the chat bubble in the bottom-right of any page on uselegion.com.
Related articles