Silicon Valley bubble risks heighten as investors pile into funds that bet on a single buzzy startup

One of the most popular acronyms in Silicon Valley these days is SPV. It stands for special purpose vehicle. In tech startup land, it's a type of investment fund that typically involves concentrating all of its assets in one company. SPVs have blown up in recent years as investors clamor to get a piece of hot startups with valuations often in the tens of billions of dollars. But buyer beware. Investors are warning of hidden fees, unclear rules about ownership, and marketing that's driven by FOMO, or the fear of missing out. Traditional venture capital funds spread risk across a portfolio of startups, with the understanding that most bets will fail and that the one or two successes will pay back the fund several times over. In an SPV, a fund manager usually raises capital for a single deal and recruits a syndicate of smaller investors to join for an added fee that covers management and other costs. Some established venture firms use the vehicles to offer their limited partners — end ... Read full article.