“How much fraud have you seen with LPs in the SpaceX SPV ecosystem?”

This was a question I was asked by the amazing Max Severijns when Hari and I sat down with him to discuss Anthropic, SpaceX and SPVs. (By the way, he has an epic mustache not reflected in his LinkedIn profile pic).

And my honest answer is: not much, but there are a lot of misaligned expectations. Here’s why (based off over 8+ years in secondaries, and having transacted probably $500M+ in SpaceX):

SpaceX announces a funding round. A tier 1 venture fund has allocation limits, and can’t invest any more in SpaceX. Instead, they spin up an SPV to participate. That SPV is open to its LPs and charges 1% management fees and 10% carried interest.

One of their family office LPs goes, “I can bring $20M to the table if I invite four other families I know to invest with me”. They have an RIA. So they set up a SPV of their own, sign up for $20M and charge 2%/20%.

And since they’re unfamiliar with running this process and required disclosures, they simply say to their friends “You’re investing in SpaceX.” No intention of fraud, just human hand-waving.

The other families see them make money by pooling capital. They invite other friends, who also want to own SpaceX. And so on.

To be clear, everyone has signed legal documents. Theoretically, there is no fraud. But there is a lot of missing information.

That’s why, when we have the Great Unravelling of SPVs post-IPO, a lot of people will end up with a LOT less SpaceX than they thought they were buying. A lot of reputations will be lost and a lot of lawsuits will be filed.

Just like Max, if you have questions about navigating SpaceX (and other) SPV investments, feel free to reach out.