How do SPV management fees work? | support.carta.com

How do SPV management fees work?

A management fee is expressed as a percentage of an SPV’s total capital raised, and can be collected annually or as a one-time, up-front fee upon closing.

Example of an SPV with no management fee

• A GP raises $1,000,000 to invest in a startup, NewCo, using an SPV.
• She decides to set the management fee to 0% (no management fee).
• The entire $1,000,000 is invested in NewCo, and the GP does not collect a management fee.

Example of an SPV with a one-time 2% management fee on top of commitments

• A GP raises $1,000,000 to invest in a startup, NewCo, using an SPV and decides to charge a one-time 2% management fee, collected up front.
• Upon close, and before wiring funds to invest in NewCo, the GP will call $1,020,000 from their investors; $20,000 for the management fee and $1,000,000 for the investment into NewCo.

Example of an SPV with an annual 2% management fee on top of commitments

• A GP raises $1,000,000 to invest in a startup, NewCo, using an SPV and decides to charge a 2% management fee annually.
• Upon close the GP will call $1,000,000 from their investors that will be used for the investment in NewCo.
• Each year, the GP will send payment notices to their investors to collect a total of $20,000 in management fees ($1,000,000*2%).