How to protect the decision making and interests of the startup and investors?
The success of a startup depends not only on having a good product or team, but also on a structure that allows it to grow without losing strategic control. As startup investment rounds progress, small investors, business angels or specialized funds enter the market, generating a phenomenon known as capital atomization, i.e., many partners with a voice and a vote.
To avoid this, there is a solution that can be very effective: the pooling of minority shareholders, a key legal and strategic tool for maintaining efficiency in governance.
What is pooling and how does it work?
Pooling consists of grouping minority investors under a single structure, which usually takes two forms:
1. SPV
It is an SPV created specifically to bring together minority investors, who contribute capital to the vehicle instead of directly to the startup, with the SPV being formally listed as a partner.
Keys:
- Typical legal form: limited liability company, due to its flexibility in Spain, although in larger operations a public limited company may be chosen.
- Contributions: the investors make their contributions to the SPV's capital, and the SPV acquires the startup's shares.
- Shareholders' agreement in the SPV: regulates the internal functioning of the vehicle (information to minority shareholders, distribution of dividends, voting rules, designation of representative...).
- Governance: an administrator or board of directors is appointed to represent the interests of the whole.
- Taxation: it is important to assess the tax costs of double taxation (between SPV and startup), which should be studied on a case-by-case basis.
Vote syndication
It consists of block voting by certain minority partners. In this way, the startup keeps all the investors in its captable, but only one will hold the voting rights.
Keys:
- Contractual formalization: a private agreement is signed that binds the partners in their actions within the general meeting. For example, in the investment agreement, in the partners' agreement or even before.
- Coordination: a representative of the union that concentrates the vote is appointed.
- Internal voting rules: according to each subject, simple majority, qualified majority.
Benefits:
- Simplified accounting and strategic control: by grouping minority shareholders together, the dispersion of votes is avoided, procedures are streamlined and the risk of blockages at general meetings is reduced.
- Attraction of investors: an orderly capital stock is more attractive to investors, as it facilitates negotiation and conveys greater professionalism.
- Coordinated voting: pooling establishes joint voting rules, allowing founders to anticipate the behavior of minority shareholders in key decisions and minority shareholders to set a strategy to act as a block with greater power vis-à-vis majority shareholders (founders and lead investors).
- Reduction of burdens: centralization facilitates internal management, as the founders deal only with the union or SPV representative.
SPV or union Which is better?
- SPV: provides clarity and professionalization, ideal for large rounds. It entails higher incorporation and management costs.
- Voting syndicate: more economical and flexible, recommended in initial rounds or with few investors.
Some startups start with a syndicate and, as they grow, evolve into an SPV.
Pooling as a defense against dilution
In growing startups, dilution is inevitable. Pooling brings together founders, lead investors and minority shareholders in each round, facilitating the negotiation of special rights (veto in strategic decisions, priority in stake sales, etc.) and consolidating a balance between external financing and internal control.
Conclusion: pooling as a pillar of growth and protection for startups
Minority partner pooling is not just a legal tool: it is a comprehensive governance strategy that brings stability, trust and professionalism. Choosing between an SPV or a voting syndicate will depend on the needs of each startup.
Planning pooling from the first rounds sends a clear message to the market: the startup is ready to grow with solidity, transparency and vision for the future. At Busquets Law & Finance we help to design and implement the most appropriate formula for each case, ensuring legal certainty, protection of the founders and attractiveness for future investors.