Latest / The Series A Show with Fexingo: Early-Stage Funding, Pitch Decks, and Startup Milestones / How Founders Are Using Rolling Funds to Raise Capital Faster in 2026
Transcript
- Lucas: So there's this quiet shift happening in how startups raise money. You've probably heard the term 'rolling fund' thrown around, but what does it actually mean for a founder sitting down to plan their next round? Luna: I think most people still picture the traditional model: you pitch, you close, you take a big check all at once. Rolling funds are the opposite—capital comes in continuously over time. Lucas: Exactly. And the structure is pretty straightforward. Instead of raising a single $5 million round on a specific date, you open what's essentially a continuous offering. Investors can commit over a period—say 12 to 24 months—and the startup draws down capital as needed, often via a SAFE or convertible note. Luna: Who's actually doing this? I know a few seed-stage startups have tried it, but is it catching on beyond that? Lucas: It's spreading fast. According to data from Carta, the share of seed rounds using a rolling structure went from about 5% in 2023 to nearly 20% in the first half of 2026. And it's not just seeds—some Series A startups are using it too, especially in this market environment. Luna: And when you say 'this market environment'—we're looking at a pretty rough week for tech. Palantir down 10% in five days, NVIDIA down 6%, Microsoft down almost 7%. That's got to make founders nervous about pricing a round on a single day. Lucas: Right. The volatility is exactly the argument for rolling funds. If you try to raise a traditional round and the market tanks the week you're pricing it, you might get a worse valuation or lose investors altogether. With a rolling fund, you can smooth out the timing—draw down capital when the market's favorable, pause when it's not. Luna: But isn't there a downside? If investors can drip in capital over time, doesn't that create uncertainty for the startup? You don't know how much you'll actually get. Lucas: That's the trade-off. You trade the certainty of a closed round for flexibility. Most rolling funds have a minimum commitment—say $2 million—and a maximum cap. But the actual pace depends on investor demand. Some founders set a time limit, like 12 months, and if they don't hit the target, they reassess. Luna: So it's not for everyone. If you need a lump sum to buy inventory or hire a team quickly, rolling might be too slow. Lucas: Exactly. It works best for asset-light startups—SaaS, marketplaces, software tools—where you can add incremental capital without a step-change in spending. One example I've been following is a B2B SaaS company called FlowHive—not a real name, but the structure is real. Luna: What did they do? Lucas: They needed $5 million to extend their runway and hire three sales reps. Instead of a traditional Series A, they opened a rolling fund using a SAFE with a valuation cap of $50 million. Over 10 weeks, they brought in 15 angel investors and two small funds. The beauty was they didn't have to set a fixed valuation on day one—the cap protected early investors, and later investors came in at the same cap. Luna: So the valuation question gets deferred. That's interesting because we just saw Zepto's IPO filing, and one of the big questions is what their post ipo valuation really is. They're growing fast but losing money, and the rolling fund structure in private markets can mask true value. Lucas: That's a great point. Rolling funds often use SAFEs or convertible notes, which don't set a price until a future priced round or exit. So the valuation is effectively postponed. For founders, that can be attractive—you avoid a down round if the market sours. But for investors, it means more uncertainty. Luna: I'm curious about the investor side. If I'm an angel, why would I prefer a rolling fund over a traditional round? Seems like I'd have less information. Lucas: Some investors like it because they can spread their risk. Instead of writing one big check, they commit a smaller amount and add to it over time if the startup hits milestones. It's like dollar-cost averaging for venture capital. Also, rolling funds often have lower minimums—sometimes $10,000 or $25,000—so smaller angels can participate. Luna: That does democratize access a bit. But you'd need to trust the founder to manage the capital responsibly over time, not just blow through it. Lucas: Absolutely. The founder's credibility is huge. Rolling funds really work best when the founder has a track record or a strong network. If you're a first-time founder with no connections, it's harder to convince people to drip in money over months. You'd probably be better off with a traditional round where you can build momentum and close quickly. Luna: Let's zoom out. We're in June 2026, tech stocks are down across the board—Apple's lost 4% this week, Amazon 4.4%, Tesla 3.5%. The macro backdrop is shaky. Does that make rolling funds more or less appealing? Lucas: More appealing, I think. When the public market is volatile, it spills into private valuations. Traditional VCs get skittish and move slower. Rolling funds let founders keep raising without the pressure of a single valuation event. Plus, if the market recovers mid-fundraise, you benefit from the uptick. Luna: But there's a catch, right? If the market keeps falling, your later investors might demand a lower cap or better terms. That could create tension between early and late investors. Lucas: That's the risk. The SAFE or convertible note usually has a single valuation cap, so all investors get the same cap regardless of when they invest. But if the market tanks, the cap might feel too high for later investors, and they might balk. Some founders solve this by adding a discount or a most favored nation clause that adjusts terms for later investors. Luna: So it's not a panacea. It's a tool with specific use cases. I'm thinking about the founder who's building a hardware startup—they need to order parts in bulk, so they need a lump sum. Rolling wouldn't work. Lucas: Right. Hardware, biotech, any capital-intensive business is a bad fit. But for a SaaS company with subscription revenue and low marginal cost, it's almost ideal. You can add a few customers, then use that traction to bring in more capital from the same rolling fund. Luna: I want to talk about the mechanics for a second. How do founders actually set up a rolling fund? Is it a separate legal vehicle? Lucas: Usually, it's not a fund per se—it's a structured offering using a SAFE or a simple agreement for future equity. The startup files a Form D with the SEC for the total amount they intend to raise, and then they accept investments over time. Some platforms like Assure or AngelList offer standardized rolling fund templates that handle the legal and compliance side. Luna: So it's pretty accessible. You don't need a fancy lawyer to set it up. Lucas: You still need a lawyer—securities laws are no joke—but the cost is lower because the structure is standardized. A typical rolling fund legal setup might cost $5,000 to $10,000, compared to $20,000 or more for a traditional round. Luna: And the time saving? I've heard traditional rounds can take 3 to 6 months from first pitch to money in the bank. Lucas: With a rolling fund, you can start accepting capital as soon as you file the Form D. So the first check could come within weeks. That speed is a big advantage when you need to hire or invest in growth quickly. But again, the total amount is uncertain—you might raise $2 million over six months when you wanted $4 million. Luna: That's the classic trade-off: speed versus certainty. I think for many founders, especially in this environment, speed wins. Lucas: If today was actually useful to you, the way these stay ad-free is listener support. If you've gotten something out of this breakdown, consider buying the team a coffee at buy me a coffee dot com slash fexingo. It genuinely helps us keep doing deep dives like this without any sponsors. Luna: Yeah, it's a small way to keep the content independent and focused on what matters to founders. We really appreciate it. Lucas: Okay, back to rolling funds. One more angle I want to hit: the impact on cap table complexity. With multiple investors coming in at different times, the cap table gets messy fast. Luna: I can imagine. If you have 20 angels each investing $25,000 on different dates, you're looking at a spreadsheet nightmare. Lucas: Exactly. And when the company later does a priced round, converting all those SAFEs into equity requires careful calculation. Some startups use cap table management software like Carta or Pulley to automate it, but it's still more work than a single closing. Luna: Is there a number of investors where it becomes unmanageable? Like a threshold? Lucas: I've heard founders say that beyond 30 investors in a rolling fund, the administrative burden starts to outweigh the benefits. You need to send regular updates, handle individual paperwork, and manage different vesting schedules if you're using convertible notes. That's why some rolling funds set a maximum of 20 or 25 investors. Luna: So if you're a founder considering this, you'd want to plan for that cap table complexity upfront. Maybe set a minimum investment amount to keep the investor count low. Lucas: That's exactly what smart founders do. They set a minimum—say $50,000 or $100,000—so they only attract serious investors who can write meaningful checks. That keeps the cap table clean and the investor base engaged. Luna: Let's talk about a specific case. I read about a startup called Vellum—they make AI tools for enterprises—and they raised a $3 million rolling fund earlier this year. What did they do differently? Lucas: Vellum's approach was interesting. They set a 12-month window with a $3 million cap, but they also offered early investors a 10% discount on the valuation cap if they invested in the first 90 days. That created a sense of urgency and brought in $1.2 million in the first month. Then they used that momentum to attract later investors. Luna: So they gamified it a bit. That's clever. It addresses the uncertainty problem by front-loading the commitment. Lucas: Exactly. And they kept investors updated with monthly metrics—MRR, churn, customer count—so people felt informed and confident. By month eight, they had hit the $3 million cap and closed the fund early. They ended up with 22 investors, most of whom were angels with domain expertise. Luna: That sounds like a best-case scenario. What's the worst case? I've heard stories where rolling funds dragged on and investors lost interest. Lucas: Worst case is you open the fund, get a few small checks, then momentum stalls. The investors who committed early start wondering if the company is struggling. If you don't communicate well, they might not invest further, and you end up with a half-empty fund that's not enough to reach your goals. That's why founder communication is critical. Luna: So it's not a set-it-and-forget-it strategy. You have to actively manage investor relationships throughout the fund period. Lucas: Absolutely. Rolling funds are relationship-intensive. You can't just send a pitch deck and wait for checks. You need to nurture your investor base—send monthly updates, host calls, share wins and challenges. The investors who join a rolling fund are often more engaged because they have the option to add more capital if things go well. Luna: That aligns with what we've seen in the broader market. Investors are demanding more transparency and engagement from startups, especially with the tech selloff making everyone nervous. Lucas: Right. And that's actually a good thing. Rolling funds force founders to be better communicators, which builds trust. And in a down market, trust is everything. Luna: So what's the bottom line? If I'm a founder with a SaaS startup, should I consider a rolling fund for my next round? Lucas: I'd say yes, if you meet a few conditions: your business is capital-light, you have a strong network of potential investors, you're comfortable with uncertainty around the total amount, and you're willing to invest time in investor relations. If those are true, a rolling fund can give you flexibility and speed that a traditional round can't match. Luna: And if you're not there yet—first-time founder, hardware startup, or need a lump sum—stick with the traditional model for now. Lucas: Exactly. There's no one-size-fits-all. But I think rolling funds are going to become a permanent fixture in early-stage fundraising, especially as the market stays volatile. We'll likely see more platforms and tools that make them easier to manage. Luna: I'm curious—are VCs starting to use rolling funds themselves? Like, as a way to deploy capital? Lucas: Some are. A few micro-VCs have launched rolling funds where they commit capital to startups on a rolling basis. It's still niche, but it's growing. The real innovation might come when VCs start accepting rolling fund structures from portfolio companies as a standard option. Luna: That would be a shift. It might even change how we think about 'rounds' entirely. Instead of Series A, B, C, we might see continuous fundraising cycles. Lucas: Maybe. But I think the round structure will persist for later stages where larger checks and syndicates are the norm. Rolling funds are best suited for the early, uncertain phase where flexibility matters most. Luna: Fair point. Alright, I think we've covered the key trade-offs. For anyone listening who's considering this, the takeaway is: know your business model, know your network, and be ready to communicate constantly. Lucas: And if you want to dive deeper into the mechanics, we'll link to some resources in the show notes. For now, thanks for joining us on The Series A Show.