Latest / The Series A Show with Fexingo: Early-Stage Funding, Pitch Decks, and Startup Milestones / Why Startups Are Using Rolling Funds to Close Rounds Faster
Transcript
- Lucas: Rolling funds have been around for a few years now, but they're really hitting their stride in 2026. If you're a startup founder, chances are you've had at least one VC pitch you on the idea of a rolling fund as a way to close your round faster. Luna: And I think a lot of founders are intrigued by the idea of continuous fundraising — no more three-month sprints to close a round, right? But is it really that simple? Lucas: It's not. Rolling funds are essentially a continuous offering — an investment vehicle that allows limited partners to commit capital on a recurring basis, usually quarterly. The fund manager then invests that capital into startups over time. For founders, it means you can have a VC who has a rolling fund writing you a check without waiting for a traditional fund close. Luna: But doesn't that create pressure on the VC to deploy capital quickly? I mean, if LPs are committing every quarter, the GP needs to put that money to work. Lucas: Exactly. And that's one of the big criticisms — the potential for rushed decisions. But the flip side is speed. A rolling fund can write a check in weeks, not months. And in a competitive market where deals are getting done fast, that matters. Luna: Let's look at a concrete example. Jack Selby from Thiel Capital has been using rolling funds to invest in hot startups like Etched, an AI chip company based in Arizona. That deal happened quickly partly because the fund structure allowed it. Lucas: Right, and Etched is a good example because it's in a capital-intensive space — AI hardware. They needed funding to scale production, and a rolling fund from Thiel Capital gave them a fast injection. But the question is, are rolling funds better for certain types of startups? Luna: I'd argue they're better for startups that have strong traction and need capital quickly to seize a market opportunity. For early-stage companies still figuring out product-market fit, the pressure from a rolling fund investor might be too much. Lucas: And there's another layer — the LP perspective. Rolling funds are popular with LPs who want more liquidity and control over their commitments. They can opt in quarterly rather than locking up capital for ten years. Luna: But some LPs worry about adverse selection — that the best deals go to traditional funds with longer track records, while rolling funds get leftovers. Lucas: That's a real risk. But the data we've seen from ARK Innovation ETF, which is up about 4% this week, shows that the broader innovation space is still hot. Rolling funds are part of that ecosystem, and they're not going away. Luna: So for a founder listening, what's the takeaway? Should you seek out rolling fund investors? Lucas: I think the answer is: yes, but with eyes open. Rolling funds can accelerate your raise, but you need to understand the GP's incentive structure. Are they under pressure to deploy? Do they have a long-term view? Ask them how many companies they've invested in from the fund and what the follow-on strategy is. Luna: And look at the fund's track record with portfolio companies. If they're doing rolling funds, they should have a clear thesis on how they add value beyond just writing checks. Lucas: If these conversations are useful for what you're building or running, we should mention that we keep this show ad-free on purpose. No sponsors, no mid-roll breaks. It's a choice we made because we want the content to speak for itself. Luna: And it stays that way because of listener support. If you find value in episodes like this, you can support the show at buy me a coffee dot com slash fexingo. Lucas: Exactly. It keeps us independent and focused on what matters — giving you actionable insights without any noise. Now, back to rolling funds — let's talk about how they interact with other trends like revenue-based financing. Luna: Sure. Revenue-based financing is another way startups are raising capital without diluting equity. But rolling funds are equity-based, so they're different tools for different stages. Lucas: Right. A startup that has recurring revenue might prefer revenue-based financing because it doesn't dilute ownership. But a pre-revenue startup with a strong team and traction might benefit from a rolling fund that can provide capital quickly. Luna: And some startups are blending both — taking a rolling fund investment for working capital and a revenue-based loan for growth. It's a hybrid approach that's becoming more common. Lucas: That's a sophisticated strategy, and it requires a founder who really understands their unit economics and runway needs. But for the right founder, rolling funds can be a powerful tool. Luna: Let's zoom out. Rolling funds are part of a broader shift toward more flexible, founder-friendly capital. We've seen SAFEs, rolling notes, revenue share agreements — all of these are trying to reduce friction in early-stage funding. Lucas: And rolling funds are one of the most significant innovations because they change the rhythm of fundraising. Instead of a sprint every 18 months, it's a marathon where you have a steady stream of potential investors. Luna: But that marathon can be exhausting if you're constantly pitching to new LPs. The key is to build relationships with a few rolling fund managers who really get your business. Lucas: So to wrap up, rolling funds are here to stay. They offer speed and flexibility, but they come with risks around investor alignment. Founders should do their homework and not just take the money blindly. Luna: And for LPs, rolling funds provide a way to invest in startups with more control, but they need to trust the GP's judgment. It's a relationship business, after all. Lucas: As always, the best approach is to be deliberate. Understand your options, and choose the capital that matches your stage and goals. That's it for this episode of The Series A Show.