Latest / The Series A Show with Fexingo: Early-Stage Funding, Pitch Decks, and Startup Milestones / How Founders Are Using Rolling Funds to Close Faster in 2026
Transcript
- Lucas: So this week we saw Reid Hoffman leave Microsoft's board to go what he called 'founder mode' with his new startup Manus. And it got me thinking about how the fundraising landscape has shifted for founders who want to stay in control. Luna: Yeah, 'founder mode' is a loaded term now. And it ties directly into one of the biggest changes in early-stage fundraising—rolling funds. Lucas: Exactly. Rolling funds let founders raise capital continuously, closing new investors every month or quarter instead of doing one big round every 18 months. If today's conversation is useful for something you're building or running, the way these stay ad-free is listener support. Buy me a coffee dot com slash fexingo. Luna: Absolutely. Keeps it independent and lets us dig into the mechanics without any sponsor noise. Lucas: So let's get into the mechanics. A rolling fund is typically structured as a series of offerings under Regulation D, where the fund accepts new capital on a recurring basis—say, monthly. Investors commit to a certain amount per period, and the fund deploys that capital into startups over time. Luna: Right. And the key difference from a traditional venture fund is that the general partner doesn't have to call all the capital upfront. They can drip it in as deals come along. Lucas: That's the advantage for the GP. But for founders, the appeal is speed and certainty. Instead of spending six months on a roadshow, you can close a rolling fund investor in a few weeks. Some funds are even doing weekly closes. Luna: And that matters especially now, when public markets are sending mixed signals. I mean, look at the numbers this week—PLTR down 15.6 percent in five days, SHOP down 11.7 percent, COIN down 16.5 percent. That volatility makes LPs nervous about locking up capital for ten years. Lucas: Right. Rolling funds offer LPs more liquidity—they can usually redeem quarterly after a lock-up period. So it's a way to keep capital flowing even when traditional VC fundraising slows down. Luna: But there's a trade-off. The continuous nature means founders are always fundraising. You're never really 'done'—you're always pitching, always updating investors. Lucas: That's the big downside. Some founders say it's exhausting. You have to maintain a constant drumbeat of communication with your investor base. On the flip side, it forces discipline—you have to report metrics regularly, which can help you stay focused. Luna: And the investor base tends to be more diverse. Rolling funds often attract smaller checks from family offices, high-net-worth individuals, even international investors who wouldn't commit to a traditional fund. Lucas: Exactly. And that aligns with the broader trend toward democratizing venture. We've seen platforms like AngelList and Republic enable rolling funds for emerging managers. It's not just for Sequoia anymore. Luna: But let's talk about the numbers. A rolling fund typically charges a management fee of around 2 percent on committed capital, plus carried interest—usually 20 to 30 percent. That's comparable to traditional funds, but the fee base is smaller because capital is deployed gradually. Lucas: Right. And the carry structure can be different. Some rolling funds use a 'deal-by-deal' carry, where the GP gets a percentage of profits from each investment, rather than a fund-level waterfall. That can be more founder-friendly because you're not waiting for the whole fund to mature. Luna: It also reduces the 'J-curve' effect—the period where the fund is underwater because of fees and early losses. With rolling funds, you see returns sooner because capital is deployed more quickly. Lucas: Let's bring it back to Reid Hoffman. He's going 'founder mode' with Manus, which is an AI startup. If he were raising a traditional fund, he'd probably be on the road for months. But with a rolling fund, he could start deploying capital almost immediately. Luna: And given the AI talent war, speed matters. If you can close a round in weeks instead of months, you can lock in key hires before competitors even start their fundraising. Lucas: The question is whether rolling funds are a fad or a permanent shift. Some data suggests they're here to stay. According to a recent report from PitchBook, rolling funds accounted for about 8 percent of venture capital raised in the first quarter of 2026, up from 3 percent two years ago. Luna: That's still small, but growing fast. And I think the trend is driven by two things: the desire for faster closes, and the rise of solo GPs who can't afford the overhead of a traditional fund. Lucas: Solo GPs are a huge part of this. A rolling fund lets one person run a fund with minimal administrative burden. You don't need a big back office. You just need a good deal flow and a platform to handle the legal and compliance. Luna: And the platforms have gotten really good. Services like AngelList's rolling fund product handle the subscription agreements, the KYC, the capital calls. It's almost turnkey. Lucas: But there's a catch. The SEC has been looking closely at rolling funds. In 2024, they proposed new rules that would require rolling funds to provide more disclosure about fees and performance. Some managers worry that could slow down the growth. Luna: That's a real risk. If the compliance burden increases, the cost advantage of rolling funds could disappear. But so far, the SEC has been more focused on retail-focused crowdfunding than on accredited investor funds. Lucas: Let's talk about a concrete example. Say you're a startup raising a $5 million seed round. With a traditional fund, you'd find a lead investor, negotiate terms, and then bring in a few co-investors. That process takes three to six months. Luna: With a rolling fund, you could start taking money from day one. You set up a rolling fund on AngelList, set a minimum check size of $25,000, and start pitching. Within a few weeks, you could have $2 million committed. Lucas: And the beauty is, you don't have to close the round at a fixed amount. You can keep raising as long as the fund stays open. Some startups have raised $10 million through rolling funds over a year. Luna: But that also means you're constantly diluting yourself. Every new investor gets a piece of the company. You need to be careful about how much equity you give away over time. Lucas: That's where the cap table math gets tricky. With a traditional round, you know exactly how much you're raising and at what valuation. With a rolling fund, the valuation can change with each close, especially if the company's metrics improve over time. Luna: Some founders handle that by setting a valuation cap for the entire rolling fund period. Others negotiate a price per share that increases every quarter based on milestones. Lucas: It's a negotiation. And it requires a lot of trust between the founder and the investors. Because investors are committing capital without knowing exactly what the next close will look like. Luna: Let's pivot to the investor side. Why would an LP choose a rolling fund over a traditional fund? One reason is liquidity. Rolling funds typically offer quarterly redemptions after a one-year lock-up, so LPs can get their money out faster if they need to. Lucas: That's a huge selling point, especially in this market where liquidity is tight. We've seen traditional funds struggle to return capital because they can't exit portfolio companies. Rolling funds give LPs more control. Luna: But there's a downside for LPs: the fees can be higher on a percentage basis because the fund is smaller. If a manager raises $10 million in a rolling fund and charges 2 percent, that's only $200,000 a year—barely enough to cover the manager's salary. Lucas: So the manager has an incentive to keep raising. That can lead to a 'raise at all costs' mentality, where the quality of investments suffers because the manager is focused on fundraising rather than due diligence. Luna: It's a tension. But I think for many early-stage startups, the speed and flexibility of rolling funds outweigh the potential downsides. Especially when you're competing for top talent and market share. Lucas: We saw a great example of that with the AI startup Writer, which used a rolling fund to raise $200 million in 2024. They closed their first $50 million in six weeks, then kept adding investors over the next year. That allowed them to hire aggressively without waiting for a traditional round. Luna: Writer is a good case study. And it shows that rolling funds aren't just for small rounds. They can scale. But the key is having a strong investor base that trusts the management team. Lucas: Let's circle back to the broader market context. With the Nasdaq down 8 percent in the last week, traditional VC fundraising is getting harder. LPs are being more selective. Rolling funds offer a way to keep the pipeline moving. Luna: And it's not just early stage. We're seeing growth-stage funds experiment with rolling structures too. The concept is spreading because it addresses a real pain point: the mismatch between the speed of startups and the speed of traditional venture. Lucas: So what should a founder do if they're considering a rolling fund? First, talk to a lawyer. The regulatory requirements are different depending on whether you're raising a fund yourself or using a platform. Luna: Second, think about your investor base. Rolling funds work best when you have a network of sophisticated investors who are comfortable with the format. If your investors are traditional LPs, they might push back. Lucas: And third, have a plan for managing the constant fundraising. Some founders hire a dedicated investor relations person. Others set aside one day a week just for fundraising updates. It's not a passive activity. Luna: But for founders who value speed and control, rolling funds are a powerful tool. And as more success stories emerge, I think we'll see them become a standard part of the fundraising toolkit. Lucas: I think you're right. The question is whether the SEC and market conditions will support that growth. But for now, it's one of the most interesting trends in early-stage finance. Luna: And it ties back to what Reid Hoffman is doing—going 'founder mode' means controlling your own destiny, and rolling funds give founders more control over their capital. Lucas: Exactly. So whether you're a founder or an investor, it's worth understanding how rolling funds work. Because they're not going away.