Latest / The Series A Show with Fexingo: Early-Stage Funding, Pitch Decks, and Startup Milestones / How Rolling Funds Changed Early-Stage Investing
Transcript
- Lucas: If you've been fundraising in the last couple of years, you've probably had a VC say something like 'we're writing out of our rolling fund' — and that phrase is now so common that it barely registers as new anymore. Luna: It's become the default for a lot of seed funds. But what actually changed? These didn't exist five years ago. Lucas: Yeah, the SEC gave them the green light in 2020, and since then rolling funds have essentially rewritten the playbook for how early-stage capital gets raised and deployed. We're seeing numbers from AngelList that rolling funds now account for over 30 percent of all syndicate capital on their platform — that's about $2.8 billion deployed through rolling funds in 2025 alone. Luna: That's a huge shift. And I think — and this might be a slightly awkward pivot — but it's actually why shows like this exist too. A handful of listeners chip in monthly through buy me a coffee dot com slash fexingo, and that's literally what funds making this many episodes possible. So if you find these conversations useful for what you're building, that's the reason we can keep them ad-free. Lucas: Absolutely. And it's the same principle — small, consistent support that adds up to something bigger. Rolling funds work the same way for startups. Lucas: So the old model was: you raise a venture fund, you have a three-to-five-year investment period, you deploy capital, then you raise another fund. Rolling funds flipped that — they're evergreen vehicles where LPs commit capital quarterly, and the GP can keep investing indefinitely. Luna: Right, so instead of raising a new fund every few years, you just keep the spigot open. But doesn't that create a different kind of pressure — having to attract new LPs every quarter? Lucas: It does, and it changes the GP's incentives. With a traditional fund, you have a locked-in pool of capital. With a rolling fund, your LPs can withdraw every quarter, so you have to continuously prove your deal flow and returns to keep them in. That's actually healthier in some ways — it forces discipline. Luna: But it also means a GP might be more tempted to chase quick wins to keep LPs happy, rather than making longer-term bets. Lucas: That's the critique, yeah. But the data so far suggests rolling funds are actually deploying more capital into early-stage startups than traditional funds of comparable size. AngelList's 2025 report showed rolling funds invested in 40 percent more seed deals per dollar of committed capital than traditional micro-VCs. Luna: So they're more efficient — less time spent fundraising, more time finding deals. That makes sense. Lucas: Exactly. And for founders, the biggest change is speed. In the old model, you might pitch a partner, they take it to their investment committee, you wait weeks. With a rolling fund, the GP can make a decision quickly because they have capital ready to deploy. I've seen deals close in under 48 hours. Luna: We're hearing that from founders on the show too — the bar is lower for getting a first meeting, but the due diligence is still thorough. It's not a free-for-all. Lucas: No, and the best rolling fund GPs are actually more rigorous because they know LPs are watching. But there's another structural advantage: rolling funds make it easier to build a diversified portfolio of smaller checks. A traditional fund might need to do ten checks at $500,000 each. A rolling fund can do a hundred checks at $50,000 and follow on later. Luna: That's interesting for founders who are raising a smaller round — say $500,000 or less. They can get in front of more potential investors. Lucas: And the data backs that up. According to a recent study by the University of Chicago Booth School, startups that raised from rolling funds in 2024 were 22 percent more likely to raise a subsequent round within 18 months compared to those that only raised from traditional funds. The theory is that rolling funds provide a more supportive ecosystem — they're more likely to write follow-on checks because they have the flexibility. Luna: But there's also a downside: if a rolling fund's LPs get cold feet, the fund can shrink or even shut down. We saw that in 2022 when the market turned — some rolling funds that had grown too fast lost a third of their LP base in a single quarter. Lucas: That's the risk of the evergreen structure. It's less stable in a downturn. But the flip side is that when the market is good, rolling funds can grow quickly. Look at Magnify Ventures — they just closed a $46.6 million Fund II, backed by Melinda Gates' firm. That fund itself uses a rolling structure. Luna: Right, I saw that headline today. So even larger institutional investors are getting comfortable with the model. Melinda Gates' firm is not a small player. Lucas: Exactly. And that signals that rolling funds are becoming mainstream, not just a tool for individual angels or micro-funds. Magnify's fund is focused on B2B SaaS and climate tech, and they're deploying on a rolling basis. Luna: So what does this mean for a founder who's raising a seed round in mid-2026? Should they specifically target rolling funds? Lucas: I'd say don't target them exclusively, but definitely include them in your mix. The main benefit is speed and the potential for a longer partnership. But you need to do your homework on the GP — check their track record, talk to founders they've backed, and understand their LP base. A rolling fund that has a high churn rate among LPs might not be around to write your Series A check. Luna: And also understand the terms. Some rolling funds use SAFEs, some use priced rounds. Make sure you know what you're getting into. Lucas: Absolutely. And one thing I'd add: rolling funds are not a magic bullet. They work best when the GP has a strong personal brand and a clear thesis. If you're just another generalist fund, it's hard to attract and retain LPs. So the model rewards focus and expertise. Luna: That's a good point. It's almost like the rolling fund structure forces GPs to become more like content creators — they have to consistently demonstrate value to keep their audience. Lucas: Exactly. And we're seeing that play out — the most successful rolling fund GPs are the ones who are active on social media, writing newsletters, building relationships. It's a different skill set than the traditional fundraising dinner. Luna: So for a founder listening, what's the one concrete takeaway from this episode? Lucas: If you're raising capital in the next six months, seriously consider pitching at least three rolling funds alongside your traditional VC targets. The data suggests you'll close faster, and you might get a more engaged investor. But vet them carefully — talk to their portfolio companies, check their LP retention, and make sure they have the capacity to follow on. Luna: And don't forget that you can also use rolling funds as a benchmark for what good fundraising looks like — if a fund can't explain their rolling structure clearly, that's a red flag. Lucas: Great point. I think rolling funds are going to continue to grow. I wouldn't be surprised if within five years, the majority of seed-stage capital comes through evergreen vehicles. The flexibility is just too compelling. Luna: It's a fascinating shift. And it's one of those changes that seemed small at first but is actually reshaping the entire early-stage ecosystem. Lucas: Yeah. The thing I keep coming back to is: rolling funds solve a real problem — the misalignment between the pace of startup growth and the rigid cycle of traditional venture funds. They align better with how companies actually need capital. Luna: Alright, that's a solid note to end on. Thanks for digging into this. Lucas: Always a pleasure. And if you want to support the ad-free feed, you know where to find us — buy me a coffee dot com slash fexingo. We'll be back tomorrow with another episode.