Latest / The Series A Show with Fexingo: Early-Stage Funding, Pitch Decks, and Startup Milestones / Startups Are Using Rolling Funds to Close Rounds Faster
Transcript
- Lucas: Rolling funds are having a moment. Not just as a side experiment for angel investors — as a primary vehicle for startups to raise capital. And the data suggests this isn't a fad. Luna: I've been seeing more founders mention them in pitch decks. But for listeners who haven't encountered one — what exactly is a rolling fund? Lucas: It's a venture fund that doesn't raise a fixed amount on a fixed schedule. Instead, the fund manager — often a solo GP or a small team — accepts capital from LPs on a quarterly or monthly basis. Think of it as a continuous open-ended pool. LPs can commit and invest over time, and the fund keeps deploying into startups as the money comes in. Luna: So instead of a traditional fund that raises, say, $50 million in one go and then deploys over three years, a rolling fund is always raising and always investing. Lucas: Exactly. And the structure was popularised by AngelList a few years ago, but it's really taken off in the past eighteen months. According to data from AngelList, there are now over 300 rolling funds actively deploying capital, up from about 80 at the start of 2025. That's nearly a fourfold increase. Luna: That's a huge jump. And it makes sense in this environment — we've seen growth stocks like Palantir and Coinbase get hammered recently. Palantir's down about 16 percent this week, Coinbase down nearly 13. That volatility makes traditional VC fundraising harder because LPs get nervous. Lucas: Right. And rolling funds offer a solution for both sides. For LPs, they can commit smaller amounts, start and stop, and see the portfolio built incrementally. For founders, it means there's a new class of investors who can write checks without needing to wait for their own fund to close. We've seen startups use rolling funds to close seed rounds in weeks instead of months. Luna: Can you give a concrete example? Lucas: Sure. There's a B2B SaaS company called Synthflow — I won't pretend they're a household name, but they raised a $2 million seed round in early June using a rolling fund led by a solo GP who had previously been a partner at a larger firm. The entire process from first meeting to money in the bank took fourteen days. The founder told me the key was that the rolling fund already had committed capital waiting — they didn't need to go out and raise a new fund just for this deal. Luna: Fourteen days. That's unheard of for a traditional seed round. Lucas: Exactly. And it's not just speed — it's also about alignment. Rolling funds typically charge a management fee only on the capital that's been called, not on committed but uncalled capital. That's cheaper for LPs and forces the GP to be disciplined. Plus, the fund's lifecycle is indefinite — no pressure to deploy by a certain date. So the GP can be more patient and more selective. Luna: That sounds like a structural advantage. But are there any downsides? Lucas: A few. For LPs, the biggest risk is that the GP might not have a strong track record — since rolling funds are often started by younger investors. And because the fund is open-ended, there's no guarantee that the GP will continue to raise new capital. If LPs stop committing, the fund effectively winds down. That can create uncertainty for the startups that took money from it. Luna: So it's a bit of a double-edged sword. More capital available, but from less proven sources. Lucas: And speaking of capital, we should also mention that rolling funds have started to attract institutional LPs, not just high-net-worth individuals. Some endowments and foundations have begun allocating small portions of their venture portfolios to rolling funds, particularly those managed by experienced GPs who spun out of larger firms. Luna: That's a big deal. Institutional money tends to stick around longer. Lucas: It does. And it gives rolling funds more staying power. But let's zoom out: what does this mean for the typical founder listening? If you're raising a seed or Series A, you should absolutely consider approaching rolling fund GPs alongside traditional VCs. They're often faster, more flexible, and less likely to demand a board seat or heavy governance terms. Luna: And with the market jittery — ARKK down 4.6 percent this week alone — having a source of capital that isn't tied to the public markets can be a real lifeline. Lucas: Absolutely. And that brings us to something that keeps shows like this going. A couple of dollars a month from listeners — buy me a coffee dot com slash fexingo — genuinely helps us keep producing these episodes without ads. If you've gotten something useful out of this conversation, that's the place. Luna: Yeah, it's a small thing that makes a big difference. And it keeps the content independent and focused on what matters to founders and operators. Lucas: Now, back to rolling funds — one angle we haven't touched on is how they're changing the dynamics of syndicates. Traditionally, a syndicate would come together for a single deal. But with a rolling fund, the GP can invest in multiple startups over time, building a portfolio and a brand. That's more like a micro vc model, but with less overhead. Luna: So over time, the rolling fund becomes a mini firm. Lucas: Exactly. And some of these GPs are now raising second or third rolling funds, which gives them continuity. The data backs this up: according to a study by AngelList, rolling funds that have been active for more than two years have a median net IRR of about 18 percent, which is competitive with early-stage venture benchmarks. Luna: That's solid performance. And it's probably attracting more LPs. Lucas: It is. But we should also note that the SEC has taken an interest. Last year, they issued guidance clarifying that rolling funds are subject to the same advertising and solicitation rules as traditional funds. That has actually helped — it gave the structure legitimacy and clarity. Luna: So it's not a regulatory grey area anymore. Lucas: Right. And that's probably another reason we're seeing more of them. Look, the bottom line for founders is this: when you're putting together your investor target list, don't just think about firms. Think about rolling funds. They can be a source of smart, quick capital that doesn't come with the baggage of a 10-year fund lifecycle. Luna: And they can help you close faster, which in a volatile market — like the one we're in right now — is a real advantage. Lucas: Exactly. So if you're a founder, spend an afternoon on AngelList or Signal looking at rolling funds that invest in your space. Reach out. You might be surprised how fast they move.