In the past few months, Rolling Funds by AngelList have been the talk of the town. Instead of having to raise a new fund every 2-3 years, fund managers can now continuously accept capital on a quarterly basis, where LPs (limited partners, like family offices or endowments or fund of funds (FoF)) typically invest with 1-2 year minimum commitments. Under the 506c designation, you can also publicly talk about your fundraise as a fund manager. Whereas the traditional Fund I typically took 11 months to fundraise for a single GP (general partner of a VC fund), 11.9 if multiple GPs, now with Rolling Funds, a fund manager can raise and invest out of a fund within a month – and as quick as starting with a tweet. AngelList will also:
- Help you set up a website,
- Verify accredited investors,
- Help set up the fund (reducing legal fees),
- And with rolling funds, you can invest as soon as the capital is committed per quarter, instead of waiting before a certain percentage of the whole fund is committed as per the usual 506b traditional funds.
Moreover, Rolling Funds, under the same 506c general solicitation rules, are built to scale. Both for the emerging fund manager playing the positive sum game of investing upstream as a participating investor, and for the experienced fund manager who’s leading Series A rounds. In the former example with the emerging fund manager, say a solo GP investing out of a $10M initial fund size, 20 checks of $250K, and 1:1 reserves. Or the latter, $50-100M/partner, writing $2-3M checks. Maybe up to $7-10M for a “hot deal“, which by its nature, are rare and few in between. In the words of Avlok Kohli, CEO of AngelList Venture, Rolling Funds are what funds would have looked like if they “were created in an age of software”.
I’m not gonna lie, Rolling Funds really are amazing. Given the bull case, what is the bear case? And how will that impact both emerging and experienced fund managers?
Continue reading “Rolling Funds and the Emerging Fund Manager”