AngeList introduced a new kind of funding to the world of venture funds at the start of this year, called “Rolling Funds”. It allows fund managers to accept capital on a quarterly subscription basis which is auto-renewing or roll in automatically. Their unique idea of making venture funds a subscription-based product and service is what makes Rolling fund standout in the venture funds market.
About Rolling Funds
Rolling Funds serves solutions to practices such as big bang fundraising which involves raising the entire fund’s capital in a short period and also the fund managers cannot raise additional funds during this time and the fund gets locked up for 2-4 years.
General partners are the ones who run the business whereas Limited partners do not take part in running the business and have limited liability. Often limited partner serve only as an investor in the business.GPs raise and manage venture funds, set and make investment decisions, and help their portfolio companies exit, because they have a fiduciary responsibility to their Limited Partners.The Recurring nature of rolling funds gives the flexibility to General Partners(GP) to start raising a fraction of funds and begin investing right away, then eventually scale up by giving access to Limited Partners to invest on a subscription basis and allowance to opt in-opt out.
The fund managers can also increase their fund size continuously so they never need to raise another fund again. This prevents the restrictive nature of traditional venture funds and gives more flexibility to fund managers.
How Rolling Funds help Fund Managers?
Rolling Funds are curated in such a way that they serve the interest of both experienced and emerging fund managers. The emerging fund managers have the ease of investing by raising a small portion of total capital while an experienced fund manager can accept continuous new capital commitments allowing them to invest in some great startups as there is an increasing capital flow for investments.
The fund’s nature is as such that it will always keep rising and the total capital will always grow. The “easier” and “approachable” nature of rolling funds ensure that there would be more capital generation and as the emerging fund managers don’t have to bother about fundraising, they can concentrate on things they have and invest in more valuable companies.
With subscription-based services growing wildly in different domains, very few had thought that something of this sort will be introduced in the world of venture funds. But now that it is here in the form of “Rolling Funds”, Fund Managers would want to embrace it for their own benefits. The model works most beneficially for fund managers who have the adequate resources and returns to persuade their LPs to invest back in them after a quarterly period.
With the LPs not being obliged to stay up till the end of the fund, this can have a cost attached to it. Nevertheless, rolling funds seem to cater to the needs of modern emerging venture managers and somewhat also satisfy the interests of experienced venture managers, indicating the benefits of the idea behind Rolling funds.