I made my first angel investment back when Friendster was still a thing. For 18 years, I’ve been in the trenches, writing checks, sitting on boards, and seeing companies go from a pitch deck to a billion-dollar exit. I’ve backed 234 companies, including some you might have heard of like Anthropic and OpenAI. When rolling funds came onto the scene, I was skeptical. It felt like a gimmick, a way for want-to-be VCs to play with smaller stakes. My playbook was built on handshakes, long dinners, and a deep, concentrated portfolio.
I was wrong.
My thinking on this has been completely turned on its head. A few years ago, a founder I’d backed before came to me with a new idea. It was brilliant, but too early for a traditional seed round. He was raising a small, pre-seed amount through a rolling fund structure. I almost passed. But I trusted the founder, so I wrote a check. That company is now a unicorn, and it forced me to look at this new model with fresh eyes. Rolling funds aren’t just a fad; they are a fundamental shift in how early-stage investing gets done. But the lessons you learn aren’t in any textbook. They’re learned in the messy middle of deals, cap tables, and LP relations. Here are the six most critical things I’ve learned.
1. Rolling Funds Are Not “Set It and Forget It”
Everyone talks about rolling funds as SPVs on a subscription. Easy, right? LPs commit capital quarterly, you deploy it. Sounds simple. The reality is a brutal operational grind. The platforms like AngelList handle the basics, the plumbing of capital calls and distributions. But that’s maybe 20% of the work.
The other 80% is you. It’s the constant deal flow sourcing, the endless emails, the quick-turnaround diligence, and the non-stop LP communication. With a traditional fund, you raise a big chunk of capital every few years and have a dedicated period to deploy it. With a rolling fund, you are always fundraising. Every quarter is a new chance for LPs to join, or to churn. You have to constantly prove your value, not just with returns, but with updates, insights, and access. It’s a content marketing machine layered on top of an investment vehicle. In a manager’s first year, it’s common to spend more time writing LP updates than meeting with founders. It’s a wake-up call. This isn’t passive. It’s one of the most active forms of investing there is.
2. Your LPs Are Your New Co-Founders
In a traditional fund, LPs are often silent partners. You send them a quarterly report and a K-1. With a rolling fund, the LPs can be the manager’s secret weapon. A manager can have LPs who are engineers at Google, product managers at Stripe, and marketing VPs at fast-growing startups. They become an extended diligence team.
Picture a manager looking at a highly technical AI infrastructure company. The founder is brilliant, but the manager can’t get their head around the core technology. They send the deck to two LPs who are AI researchers at major tech companies. Within 48 hours, they have a two-page document breaking down the tech, the competitive landscape, and the potential risks. That insight is deeper than what they could have gotten from any paid consultant. They write the check. That kind of rapid, expert feedback is an unfair advantage. You’re not just getting capital from your LPs; you’re getting a distributed network of experts. But you have to cultivate it. You have to treat them like partners, not just sources of cash.
3. The 2% Management Fee Is a Lie
Well, not a lie, but it’s misleading. The standard 2/20 model (2% management fee, 20% carry) gets distorted in the rolling fund world. That 2% sounds great, but it gets eaten up fast. First, the platform takes a cut. Then there are the one-off costs for legal, accounting, and state filings for each SPV you create. Before you know it, that 2% is barely enough to keep the lights on.
Run the numbers after a first year and the all-in costs can be closer to 4% of committed capital. The management fee becomes a loss leader. The only way you make real money is from the carry. This changes the entire dynamic. It forces you to be incredibly disciplined about your investments. You can’t afford to just make a bunch of small bets and hope one pays off. You need to have high conviction in every single check you write, because your financial success is directly tied to the success of your portfolio companies, not the fees you collect. It’s a purer form of venture, in a way. You eat what you kill.
4. Portfolio Construction Gets Weird
The power law in venture is real—a small number of investments drive the majority of returns. With a traditional fund, you make 20-30 bets and pray for one or two 100x outcomes. With a rolling fund, you might be writing dozens of smaller checks. This changes the math.
The strategy that fits is what I call “concentrated diversification.” The manager is still looking for those outlier companies, but is also building a base of solid, 5-10x return potential companies. The smaller, more frequent deployment cycle allows them to adjust their thesis in real-time. If they see a new trend emerging, they can immediately start making bets in that space. They don’t have to wait for the next fund cycle. For example, a rolling fund can build a portfolio of 5 generative AI companies in a single quarter, something that would be impossible in a traditional structure. It’s a more nimble, adaptive way to build a portfolio, but it requires constant attention. You’re not just a stock picker; you’re a portfolio manager in the truest sense.
5. The Cap Table Is a Story—Rolling Funds Add a Weird Chapter
I’ve seen cap tables that look like horror novels. Messy, complicated, and full of scary surprises. A poorly managed rolling fund can create a massive headache for founders down the line. When a Series A investor comes in, they want to see a clean, simple cap table. They don’t want to see an SPV with 99 LPs who all have tiny, fractional ownership.
I saw a great company almost lose a term sheet because of this. The founder had raised his pre-seed from three different rolling funds, and the cap table was a disaster. It took two weeks of expensive legal work to clean it up. As a rolling fund manager, it’s your responsibility to be a good steward of the cap table. This means consolidating your LPs into a single, clean SPV for each investment. It means being transparent with founders about how your fund is structured. And it means being ready to explain it to downstream investors. A clean cap table is a sign of a disciplined founder and a disciplined lead investor. Don’t be the reason a great company gets a bad reputation.
6. Your Personal Brand is the Fund’s Biggest Asset
More than anything else, a rolling fund is a bet on you. LPs aren’t just investing in your deal flow; they’re investing in your judgment, your network, and your reputation. My blog, my Twitter account, my book—these aren’t side projects. They bring founders to me as an angel investor, and for a fund manager, channels like these are the fund’s primary marketing.
When I write about a specific investment thesis, I’m not just sharing my thoughts. I’m attracting founders who are building in that space, and for a fund manager, LPs who want to invest in it. It’s a flywheel. The more you share your expertise, the better your deal flow becomes. The better your deal flow, the better your returns. The better your returns, the more LPs want to join your fund. It’s a full-time job, and it’s not for everyone. You have to be willing to put yourself out there, to have strong opinions, and to build in public. Your reputation is your deal flow. In the world of rolling funds, you are the product.
Frequently Asked Questions
Q:How can I apply this thinking to my own situation?
Start by identifying the core principle behind the opinion, not the specific example. Then ask yourself: does this principle apply to my context? If yes, test it in a small, low-risk way before going all in.
Q:What experience informs this perspective?
This perspective comes from over a decade of building companies in Silicon Valley, two successful exits (RemoteTeam to Gusto, MovieLaLa to Gfycat), and investing in 234 startups including Anthropic, OpenAI, and Scale AI. I write about what I've lived.
Q:Do all experts agree with this view?
No, and that's fine. The best ideas in business are often contrarian. I share my perspective based on my experience and data, but I encourage you to seek out opposing viewpoints and form your own conclusions.
Q:What's the most common pushback you get on this?
People often push back by citing exceptions or edge cases. And they're usually right that exceptions exist. But building a strategy around exceptions rather than patterns is a losing game for most founders.