AngelList has recently launched a new early access program for a new platform. Similar to their syndicates, AngelList is powering a new generation of Venture Capital Funds known as Rolling Venture Capital Funds. This will be an interesting evolution in the venture investing landscape. With a ongoing funding model and a diverse set of LPs, can emerging GPs use this new model to bring new forms of Venture Investing to help better serve startups?
With a quarter-to-quarter funding model, these Rolling Funds will have cashflow similar to that of their startup compatriots. Recurring money in, recurring expenses out. A lot of the new GPs that are emerging to start these funds are former startup founders who have been part of a recurring revenue business.
Venture capital funds have traditionally operated in a singular investing model, equity. As startups begin to grow and require capital to help do so, VC funds step in and provide capital in return for equity in the business. Given the risk involved, VC typically need to maximize their equity positions so that they companies that emerge as winners can return enough capital to cover their losses. The issue is that the model in which these companies grow isn’t so stepwise, they don’t get huge chunks of revenue dumped on them like in a funding round, their growth is gradual, with deferred revenue meaning that their revenue and customer base can often outgrow their capabilities with the burn rate they set based on their funding round.
With a new rolling venture capital model could we find new ways to adapt this? With fresh capital available to rolling fund GPs each quarter, could we find ways to inject capital and liquidity into startups on a more rolling basis, just like the subscriptions in these new funds. With more consistent access to capital, could we help more portfolio companies become winners as they use this capital to help grow faster and gain traction? Can we take these new tools and help innovate access to capital for startups the same way founders and entrepreneurs innovate products and service?