Rolling Fund Weekly - Edition #11
Rolling Fund Miami VC, Roaring Twenties, and Year-In-Review Edition: All the Best Rolling Fund Articles, Interviews, and Essays From the 2020 Archives
Welcome to the eleventh edition of Rolling Fund News, a weekly digest with updates and analysis of rolling funds and their wider impact on venture capital and early-stage investing.
This week, we’re diving deep into the rolling fund archives for a year-end review and recap with all the most impactful articles and interviews on rolling funds from the past year. We also take an exciting look at Miami-as-tech-hub and the decade ahead for solo capitalists and emerging GPs.
The Next Decade In Rolling Funds 🎢
Do you need to be in Silicon Valley to be a great investor?
Until recently, the answer was a definitive “Yes.” No region delivered a bigger impact (or better investment outcomes) than San Francisco and Silicon Valley. Jason Calacanis wrote an entire book on angel investing and it’s practically axiomatic—you need to be in Silicon Valley to be successful.
If you were a founder in Silicon Valley, you could pitch investors every week and never run out of fundraising opportunities. There were thousands of angel investors and early-stage venture funds dotting the landscape. The network effects of Silicon Valley are unprecedented in history.
Venture capital tends to chase the companies most strongly aligned with prevailing narratives. Therefore, founders in Silicon Valley would get the lion’s share of investment dollars.
All that has changed. Silicon Valley is no longer untouchable.
The next decade will be defined by solo capitalists.
Miami is fast-emerging as a major tech hub. It’s already popular with venture capitalists. Will engineering talent and startup executives follow them and move to the Magic City?
Can Miami appeal to the people who are really building things? Or will another city, like Austin, continue to grow its technology presence with major headquarters and founders moving to Texas?
Ultimately, the city with a thriving tech community and the strongest founder network will attract near-unlimited capital and investment dollars for new companies.
Rolling funds and solo capitalists are already nimble (and highly mobile) sources of investment capital. They’ll definitely play an enormous role in determining the success of these future tech hubs in the coming years.
Last Week In Rolling Funds 🚀
Newcomer: Keith Rabois on Taking His Talents to Miami Beach - In this exclusive interview with Eric Newcomer, Keith Rabois of Founders Fund explains his major decision to move operations to Miami and why he’s such a vocal champion on Twitter and elsewhere for Miami as a future tech hub. Will there be a “YC for Miami?”
Extra Crunch: U.S. Seed-Stage Investing Flourished During The Pandemic - Natasha Mascarenhas and Alex Wilhelm dive deep into the data for the U.S. seed market in 2020. Venture capital as an asset class hasn’t just survived this year’s stress test—there is a veritable deal frenzy to close out the year.
Pathway Ventures: Operator-Investors, The Future of Venture Capital - Siya Raj Purohit and Taylor Stockton of Pathway Ventures, an early-stage rolling fund investing in the future of work, introduce the third wave of operator-investors (or, operator fund managers). This article presents a helpful set of frameworks for the ever-increasing number of successful operators who are now raising venture funds. This trend is powered by a combination of founders’ preferences for operator investors, easing regulations, and, of course, rolling funds.
Marvin Liao: Operator-Investor Nano Funds are The Future (and Present) - Marvin Liao presents his thesis on “nano funds” and the future of investing. This trend is supercharged by the introduction of rolling funds, which have achieved product-market fit in an industry not generally known for its own innovations.
Bartosz Trocha: Data-Driven VCs - This essay shows how eighty-plus venture capital firms use alternative sources of data, sophisticated A.I. and machine learning models, and other proprietary software to deliver significant out-performance for their funds.
“For an industry which is supposed to be at the forefront of innovation, it’s shocking how outdated, or rather broken, venture capital really is.”
—Bartosz Trocha in Data-Driven VCs
To understand the impact of rolling funds on venture capital, simply imagine two funds:
Traditional Fund (“TF”) must raise an entire fund within a short fundraising window that’s only open once every three or four years. TF cannot publicly market or advertise any of its fund offerings.
Rolling Fund (“RF”) raises quarterly subscriptions from accredited investors via a streamlined, online checkout process. RF can raise funds anytime, and even advertise its fundraise publicly via Rule 506(c). Rolling funds automate and simplify much of the fund’s infrastructure and underlying operations, so RF can focus on making successful investments.
Which fund, TF or RF, has the fundraising advantage?
Next Big Thing #28: “The next big thing in 2021 is…” - Nikhil Basu Trivedi asked fifty of the brightest thinkers in venture and technology to complete the sentence:
“The next big thing in 2021 is—”
Here are a few of the responses on venture capital, and they’re all eminently positive tailwinds for rolling funds and emerging GPs:
TikTok eats VC. “As capital has become increasingly commoditized and portfolio services have converged, the most explicit value-add an investor can provide is, in many cases, distribution.” —Mario Gabriele at The Generalist
The reemergence of the first-time, or emerging fund manager. “This will create opportunities for new venture funds to emerge established by range of new entrants: experienced GPs spinning out of large established platform funds, newly-minted tech millionaires creating their own investment vehicles, the institutionalizing of rolling funds or existing microfunds whose portfolios have developed over the course of the last year.” —Beezer Clarkson at Sapphire Partners
A rise in pre-seed deals and institutionalized seed rounds. “Seed rounds have become more institutionalized and a lot like Series A rounds in terms of size and traction.” —Lisa Wu at Norwest Venture Partners
Halle Kaplan-Allen: The Emerging Manager Toolbox - Halle Kaplan-Allen, venture operations at AngelList, is putting together a helpful compendium of automation resources for emerging fund managers and solo capitalists. The venture capital “tech stack,” or set of tools and processes used to automate and streamline their back office and portfolio operations, is especially useful for emerging GPs.
ICYMI, The Best of Rolling Fund Weekly 🥇
For your reading pleasure, we’re highlighting a couple of the best editions from the Rolling Fund News archives.
Edition #5: Will Venture Fund Management Fees Go To Zero? - This essay takes a look at the traditional “2/20” fee structure and why management fees are so valuable for traditional funds, and postulates the rise of a new class of venture funds, primarily led by emerging fund managers, with 0% management fees.
Rolling Fund FAQ: What Is A Rolling Fund? - Of course, this hugely popular rolling fund FAQ answers the most frequently-asked questions on rolling funds.
Interviews With AngelList Venture 🎤
AngelList Venture: Disrupting Wall Street with a Rolling Fund: An Interview with Alexander Pack - Alexander Pack of Pack Capital, a new cryptocurrency-focused rolling fund, sits down virtually with Seif Salama of AngelList Venture to discuss his new fund.
Pack shares his outlook for cryptocurrencies in 2021, his rolling fund’s investment strategy, and the significant advantages of choosing a rolling fund structure for his new fund. What makes cryptocurrency investing different (a “civilization-level disruption”) and what does Pack look for in an investment?
AngelList Venture: Superhuman to Super-Angel: Rahul Vohra Discusses His New Rolling Fund - Rahul Vohra of Superhuman (“the fastest email experience in the world”) discusses his experience launching a rolling fund with Todd Goldberg for later-stage investments, aptly named the Follow-on Fund.
Vohra also offers fundraising advice for startup founders, as well as some tips for first-time fund managers and angel investors just starting out.
Angellist Venture: Correlation Between GP Experience and Fund Performance - Abe Othman of AngelList Venture presents a compelling and evidence-based case that first-time fund managers perform no better or worse than experienced fund managers.
Fund performance is always determined by a tiny handful of top-performing investments. Does a fund manager’s past performance have any predictive value for determining the performance of their next fund? Now, we have the answer.
Chic Tweets 🔥
@austin_rief demonstrates the impact of public fundraising in two tweets.
Will @FrancisSuarez follow us on Twitter?
We won’t be surprised, @anothercohen.
What lies in the decade ahead? You can follow @RollingFund on Twitter for the latest updates in 2021 and beyond.
Disclaimer: This material should not be construed as a recommendation for any investment or other advice of any kind and shall not constitute or imply any offer to purchase, sell or hold any security or to enter into or engage in any type of transaction.