Almost all comparisons of Rolling Funds compare them to traditional venture capital funds; we haven’t found anything that compares Rolling Funds to angel groups. That is odd, because there are a lot of similarities.
First, let’s look at the positives of Rolling Funds and see how they relate to angel funds.
- Small checks. A key selling point of Rolling Funds is that they open up “venture investing” to a large universe of investors who – finally! – have a way to deploy smaller investments. Compared to a large VC fund, that would be true: large VC funds typically require a $200K+ investment, which a “micro-LP” might be hesitant to do.
But there is another name for “micro-LP”: “angel investor”!
Angel investors invest in companies and funds all the time. At VentureSouth, an active member has a minimum investment of $5,000 to participate in a portfolio company – and had a $25,000 minimum to participate in the VentureSouth Angel Fund IV raised last year.
Rolling Funds don’t really open up a universe of new investors – you still have to be an accredited investor to invest in a fund – or create the first opportunity to make small early-stage investments. VentureSouth has offered this for a decade.
- Rolling commitments. A second selling point is that you don’t need to commit all your investment upfront – you can do it over time. You can probably guess where this is going: this is called angel investing!
On the VentureSouth Angel Fund IV, for example, 25% was funded upfront, and the rest called over the course of the following 18 months as the fund invested. That looks a lot like a Rolling Fund subscription period! In the angel group membership model, too, a member picks and chooses their investments over time, not all at once. Maximum flexibility.
Still, being able to subscribe quarterly – and critically being able to continue making more investments automatically if you are impressed with how the fund executes, rather than having to wait until the next fund – which may be several years from this one – is a nice feature of Rolling Funds.
- Multiple manager diversification. Relating to 1 and 2, these small checks allow an investor to join with several Rolling Funds, and therefore get multiple manager diversification, the benefits to diversification all investing requires, and a lot of learning and deal flow possibilities for LPs – benefits many, like Paul Andersen, correctly believe are substantial.
You can do that using the same small checks through angel groups. Join VentureSouth, Space Angels, Tech Coast Angels, Anglia Capital, too. Diversified deal-flow in early-stage investing is not that difficult if you try!