I’m going to say something that might sound crazy: most of the advice out there on rolling funds is wrong. Not just a little off, but fundamentally misguided for the people who need it most—founders.
I’ve raised money, I’ve invested in over 200 companies, and I’ve seen the good, the bad, and the ugly of venture capital. The truth is, the guides you’re reading are written by VCs, for VCs. They’re designed to help them raise money, not to help you build a company. They tell you what to do, but they don’t tell you why, and they certainly don’t tell you how to negotiate from a position of strength.
This is the guide I wish I had when I was raising my first round. It’s a founder-friendly approach to building a rolling fund that protects you and your company.
The Problem with Traditional Rolling Fund Advice
Most guides will tell you to set up a rolling fund with a standard 2% management fee and 20% carry. They’ll tell you to court big-name LPs and to run your fund like a mini-VC firm. And for a VC, that’s great advice. But for a founder, it’s a trap.
I remember when I was raising for RemoteTeam. We were getting a lot of interest, and I was talking to a well-known VC who suggested I start a rolling fund. He sent me a bunch of articles and templates, all with the same standard terms. I almost went along with it. It seemed like the “right” thing to do.
But then I started to think about it. A 2% management fee on a $5 million fund is $100,000 a year. That’s a full-time salary. And for what? To manage a handful of investments? It didn’t make sense. And the 20% carry? That’s a huge chunk of the upside that could be going to my team, my early employees, and the people who are actually building the company.
I realized that the traditional rolling fund structure is designed to enrich the fund manager, not the founder. It’s a distraction from what really matters: building a great product and a great company.
My Counterintuitive Approach to Rolling Funds
So, I threw out the rulebook and created my own structure. It’s a structure that’s designed to align the interests of the founder, the company, and the investors. It’s a structure that’s designed to be a strategic asset, not a financial burden.
Here’s how it works:
1. No Management Fees
That’s right, zero. I don’t charge a management fee on my rolling fund. Why? Because I’m not a full-time fund manager. I’m a founder. My job is to build my company, not to manage a fund. The rolling fund is a tool to help me do that, not a separate business.
Instead of a management fee, I have a small, one-time setup fee to cover the legal and administrative costs of setting up the fund. That’s it. After that, 100% of the money goes into the company.
2. A Founder-Friendly Carry Structure
I also have a non-traditional carry structure. Instead of the standard 20%, I have a tiered carry that starts at 10% and goes up to 20% based on the performance of the fund. This aligns my interests with my investors. If they do well, I do well. But I’m not taking a huge chunk of the upside from day one.
I also have a “founder’s carry” that goes to the company, not to me personally. This is a way to give the company a piece of the upside from the rolling fund. It’s a way to reward the team for their hard work and to give them a stake in the success of the fund.
3. A Focus on Strategic LPs
I don’t court big-name LPs who are just looking for a financial return. I look for strategic LPs who can help me build my company. These are people who have deep industry expertise, who have a strong network, and who are passionate about what we’re building.
I’ve found that these strategic LPs are much more valuable than the money they invest. They’re an extension of my team. They’re my evangelists. They’re my secret weapon.
The Benefits of a Founder-Led Rolling Fund
A founder-led rolling fund is more than just a way to raise money. It’s a strategic asset that can help you build a better company.
Here are some of the benefits I’ve seen:
- A Community of Evangelists: My LPs are my biggest fans. They’re constantly talking about my company, introducing me to new customers, and helping me recruit top talent.
- A Source of Expert Advice: I have a brain trust of over 180 experts that I can tap into at any time. When I have a question about product, marketing, or sales, I have a whole community of people who are willing to help.
- A Long-Term Capital Partner: A rolling fund is a long-term capital partner. It’s a source of patient capital that’s aligned with the long-term vision of the company.
Stop Letting VCs Dictate Your Rolling Fund
It’s time for founders to take back control of their fundraising. Stop letting VCs dictate the terms of your rolling fund. Stop following the traditional advice that’s designed to enrich them, not you.
Build a rolling fund that’s a strategic asset for your company. Build a rolling fund that’s aligned with your interests. Build a rolling fund that’s founder-friendly.
This is not just about money. It’s about building a community. It’s about building a movement. It’s about building a company that will change the world.
Frequently Asked Questions
How do I measure success with this approach?
Pick one or two metrics that directly tie to your goal and track them weekly. Vanity metrics like page views or follower counts rarely matter. Focus on metrics that reflect real engagement or revenue impact.
What are the most common mistakes when structuring a rolling funds (the counterintuitive guide for founders).?
The biggest mistake I see is overcomplicating things early on. Start with the simplest version that works, get real feedback, and iterate from there. Another common trap is copying what worked for someone else without understanding the context behind their decisions.
What tools do I need to get started?
Start with the basics. You don't need expensive software or fancy tools. A spreadsheet, a note-taking app, and direct access to your customers will get you further than any enterprise platform. Add tools only when you hit a specific bottleneck.
Do I need technical skills to structure a rolling funds (the counterintuitive guide for founders).?
Not necessarily. While technical understanding helps, the most important skills are clear thinking and the ability to break problems into smaller pieces. Many successful founders I've invested in started with zero technical background and either learned enough to be dangerous or found the right technical partner.