Note: This guide is short but the journey is long. There's no rush! Let me know if you have any questions and what I should add/clarify.

What is a fund?

A fund raises money from accredited investors to invest into startups. For example, a $10M fund may raise $1M from 10 individuals and invest $100K into 100 startups. The investors do not get to participate in the decision-making process.

Typically the GPs (or you!) make 2% or 2.5% in management fees per year, plus 20% carry after the initial capital is returned to the LPs. This can (and likely will) take several years. If it's a part-time thing for you, you could start at 1% or even 0% management fees.

What is a rolling fund?

A rolling fund allows you to raise money from LPs on a quarterly basis (software innovation due to AngelList), and publicly (due to JOBS act). See more:

AngelList charges an annual admin fee for the life of each quarterly series that is 0.15% of contributed capital for a standard 10 year term. So you should consider a minimal fund size of about $100K a quarter to get started (the minimum is waived for the first two quarters) with a path to growing it to $250K+ per quarter. This is much cheaper than starting a traditional fund.

Should I start a rolling fund?

First, make sure you can: you must be accredited. Then, make sure the market wants you to: LPs must want to give you money, and founders must want you on their cap tables.

In my opinion, if you are already seeing many cool companies early and just don't have the personal capital to invest, you should consider starting a rolling fund.

How do I raise a rolling fund?

  1. Build a brand. This can take years. Do this by helping others publicly and privately.
  2. Write a memo. You can use mine as a base: Fund memo
  3. Get LPs on board. Ping people you know first and get a few "anchor commitments." You can start with former coworkers, investors, friends, and other folks who trust you.
  4. Reach out to AngelList to get set up:
  5. Announce your rolling fund broadly.