Capital Factory has launched an investment fund that operates under something akin to a software-as-a-service, or SaaS, model.
It is the first rolling fund for the investment arm of Capital Factory, a startup accelerator and coworking company based in downtown Austin. Capital Factory has launched “more than a dozen funds” to date, founder and CEO Joshua Baer said.
California-headquartered AngelList in February 2020 founded rolling venture funds.
“Fund managers can now accept new capital in the form of auto-renewing quarterly commitments” in rolling funds, wrote AngelList Venture CEO Avlok Kohli in the rolling fund announcement. The structure also enables “fund managers to raise a fraction of a traditional fund and start investing in startups right away,” Kohli said. Even better, he wrote, fund managers may “continuously increase the fund size so they never need to raise another fund again.”
Like a software-as-a-service subscription, rolling venture funds enable investors to re-up at a set amount on a regular basis.
Capital Factory’s rolling fund will be quarterly, Baer said. A hypothetical investor in Capital Factory’s rolling fund could sign up for a quarterly commitment of $100,000, he said, totaling $400,000 over a full year. That investor also may stop investing at any time.
Among the benefits such a fund structure offers, Baer said, is that every quarter yields a new fund. That allows Capital Factory “to add new investors to the pool, so there is more money to invest each quarter,” he said. A rolling fund also provides access to smaller investors who frequently cannot meet minimum investment requirements of venture capital funding rounds, Baer said.
Baer anticipates Capital Factory will “make on the order of 10 to 20 investments per quarter” from the rolling fund. Investments will range from $50,000 to $250,000, he said.
AngelList manages the fund, called the Texas Fund by Capital Factory, Baer said, adding: “We could have more than one at some point in the future.”
Capital Factory’s investment thesis remains the same, Baer said. It invests in Texas-based early-stage companies with a focus on those that operate in the technology sector. Though, Baer pointed out, Capital Factory does invest in companies that operate in other sectors, including consumer packaged goods. Capital Factory does not lead deals, instead choosing to participate in funding rounds.
With a portfolio of more than 500 companies, Capital Factory said it has been the “state’s most active, early-stage venture capital investor” since 2010.
Slideshow: What did Capital Factory look like before the pandemic? Take a tour from 2016 in the gallery below.
