A rolling close allows investors to invest at different times during a funding round rather than all at once, giving startups access to capital as it becomes available whilst maintaining momentum in their fundraising process.
A rolling close is a fundraising approach where investors can complete their investments at different times throughout a funding round rather than all committing funds simultaneously on a single closing date. This structure allows your company to begin accessing capital as soon as individual investor agreements are signed, rather than waiting for all participants to be ready at the same moment. In practice, this means you could receive your first investment cheque weeks or even months before the final investor completes their due diligence and paperwork.
The rolling close contrasts with a traditional "hard close," where all investors must sign and fund on a predetermined date. This traditional approach often creates delays, as the slowest investor determines when everyone gets paid. With a rolling close, you maintain fundraising momentum and can start deploying capital immediately to fuel growth, hire talent, or meet critical business milestones that might help attract remaining investors.
For founders, understanding when to use a rolling close versus a traditional close is a strategic decision. Rolling closes are particularly useful in pre-seed rounds or when raising from a diverse group of investors who operate on different timelines. They provide flexibility but require careful management of your cap table and legal documentation to ensure each investor receives the appropriate rights and protections based on when they join the round.
A rolling close begins with setting a target amount for your funding round and establishing a window during which investors can participate. You might announce the round publicly or approach investors privately with a timeline that extends for several months. As each investor completes their assessment and signs the legal documents, their funds are transferred to your company bank account, and they receive their shares at the agreed valuation.
Throughout this process, you'll need to maintain clear communication with all prospective investors about how much of the round has been filled and how much capacity remains. Some rolling closes use a "first-come, first-served" approach, which creates urgency, whilst others maintain a consistent valuation throughout the window. The legal agreements must specify that the terms apply equally to all investors, regardless of when they join, to avoid creating different classes of shareholders unintentionally.
Managing a rolling close requires disciplined administration. Each time an investor closes, you must update your company's share register, issue share certificates, and potentially file updates with the Companies Registration Office. This ongoing administrative work can be burdensome for founders already focused on growing their business, which is why many opt for professional support during fundraising.
The primary advantage of a rolling close is accelerated access to capital. Rather than waiting months for all investors to complete their processes, you can start using funds from early closers immediately. This can be critical for startups operating on tight cash runways or needing to seize time-sensitive market opportunities. The early infusion of capital can also demonstrate momentum to other potential investors, making your round appear more attractive.
A rolling close also reduces the risk of a funding round falling apart because one investor gets cold feet or encounters unexpected delays. In a traditional close, if a single investor drops out at the last minute, the entire round might need renegotiation or could collapse entirely. With a rolling close, you've already collected funds from other participants, providing a buffer against such contingencies.
Furthermore, rolling closes allow you to build relationships with investors gradually. You can start with your most enthusiastic supporters and use their commitment as social proof to attract larger or more cautious investors later in the process. This staged approach often results in better terms, as demonstrating traction with early funds can justify maintaining or even increasing your valuation as the round progresses.
The main disadvantage of a rolling close is the administrative complexity. Each investor closing requires separate legal work, share issuance, and potentially different communication timelines. This can create confusion and increase legal costs compared to a single bulk closing where all investors sign identical documents simultaneously.
Another challenge is managing investor expectations around valuation. If your company's performance improves significantly between the first and last close, early investors might feel they got a better deal than later investors, or conversely, later investors might demand better terms based on your recent progress. To avoid disputes, most rolling closes lock in valuation at the start of the window, though this requires careful consideration of how your business might evolve during the fundraising period.
Rolling closes can also create perception issues. Some institutional investors prefer the certainty of a traditional close and may view a rolling close as a sign that you're struggling to fill the round. This perception can be managed through transparent communication about your strategy, but it remains a consideration when targeting venture capital firms or other sophisticated investors accustomed to conventional funding structures.
Founders should consider a rolling close when they have a mix of investor types with different decision-making speeds, such as combining angel investors who move quickly with institutional investors who require lengthy due diligence. This approach is also useful when you need immediate capital to hit a critical milestone that will make the rest of your fundraising easier, like launching a product or securing a major customer.
Rolling closes work particularly well for equity financing rounds where you're building a syndicate of multiple smaller investors rather than seeking a single large cheque. They're common in community rounds, crowdfunding campaigns, and situations where you're tapping into your existing network of supporters who trust you and don't require extensive verification processes.
However, if you're pursuing a single lead investor who wants to set the terms for the entire round, a traditional close may be more appropriate. Similarly, if you need the full amount before you can execute your business plan, waiting for a single closing date might make more strategic sense than taking partial amounts through a rolling close.
A rolling close typically locks in valuation at the beginning of the fundraising window to ensure fairness among all investors. This means that even if your company achieves significant milestones during the fundraising period, all investors receive shares at the same price per share. This approach prevents disputes but requires founders to carefully consider their valuation at the start, as it won't be adjusted for positive developments during the round.
In some cases, founders negotiate a "valuation cap" that allows for adjustments if certain milestones are hit, but this adds complexity to the legal agreements. More commonly, if a company experiences dramatic growth during a rolling close, they might close the current round early and immediately open a new round at a higher valuation—essentially creating a rapid sequence of up rounds.
For investors participating early in a rolling close, the locked valuation provides certainty. For those joining later, they benefit from seeing that other investors have already committed capital, which de-risks their decision. This dynamic can create a virtuous cycle where early commitments attract later ones, potentially filling the round faster than anticipated.
Yes, rolling closes can be combined with various fundraising instruments. For example, you might use a rolling close for a convertible note round, where investors provide debt that converts to equity in a future priced round. In this structure, investors can sign and fund at different times, with their notes converting under the same terms when a triggering event occurs.
Some companies combine rolling closes with traditional closes by having an "initial close" with their core investors followed by a "final close" for remaining participants. This hybrid approach provides early capital access while maintaining a clear endpoint for administrative purposes. The key is ensuring all legal documents clearly specify the rights and obligations of investors based on which closing they participate in.
Rolling closes also work well with SAFE agreements (Simple Agreement for Future Equity), which are designed for simplicity and speed. Since SAFEs typically don't require extensive negotiation, they're ideal for a rolling close structure where you want to quickly onboard multiple investors without complex legal processes delaying each individual investment.
The primary legal consideration for rolling closes is ensuring consistent terms for all investors. Your subscription agreement should clearly state that all investors receive the same rights, regardless of when they sign. This includes voting rights, liquidation preferences, anti-dilution protections, and information rights. Creating different terms for different investors based on timing could lead to disputes and complicate future fundraising.
You'll also need to manage share issuance carefully. Each time an investor closes, you must issue the appropriate number of shares and update your statutory registers. Depending on your jurisdiction, you may need to file notices with the company registry after each significant closing or at regular intervals. Failure to maintain accurate records can create problems during future due diligence when potential investors or acquirers examine your cap table.
Finally, consider the tax implications of staggered investments. In some jurisdictions, receiving funds at different times could affect when revenue is recognised or how investment income is treated. While this is typically a minor consideration compared to the strategic benefits of a rolling close, it's worth discussing with your accountant to ensure your financial statements accurately reflect the timing of capital inflows.
