Sahil Lavingia, the CEO of ecommerce company Gumroad, announced the details of his new celebrity-backed venture capital fund Wednesday.
His fund, which will invest $5 million a year, will be writing checks ranging from $100,000 to $250,000 for “primarily pre-seed and seed companies,” according to a release provided by Lavingia. He doesn’t have hard rules on what he’ll invest in, but he said he’d like to pursue various interests including software such as SaaS, online commerce, developer tools, and physical technology.
”I’ve communicated to my LPs that I don’t have a strict edict,” Lavingia told Business Insider. The new VC said he’ll be the sole person choosing the startups to invest in. He’ll remain in his role as Gumroad’s chief executive.
Lavingia’s fund is backed by a number of tech figures and celebrities, including author Tim Ferris, Backstage Capital founder Arlan Hamilton, venture capitalist Josh Kopleman, ex-Mozilla CEO John Lilly, WordPress co-creator Matt Mullenweg, and AngelList founder Naval Ravikant.
Lavingia is creating a rolling fund, a venture capital fund model introduced by AngelList earlier this year. Rolling funds allow the people who invest in them to “subscribe” to the fund, paying into them on a quarterly basis but with the option to cancel. He’s the second prominent tech figure known to start one, after news leaked in July that former Facebook employee Dave Morin had started his own fund called Offline Ventures.
The quarterly nature of rolling funds means Lavingia can continuously fundraise. And unusually for a venture capital fund manager, Lavingia is able to advertise his fund to the public through tweets, mass Zoom meetings and other public forums, pulling in many small investors “Bernie-style,” as he puts it.
In some circumstances public appeals like Lavingia’s might be illegal under SEC rules, but Lavingia is operating under SEC Rule 506(c). It allows him to publicize his fund provided he only takes on accredited investors, which are business entities or people with high incomes or high net worth, making them less liable to suffer financial damage if their investment doesn’t work out.
“I raised using a Notion memo, a couple tweets, and a Zoom call,” Lavingia said in a statement. “No plans, trains, or cars.”
Lavingia was drawn to the convenience of the rolling fund model. For a fee, AngelList handles the regulatory busywork that would otherwise distract from his duties running Gumroad. It also fits with his passion-project treatment of the fund. Lavingia said he will charge a 20 percent fee as manager of the fund, but he will transfer 80 percent of his management fees back into the fund so that it can add to the amount being invested directly in startups.
“I don’t want others to think I’m doing it to make an income,” Lavingia said. “I get a salary from my day job at Gumroad and this is just a part-time thing.”
The quarterly nature of rolling funds could amp up pressure on fund runners like Lavingia to perform short-term. That’s why Lavingia asked investors in his fund to commit for a year, with the hope that they would be “understanding.”
Lavingia’s ultimate hope is that user-friendly, low-cost rolling funds will address the lack of diversity in Silicon Valley, leading to “more diverse LPs, GPs, founders, and employees.”