Fund Structure
Follow-On Investment
Additional capital invested by an existing investor in a later funding round to maintain or increase their ownership stake.
A follow-on investment is when an existing investor participates in a subsequent funding round for a company already in their portfolio. Follow-ons are a standard part of VC strategy — most funds reserve 40-50% of their capital for follow-on investments in their best performers. Pro-rata rights contractually guarantee existing investors the right to follow on. The decision to follow on is a strong signal: existing investors who don't participate in a new round ('sitting out') signal to new investors that they have concerns about the company. Conversely, insider-led rounds (where existing investors lead follow-ons) can signal strong conviction — or lack of outside interest.