Follow-On Investment
Definition
A follow-on investment is additional capital an existing investor puts into a portfolio company in a later round, often using pro rata rights to maintain ownership.
How it comes up in fundraising
Funds reserve significant capital for follow-ons; whether insiders follow on is read by new investors as a signal of conviction.
Frequently asked questions
Why does insider participation matter in a new round?
Existing investors know the company best; their absence from a new round raises questions, while strong participation validates the deal.
What are reserves?
Capital a fund sets aside for follow-on investments in its existing portfolio, often comparable in size to its initial-check budget.
Related terms
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