follow-on investment

Definition

Additional money invested in a portfolio company after the initial round—either because things are going great and you want more ownership, or things are terrible and you're protecting your original investment. Hope and desperation look surprisingly similar.

Example Usage

We reserved half our fund for follow-on investments, knowing our best returns would come from doubling down on winners.

Origin

Investment management terminology standardized in venture capital during the 1980s-1990s

Fun Fact

Studies show that portfolio companies receiving follow-on investments from their original backers are significantly more likely to succeed—either because VCs pick winners or because the capital itself helps.

Source: Venture capital fund management and portfolio strategy documentation

Related Terms

Advanced

pre-emption rights

The contractual right of existing investors to lead or participate in the next funding round before the company can seek outside investors. It's a first-look deal built into your cap table.

🚀 Startup / VC

Beginner

Stealth Mode

When a startup operates in secrecy to avoid competitors copying their idea, which assumes competitors would care about the idea in the first place. It's the startup equivalent of whispering at a party where nobody is listening.

🚀 Startup / VC

Intermediate

follow-on funding

Additional investment in portfolio companies by existing investors in subsequent rounds. Doubling down on your bets or, less charitably, throwing good money after bad while hoping the first investment wasn't a complete disaster.

🚀 Startup / VC

Intermediate

give-to-get

The VC expectation that founders will make introductions, provide advice, and help other portfolio companies in exchange for investment and support. Networking as a contractual obligation.

🚀 Startup / VC

Beginner

zombie startup

A company that's neither thriving nor dying—generating just enough revenue to shuffle forward indefinitely but lacking the growth to succeed or the decency to fail completely. The undead of the startup ecosystem.

🚀 Startup / VC

Intermediate

commercialization

The process of taking an idea, product, or technology and transforming it into something that actually makes money, because apparently innovation for its own sake doesn't pay the bills. It's the startup world's coming-of-age ceremony, where brilliant concepts either become profitable products or expensive lessons. Essentially, it's the bridge between "we built something cool" and "people are actually buying it."

🚀 Startup / VC

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Intermediate

down-round

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