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

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Phantom stock or profit interests that mimic real equity without actually granting ownership, often used to incentivize employees without diluting founders. All the motivation, none of the control.

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grayhair

An experienced executive or advisor brought into a startup to add operational credibility and grown-up supervision to a young founding team. Think adult daycare, but for unicorn hopefuls.

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micro-VC

A venture fund typically under $50M that invests small checks in very early-stage startups. They offer founder-friendly terms and actual attention, mainly because they can't afford fancy offices or ignore their investments.

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crowdfunding

The modern equivalent of passing the hat, except the hat is a slick website and you're asking thousands of strangers on the internet to fund your dream project, questionable invention, or potato salad. It's democratized investing meets collective optimism meets occasional fraud.

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change of control

Any transaction that transfers majority ownership or control of a company, typically triggering various contractual provisions like vesting acceleration, payment obligations, or approval rights. The legal definition of when your startup stops being yours.

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tag-along rights

Provisions allowing minority shareholders to join a sale if majority shareholders exit—the friendlier sibling of drag-along rights. It's protection ensuring you can't get abandoned while insiders cash out.

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