The TLDR

If you are building a diverse portfolio of early-stage tech-scalable investments (aka, not writing 6-figure checks directly into startups), you likely won’t be able to make follow-on investments to preserve your ownership percentage.

That “pro rata” right is usually reserved for the biggest investors or folks *super* close to the company.

But that might be ok, because both math and experience are starting to show that “following on” might not be the best strategy for individual investors. 👀👀

Tell me more…

Many VCs have the strategy of “following on.” This means they invest in a subsequent round of fundraising—usually at a higher valuation—to maintain their ownership of the company and avoid dilution.

At first blush, this sounds smart. Dilution sounds bad. Maintaining your ownership position in companies that look like they might be winners sounds good.

It’s not always so clear-cut, though.

Ownership, Dilution, & Follow On