FOLLOW ON

Accelerate your business with these expert tips on "Follow on". Analyse and discover this TIP!

Refers to money that an investor puts into a subsequent round of a startup, in which he has previously invested. Follow on is a financing round (+) where an investor who has previously participated in a previous round of a startup decides to invest in a new round to maintain or increase its stake in the company. This investment usually takes place when the startup is experiencing significant growth and is preparing for the next stage of its development. Follow-on investment is a positive signal to other investors and may be an indication that the company is on a positive path to success.

Tips for effective follow on

1. Evaluation: Before investing more money, it is important to evaluate the startup's progress and results. Make sure the company is on the right path to success.
2. Negotiation: It is important to negotiate the terms of the follow on round before investing. Make sure the terms are fair and equitable for you and the company.
3. Alignment of objectives: make sure that your goals as an investor and the company's goals are aligned. If they have different objectives, it may be difficult to follow on successfully.
4. Risk analysis: make sure you are aware of the risks involved in the additional investment.
5. Communication: maintain good communication with the company and other investors. Transparency and collaboration are key to a successful follow on.

In general, it is important, do thorough research before making a follow on. Make sure the company is in a strong position and that your goals as an investor are congruent with those of the company.

The risks of a follow-on include:

1. Changes in strategic direction: the company may have changed its strategic direction, which may result in a bad investment.
2. Competence: the company may be facing increased competition, which may affect its profitability.
3. Market changes: the market may have changed, which may affect the demand for the company's products or services.
4. Changes in management: there may have been changes in the management of the company, which may affect its performance.

It is important for an investor to carefully assess these risks before entering into a follow-on. It is advisable to conduct a thorough investigation of the company, including a financial analysis and a review of future projections, before making an investment decision. As a curious fact in Spain in 2021, 79% of business angel investments were for follow up operations, which demonstrates the commitment of the business angel to its portfolio.