What is a follow-on investment? 

It is typically an investment in the next round of financing, where a new fund/investor appears. Such a round independently revalues the company. In this case, new shares are issued for the new investor. As a fund that was previously a shareholder in the company, we secure the right to participate in the next round to ensure that the percentage of our shares is not reduced (thus avoiding so-called “dilution”).

We do not always us it. We only do so when we believe that the company has the potential for a significant return on our fund’s investment.