Five years and over 200 angel investments. If you’d told me when I started that my biggest wins and most painful lessons would come from the rounds after the first check, I’d have probably nodded along, thinking I understood. I didn’t. Not really.
Textbooks and blog posts talk about pro-rata rights and portfolio theory. They don’t tell you about the gut-wrenching feeling of deciding whether to triple down on a company that’s either about to go to the moon or straight to zero. They don’t explain the weird signaling games that happen when a new lead investor comes into the picture. After five years in the trenches, my playbook for follow-on investing looks nothing like it did when I started. Forget the theory. Here are three real-world lessons that have shaped my approach.
1. Your Best Companies Will Shatter Your Portfolio Model
When I first started, I had a neat little spreadsheet. I’d allocate a certain amount for initial checks and a tidy, calculated reserve for follow-on rounds for the "winners." It was all very scientific. It was also completely wrong.
My investment in Scale AI taught me that my best-performing company wouldn’t just outperform the others; it would break the entire model. The sheer scale of its success was something my initial spreadsheet couldn’t have possibly predicted. When the opportunity came to follow on, it wasn’t a small, calculated decision. It was a bet-the-farm kind of moment. The amount of capital required to maintain my ownership percentage was more than my entire initial fund for that year.
This is where the real money is made. Not by spreading your bets evenly, but by having the conviction to go all-in on your outliers. The truth is, one or two of your investments will likely generate 90% of your returns. Your job as an investor is to identify those companies early and have the courage to abandon your neat little allocation model when they start to take off. Don’t be afraid to have a lopsided portfolio. In fact, if your portfolio isn’t lopsided, you’re probably doing it wrong.
2. Pro-Rata is a Right, Not a Religion
Every angel investor is obsessed with getting pro-rata rights. We fight for them in our term sheets and see them as a golden ticket. And they are important. But they are not a commandment to be followed blindly.
I’ve seen too many investors get wiped out because they felt obligated to exercise their pro-rata in every round, for every company. They treat it like a religion. If you have the right, you must use it. That’s a terrible strategy. A company raising a down round with questionable traction is not the same as a company raising a competitive round with three of the best VCs in the Valley fighting to get in.
I’ve passed on my pro-rata rights more times than I’ve exercised them. The decision isn’t just about the company’s performance. It’s about the new terms, the new investors, and the new valuation. Is the new lead investor someone you trust? Is the valuation justified by the progress? Or is this a "pay-to-play" round where you’re being forced to invest more money just to keep from being diluted into oblivion?
Your pro-rata is a tool, not a rule. It gives you the option to maintain your ownership, but it doesn’t mean you have to. The real skill is knowing when to use it and when to walk away.
3. The Real Signal is in the "Why Now"
Valuation is the first thing everyone looks at in a follow-on round. Is it up? Is it down? How does it compare to the market? It’s a useful data point, but it’s not the most important one.
The most critical question to ask is: "Why are you raising money now?"
The answer to this question tells you everything you need to know about the company’s position. Are they raising from a position of strength or weakness? Are they pulling forward their fundraise because they’ve hit an inflection point and need to pour fuel on the fire? Or are they running out of money because they missed their targets?
I was an early investor in a company that was a clear market leader. They were growing fast and had their pick of investors. They decided to raise a new round just six months after their last one. The valuation was high, but the "why now" was clear: they had an opportunity to corner the market, and they needed the capital to do it. I didn’t just exercise my pro-rata; I fought for a larger allocation.
Contrast that with another company in my portfolio that was struggling to find product-market fit. They came back to investors asking for a bridge round to "extend their runway." The "why now" was desperation. I passed.
Don’t get distracted by the valuation. Focus on the story behind the fundraise. That’s where you’ll find the real signal.
The Long Game
Follow-on investing is where the real work of an angel investor begins. It’s a test of your conviction, your discipline, and your ability to see the long-term picture. It’s not about spreadsheets and models. It’s about understanding people, markets, and the subtle signals that separate the good from the great.
After five years, I’ve learned that the most valuable thing I can offer a founder isn’t just my first check, but my continued support in the rounds to come. It’s a long game, and the follow-on round is where you prove you’re in it to win.
Frequently Asked Questions
Are these recommendations still relevant in 2026?
Absolutely. While specific tools and tactics change, the underlying principles remain consistent. I update my thinking regularly based on what I'm seeing in the market and across my portfolio companies.
Can I implement all of these at once?
I'd strongly recommend against it. Pick the 2-3 items that resonate most with your current situation and focus there. Trying to do everything simultaneously is a recipe for doing nothing well.
How were these items selected?
Each item on this list comes from direct experience, either from building my own companies or from patterns I've observed across the 200+ startups I've invested in. I prioritize practical, actionable items over theoretical concepts.