Should Seed Investors Follow On?

We ran 10,000 simulations to try to find out.

It’s a best-case scenario: You are an investor who bet on a seed-stage company, and the team finally got to its Series A. Your convertible investment are now shares of the company, and you can see promise in the startup’s future.

You’re faced with two options: Do you follow on and write an additional check into the startup’s Series A at its increased price, or do you use your capital to invest in another startup’s seed round?

AngelList's database can help answer that question.

We track the performance of early-stage investments, and with that data, we can simulate portfolio performance for all the decisions investors could have made along the way. We ran 10,000 simulations to understand what performance would have resulted from three different follow-on strategies:

  • Never: The investor only makes seed-stage investments and never follows on. This is sometimes called "spray and pray."
  • Always: The investor always follows on at Series A.
  • Double down on winners: The investor follows on at Series A only if the seed investment has at least doubled in value.

So, should seed-stage investors take advantage of their follow-on rights? Download the full report here.