How can you get existing investors to invest in a follow-on round?

Reflect on your growth story—what metrics have most impressed investors historically? Use these as a baseline. Investors look for patterns of growth, not just isolated metrics. When preparing the pitch, address head-on any areas where you haven't met expectations, explaining why and how you're addressing these areas. Investors respect founders who are realistic and solution-oriented.

Regular communication is not merely an update—it's a tool to manage expectations and create a narrative around your company's journey. For investors, the context in which achievements and setbacks are presented is crucial. Remember, they invest in dozens of companies; your clear communication helps keep your business top of mind and reduces the cognitive load of understanding your progress.

From an investor’s perspective, referrals are a two-way street of trust. When asking for them, make it easy for the investor to make the introduction. Provide a concise, powerful blurb about your company's value and progress. They're putting their reputation on the line with their network, so the more assured they feel about your success, the more likely they are to help.

During negotiations, investors look for terms that protect their investment and align with their risk profile. Be transparent about why certain terms are on the table, and back up your valuation with data. Investors may push back, but if they see the logic in your terms, the process will be smoother. Keep in mind that the best deals make all parties feel like winners.

Founders should focus on the negotiations with the lead investor as this is the one who mainly sets the deal terms. Co-investors will follow the decision of the lead (unless there are hard points they cannot accept or conditions from their LPA they have to obey). There is a point when the existing investors (e.g. angel investors) and other shareholders (friends&family; advisors?) have to be involved as at the end of the day, everybody has to accept the deal and sign it. Once all the main points have been cleared between founders and lead-investor, it is the ideal time to involve the others.

After closing the round, investors still crave engagement and insights into the company they've backed. They don't just want to hear about the milestones reached; they're interested in how you're paving the way for future milestones. Share lessons learned, industry insights, and how the market is evolving. This keeps them informed and ready to provide more than just capital.

To encourage existing investors to participate in a follow-on round, maintaining strong relationships is crucial. Regularly update them on your company's progress, including both successes and challenges. This transparency builds trust and demonstrates your commitment to the business's growth. Engage them in strategic discussions, valuing their insights and feedback. Show how their continued investment can contribute to significant milestones and future success. If an investor contributed to an initial round that led to a successful product launch, highlight how their follow-on investment can help scale this success or explore new markets. Personalized communication and acknowledgment of their role in your journey can be persuasive.

The worst thing that can happen to you as a founder is an investment from a VC that won't make a follow on in the next round. Signaling from existing investors helps a lot in fundraising. So, when inviting investors to your startup, make sure they can contribute capital. If not, look for others. If they do, make sure on what terms they do it. The more you understand, the easier your next fundraising will be. Investors who invest only once give little value. Make sure you surround yourself with those who believe in long-term cooperation with you and can do so.