Follow the Follow-ons?

Sammanfattning: Even though the field of venture investing has grown immensely in the latest decades, the empirical evidence on how to interpret signals from investors' follow-on decisions is limited. This explorative study seeks to take steps towards understanding how to value signalling in the context of follow-on decisions and staging dynamics. We test three hypotheses derived from earlier research in adjacent fields using a binary logistic regression. Our finding suggests that a professional investors' follow-on decision in an outside round increases the probability of a venture success, and could thus be regarded as a positive signal. We also provide evidence on the complex nature of inside rounds, finding that inside rounds decrease the probability of success. Our main contribution is our methodology for assessing ex-ante investment opportunities, and we hope it will serve as a valuable starting point for future research within the field.