In a second investment round, can the managing founder protect his equity in the company if he does not invest?

Depending on the term sheet you signed when you first invested in the company, you may have the right to invest in follow-on rounds without diluting your equity. However, if you choose not to invest in subsequent rounds, you may very well find yourself owning a smaller piece of the company than you do now. My advice is to check with your attorney and see what anti-dilution protections you were originally granted. If you decide to try to re-cut your deal with your partners, it’s better to have that discussion sooner than later.

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