A Lead Investor is an investor who willingly steps in and represents the investors of a startup before, during and after a fundraise. They are engaged with the startup for some time to understand the business and see how they can support the entrepreneur. A lead understands the nuances of angel investing, can bring in strategic value to the business — and most importantly — is willing to commit the time to work with the startup. It wouldn’t be much of an exaggeration to say that Lead Investors love the founders they work with and believe in what they are trying to build. They lead and lead with passion! Securing a lead investor is vital for 99% of startup fundraising rounds. Without one you may not get any traction. You may just spend months spinning your wheels before having to go back to the drawing board. Those are precious hours that are being sucked away from your ability to code and market and clock up real customers and sales.
What does a Lead Investor do?
This investor(s) step up to be in the lead and put up the bulk of the capital. They give your startup and funding request legitimacy and social proof, lower perceived risk for others, and create confidence in your venture.
They will also often negotiate terms, advise your startup, take a seat on the board, make introductions and connections, help structure future fundraising rounds, bring other investors, financing and distribution channels and participate in follow up funding rounds
Who Should Your Lead Investor be?
To take this pole position, investors don’t just need to like your math or visuals. They need to be almost blindly passionate about you as an entrepreneur, and/or your mission. They have to be believers. They have to have a strong mental buy-in.
Unless you are working on a pre-seed friends and family round, your lead probably isn’t going to be your relative. Entrepreneurs are best served if this role is taken by someone with industry experience and respected in the sector or at least in the investment arena. They may be a notable angel investor, head of an angel group, executive or attorney for a related company, or have had a successful exit themselves.
Things may work even more smoothly if your lead has been a lead before. At a minimum it should be obvious that they need to have the money, and be ready to act. Be working to qualify them in advance.
How Much Should Your Lead Take?
Opinions vary widely on this. There are many variables. Expect most to take 25% to 50% of the round.
When to Start the Search?
After you’ve met a bunch of potential investors who have pushed you off until you find a lead, is not the time to start the search. Be efficient and get the best return on your time by focusing on the lead first.
Smart entrepreneurs will start this search, screening and nurturing process a quarter or more in advance. Knowing your targets ahead of time will also help you in preparing the highest converting pitch deck and messages. Don’t think you are going to just get off a discount flight to San Francisco and score millions by knocking on doors and demanding meetings.
Closing the deal can take months of feeding messages into their subconscious, building real relationships and convincing them that you are the one.
At Tyke, we do this task for you. The majority of our deals are led by marquee angels, successful entrepreneurs and industry experts who are looking to make the most of top quality startups. This also gives confidence and faith to the other investors anchoring the same round and helps you close faster. So if you are a founder looking for a lead investor or an investor waiting to hop onto investments lead by the experts, you are at the right place.
Give us a visit to our website https://tyketech.squarespace.com/
In case of queries, write to us at Contactus@tykeinvest.com
