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What Do You Mean By A Lead Investor In A Venture Capital Round?

Lead Investor In A Venture Capital Round

India is one of the top nations on earth with a thriving startup ecosystem. With over 50,000 businesses and 3,500+ funded startups growing at an exponential pace of more than 30%, India’s startup ecosystem significantly boosts the national economy. In this article, we will answer a significant question, and the question is, what is a lead investor?

Businesses need money and a lead investor in startup to help them. However, finding a lead investor is crucial for a firm looking for funding. It functions like a magic key that can transform the company in its early stages and facilitate successful investment. In other words, finding the appropriate lead investor is crucial to a firm’s success.

What is a lead investor? Before, during, and after fundraising, a Lead Investor is an investor who voluntarily steps in and speaks on behalf of a startup’s investors. The lead investor can add strategic and business value to the firm and passionately support its growth by being aware of the subtleties of angel investing.

Read Also: What is a Unicorn Company?

What Function Does A Lead Investor Perform?

Below are the primary responsibilities of the lead investor.

Make the most investments

The lead investor in startup may not always provide the most significant amount to the round, but they often contribute between 30% and 80% of the capital. They are permitted to invest 100% in angel rounds.

Find additional investors.

Finding your lead investor is the hard part of finding a VC. Once you locate a reputable one, they may typically assist in filling the round with additional investors. The best ones will be able to fill your pockets with their extensive network and wealth of experience managing VC rounds.

Consult with the company

The lead investor in startup nearly always has board seats and is knowledgeable about your company. They won’t likely provide consulting services like a conventional consulting firm. Still, they need to be able to offer strategy recommendations, create financial projections, and identify potential investment opportunities for your fresh capital.

Perform grunt work

The principal investor decides upon the deal’s terms. You collaborate with them on the settlement agreement as you choose the amount of funding to be raised and the post-money valuation.

Approaches For Selecting A Lead Investor

Why Do They Matter?

You will require a lead investor if you raise money from numerous investors in the same round. Your other investors must be aware of the lead investor’s role and at ease with taking the lead in the round.

Negotiating the terms of a capital raising would be difficult, if not impossible, without a lead investor. If your startup had to bargain with several investors at once, you would discuss and address the same topics more than once. Additionally, you might have to discuss competing terms with several investors at once.

If you only have one lead investor, that investor will be in charge of initially negotiating the deal documentation. The other investors often conduct a brief check to ensure everything is by the first critical terms in the term sheet once you and the lead investor have agreed on the paperwork. They won’t try to change the essential terms that have already been agreed upon.

Read also: Top 10 Venture Capital Investors In India

Getting the Lead Investor’s Yes

Never ask for cash before you’ve spoken with your possible lead investor five or six times and are at least 50% certain they’ll say yes. If they respond with “Maybe” or “I’ll think about it,” you should immediately send them a news update. The likelihood that they will respond “Yes” after receiving a news update will gradually decline if you don’t hear back from them.

But it’s important to remember that your main objective with each meeting is to secure a subsequent one until you feel secure enough to ask the lead investor in startup for funding. When the time comes, you should offer them a question that won’t immediately elicit a “Yes” or “No” response. Here are a few examples of the various kinds of questions you could ask:

“Would you be interested in leading the next round of fundraising and assisting the company in expanding?

Will you be prepared to provide us with development-related advice?

“Would you be interested in heading our fundraising round and guiding the company on how to grow?”

Increase Awareness of Your Funding Round

Make sure to strike a balance between generating buzz and maintaining or improving your growth metrics before you clinch a deal with a lead investor.

Set up a system of internal company benchmarks and publish regular newsletter updates. Before closing and securing alliances, plan at least one public announcement for external validation.

Verify that metrics are rising. Even though you could be working more hours now, try not to forget about your company. If your metrics decline, an investor won’t hesitate to withdraw even if you have a lead and intend to close in two to three months. To lessen the likelihood of failure, ensure you’re working hard to close, generating buzz, gaining press, and expanding your metrics simultaneously.


A few investors, typically the biggest investor, will serve as the lead investor in startup while your firm seeks money from numerous investors in a round. When obtaining money from several investors, it is crucial to have a lead investor. By negotiating the transaction agreements on behalf of all investors, the lead investor will facilitate the negotiation process and set the critical conditions of the agreement with your startup. However is, which gives aspiring entrepreneurs a platform and correctly points them for money-raising. Here, they can look for potential investors, get in touch with them, and learn the information they need to make a pitch. Therefore, there is no requirement to worry that a particular idea won’t work. will assist in providing a platform for pitching to the appropriate investors, so just come up with fantastic ideas.

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