LV InsightsThe Basics

Who is a Lead Investor

Breaking down the definition of a Lead Investor, their role in a round & how to become one

Today, at LetsVenture, we have more than 6500+ angel investors from 52 countries. These angels come from a variety of sectors and are experts in their domains. However, every time a startup looks to actively close their round on the platform, the role of a “Lead Investor” becomes critical.

Over the past few years, we have been engaging with investors to try to figure out what encourages (or discourages) them from becoming a Lead Investor.

Who is a Lead Investor?

After receiving multiple definitions from those who have been in this position, this is what we stick to – A Lead Investor is an investor who willingly steps in and assumes the mantle of the captain of a fundraising round. They should ideally have 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!

What does a Lead Investor do?

Lead investor plays an active role in two phases.

Phase 1:  The Fund Raise Phase

  • Leads are willing to spend time validating the business plan of the startup. When a round is anchored by a Lead Investor, the other participating investors put their faith in the lead’s due diligence.
  • Set the valuation and terms of the investment for the current round.
  • Be available and accessible to other investors in the round. Participating investors often wish to talk to the lead investor to understand the “investability” of the business. A lead’s endorsement helps drive investor confidence to a great extent.

*At LetsVenture, we have standardized term sheets, and special provisions in the legal documentation (term sheets & shareholding agreements) that enables a Lead Investor to represent the Syndicate more effectively, especially for the next round of fundraising.

Phase 2:  After the fundraise and in the growth years of the company

  • A Lead Investor typically represents the interests of all the angel investors by taking a board position in the company
  • Plays an active role in the ongoing governance and reporting of the company
  • Provides support with the future financing rounds as well as strategic decisions

Note: A Lead Investor is not necessarily the person who puts in the maximum capital. The Lead Investor is only a role definition – this could be a team of people (typically investors lead in pairs so there could be a lead and a co-lead investor) Phase 1 and Phase 2 could be managed separately by two different people.

How to become a Lead Investor on LetsVenture?

  1. Construct a Syndicate easily (online and offline tools to help bring the Syndicate together with minimum effort)
  2. Seamless and high-quality legal paperwork via Commitment-to-Closure (Financial and Legal Due Diligence, Standardized Term Sheet and Share Holding Agreements)
  3. Program Management of closing a deal in the Syndicate
  4. Lead Investor incentives

About #LeadwithLV initiative

Every change is accompanied by resistance and followed by learning. #LeadWithLV is an initiative to break the barriers associated with leading startup rounds by providing lead angels the assistance and understanding required to effectively take that position. Leading a round has been made much simpler on LetsVenture with our Lead Syndicate model and the availability of legal counsel. Now, it’s time to enable the many industry experts and angel investors to rise and take up this crucial role to help Indian founders build great companies. Connect with syna@letsventure.com to find out more.

Also read this blog by LetsVenture co-founder, Shanti Mohan on the “Business of Angel Investing”

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