Are you fundraising and wondering how to find a lead investor?
Too many entrepreneurs focus on the quantity of capital they can raise rather than the quality of the investors at their disposal. This is no more apparent than when trying to find a lead investor for a startup.
With the right lead investor in place, startup founders increase their chances of producing a successful end product. In this article, I’m going to describe exactly what a lead investor is, why entrepreneurs should care, and how to find a lead investor that works for you and your business.
What is a Lead Investor?
Defining what a lead investor is, is not easy. The reason for this is that numerous business websites, startup crowdsourcing platforms, and business gurus give different answers to that question.
The truth is, all of these definitions are correct and used regularly, so it’s important that you understand them. I’m going to give you the three most common definitions so you’re good to go in most situations when discussing this with others.
One definition is that a lead investor is an investor who puts the largest amount of capital into your business during one round first representing at least 20% of the entire funding round. Another is that this only applies to investors putting forward the largest share during a syndicated round.
You’ll also see some businesses refer to lead investors as those who step up to converse with, represent, and organize the other investors collectively.
The final often-used definition is that a lead investor is the first person to invest in your business. This doesn’t mean that they put in more money than anyone else, but it does mean that they had the courage and faith in you and your business to put up capital first.
When it comes down to how to find a lead investor, I prefer to think of lead investors as those investing the largest amount of capital, but it’s important that you understand the other definitions to avoid confusion.
Before finding a lead investor make sure you have all your materials in place. Remember that storytelling plays a key role in fundraising and you will need capital to scale things up. This is being able to capture the essence of the business in 15 to 20 slides. For a winning deck, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
ACCESS THE PITCH DECK TEMPLATE
Why Lead Investors are Important
The right lead investor provides advantages to your business. These include:
1) Social Proof
Investors are far more likely to offer capital when they see that others have already done this. It’s not necessarily a kind of peer pressure, but rather, knowing that other investors have put forward finances, provides more confidence in a start-up’s business model, market research, and potential for a lucrative ROI.
See How I Can Help You With Your Fundraising Efforts
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