What is a lead investor?

Landing investors for your startup is a lot like trying to move a huge boulder. It can feel almost impossible. Until you start to get some momentum. One key to gaining momentum, or moving that boulder, in the fundraising process is landing your first lead investor.

Lead investors can change everything for your startup

Lead investors play a key role for startups that need to raise money from multiple investors. A lead investor is generally the first investor that agrees to fund your startup. Not only is landing a lead investor exhilarating because they are the first to believe in your startup but landing a lead investor does a few more things for you.

It signals other investors

Investors tend to know one another. So, when one investor decides to bet on a startup it signals to other investors that the opportunity might be one that they should consider. Especially if the other investors respect the investment strategy of the lead investor.

It begins to establish a valuation

Depending on the deal you get from your lead investor that first bit of investment can help to establish the valuation of your startup. That is why getting a fair valuation, for the founders and the investor, is key early on. Of course, there are investment strategies that don’t actually value the business. Such as convertible notes.

It levels up your team

Usually lead investors are willing to play a more active role in your startup. They are willing to use their experience and network for the greater good of the business. That is why you see so many entrepreneurs being strategic about the investors on Shark Tank that they want to take a deal from. For them, it isn’t just about the money. They know that if they are targeting the sports industry that Mark Cuban is the lead investor they want.

In the queue

All the above reasons are why it is important that you partner with the right investor. Just as they are being very deliberate about the startup founders they want to invest in you should be very deliberate about the investor(s) you want to take money from.

Next up I will be sharing how behavior-based design can help drive adoption of your products or services.