The role of a lead investor is of utmost importance in building an organization and structuring them for funding, having gained extensive experience in start-up investments over the past 15 years, it has become very evident to me that the success of investment returns and the ability of start-ups to scale is largely dependent on the lead investor. Lead investors typically manifest themselves in the form of a company or an independent investor.

Once this lead investor establishes contact with the entrepreneur and the start-up, the lead investor makes it their mission to immerse themselves in the entrepreneur’s story, diligently observing their passion and conviction. Leveraging their experience, if the lead investor deems that it is too early for investment, they may provide more information to be collected or suggest exploring the growth journey of similar solution providers in the market. The lead investor then takes time to check with their network and various other avenues for any similar solution providers in the market. This is executed in order to determine the growth process and account for any subsequent roadblocks that may prevent the said start-up from scaling.

Scaling is extremely crucial in the investment world as exit opportunities for early investors typically arise after the next round of investors expresses their interest to be involved in the project.

Yet again, the lead investor’s role in this stage becomes vital as they now act as the face of the company for both the next round of investors and the start-up itself. They carefully analyse the core processes and competencies that need to be emphasised for scaling. Upon debating and analysing, they craft an execution plan and align it with a developed go-to-market strategy. Once the lead investors are convinced about the entrepreneur their ability to manoeuvre the space they operate in, the lead investor then commences a deep dive into the details of the go-to-market plan, and they begin to introduce the start-up’s offerings to initial markets so as to collect feedback that will possibly point out the cracks in their armour.

Once the lead investor is confident about the various elements of scaling the organization, the lead investor will then seek to understand the organisation from the perspective of dilution and valuation, as well as talk to their network of angel investors or funds with possible investment interests in the space. The crucial discussion is centred around the impact of the money to be raised during the round in discussion, which helps in building milestones and creating a niche for the start-up to attract investor sentiment.

The lead investor’s involvement can greatly impact the entrepreneur’s thought process and confidence, which typically takes a minimum of three to six months of engagement between them to gauge.

In angel groups such as Indian Angel, Native Angel, and Chennai Angel, the individual investors may act as the lead and the co-lead, while a fund manager is typically assigned in a fund.

In my next blog, I will delve into the post-investment role of a lead investor. Stay tuned!