Glossary - Lead Investor
A Lead Investor is typically the first and most significant investor in a funding round, setting the terms and conditions of the investment. This investor may also take a proactive role in mentoring and providing strategic guidance to the company.
Also known as
- Anchor Investor
Use cases examples
- Term Sheet: XYZ Capital will act as the lead investor in this Series A financing round, committing $5M of the total $7M being raised.
- Investors' Rights Agreement: The lead investor shall have the right to appoint one member to the company's board of directors, reflecting its significant investment and interest in the company's success.
Considerations for investors
- As a lead investor, conducting thorough due diligence is crucial given the larger size of the investment and the influence over the startup’s direction.
- The lead investor must be prepared to provide considerable time and resources to support the company, beyond just financial support.
Considerations for founders
- The selection of a lead investor should consider not only the financial aspects but also the value-add in terms of network, expertise, and potential doors that the investor can open.
- Founders should be aware that the lead investor will set the precedent in terms of valuation and terms, which will influence subsequent investors in the round.
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