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What does it mean to be the lead investor?

Venture south fallback
Venture South Team
Last updated: June 4, 2024
Venture south fallback

One struggle that entrepreneurs, individual angels, and even small cooperatives of angels frequently face is finding a lead investor. Time and time again, entrepreneurs’ have a portion of funding soft circled, but everyone has to wait for a “lead investor” to set the terms and close the deal. Why is finding a lead investor so hard? Why don’t more groups and firms lead? And why does a round even need a lead investor?

Even as early stage investing continues to grow in the Southeast, there remains a limited number of firms and groups who are willing and able to lead Pre-Seed, Seed, and Series A investment rounds. As VentureSouth has grown and our members have invested more, we find ourselves increasingly leading rounds: we have led nearly 50 to date, and virtually all the new additions to our portfolio over the last couple of years have been VS-led.

We aren’t the only group in the region that leads but even some large angel groups and funds do not, or cannot, lead. Why not?

Technically, the only requirement to be a lead investor in a round is the entrepreneur agreeing to a term sheet with you and your ability to make an investment on the terms presented. Practically, the lead investor is going to be a major investor in the round, which is what makes the time commitment of being the lead worth it. Other than essentially being a de-facto requirement to invest significantly in a seed or series A round, are there any advantages of being a lead investor? And how do the disadvantages compare?

Over the next few posts, we’re going to answer these questions with a dive in to the pros and cons of being the lead investor in an early stage investment. Stayed tuned and let us know your thoughts!