The Quest for a Lead Investor

When you start fundraising, the universe is a big blob of potential investors.

A lead investor typically anchors the round and helps set terms that other investors follow.^[1][2]

So you take meetings.

If it's your first rodeo, you'll get a lot of "no" because:

• Wrong type of company for the fund
• Wrong stage ("you're a bit early for us")
• Portfolio conflict
• They just don't know your space
• They do know your space and think you're meh (this is the most common reason, hate to break it to you)

So you end up with a pile of "no" and a smaller pile of "maybe."

The quality of your investment opportunity—team, product, market, traction, pitch—determines these ratios.

Digging into your pile of "maybe," you discover that only a few are potential lead investors. The rest tell you they'd invest "if you find a solid lead."

And you'll discover that most of the strong investors (who are likely to lead) are already in your "no" pile. Because they're rockstars. They're pickier.

At this point, if you have too few potential leads, it's hard to create FOMO—and therefore hard to get term sheets. You're sorta screwed.

If you sort through your "maybe" pile and there's no potential solid lead, it's settled: you're not ready for an institutional round. Go back to the best investors you spoke to, find out why they said no, and get back to work.

Repeat this process until you find a lead investor.

Simple, eh?

— Ry