As a startup founder, you are concerned about securing investments for the development of your product. There is a belief that at the early stage, it doesn’t matter where your initial funding comes from, but that is far from true. Choosing the right lead investor can help the founder not only secure initial financing but also gain the necessary connections, assistance, and advice to avoid fatal mistakes on the path to success.
The role of a lead investor is to assist the startup in building the right relationships with other participants in the funding round, conducting due diligence on the team, project, and financial aspects, thereby forming unified evaluation criteria and approaches to the project from other investors. Often, the lead investor is also the largest participant in the funding round, but their involvement and assistance to the startup go beyond that of other participants.
Choosing a lead investor should be approached as choosing a life partner because you will embark on a long journey together. But how can you ensure that your choice is not a disastrous one?
Do you enjoy working together?
Despite the selection of an investor often being based on pragmatic criteria, we recommend considering whether you enjoy working with them. This does not mean there won’t be disagreements, but it means that you find inspiration in working with the potential lead investor.
Pay attention to expectations, do they align?
As previously mentioned, choosing a lead investor is like choosing a partner. You should have similar expectations for working together and full transparency regarding goals.
Can they support your startup?
If we revisit the description of a lead investor, it is worth noting that they invest not only money but also time and resources. A lead investor, more than anyone else, is interested in the success of the curated startup.
How do they work with other startups?
Take note of whether your lead investor has participated in other funding rounds in the same position. Look at whether another startup has achieved heights and how the lead investor contributed to it. Considering past interactions and traction is crucial.
Consider the lead investor’s expertise in your industry
The previous experience of the investor and their involvement in other startups in your industry or related sectors are highly important. Understanding the intricacies of the industry will not only provide better advice but also help save money and avoid mistakes.
Choosing a lead investor is a challenging process. Founders should consider not only professional but also social factors when selecting a lead investor, as it can impact the future of the startup.
