editione1.0.1Updated September 19, 2022
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Almost always in priced equity rounds, and often in convertible note rounds, there is a lead investor.
The lead investor is typically an experienced angel investor (or institutional investor) who negotiates the detailed terms of the deal with the entrepreneur, including the valuation. They also often have the thankless task of coordinating the due diligence efforts, working with the lawyer(s) representing the investors (including hiring and paying them, to be reimbursed later by the company), and reviewing the final documents. They may also be coordinating with other angel groups or investors on the closing date.
cautionThis is time-consuming work, and it can feel like herding cats at times—wealthy, busy, sophisticated cats. Investment rounds can bog down if no one is willing to step up and be the lead. We would not recommend that you take on this role until you have invested in a couple of deals and have some experience with the process.
If everyone is motivated, the deal is priced attractively, and there are few if any red flags, getting through this process can take as little as four to six weeks. Unfortunately, this process can often drag on for several months or more, in which case it becomes a big time and energy drain for the entrepreneur who is trying to build a company.
important It behooves angels to move as quickly as is prudent to get the deal done if they want to maintain the momentum of the company they are investing in. As an angel, be respectful of the lead investor’s time, and be responsive to their inquiries and requests, as they have taken on the extra work and responsibility for no additional gain.
Paul Graham, in his essay “How To Be an Angel Investor,” writes that being a “good” investor is defined by the following traits: