A “Lead Investor” is considered the investor that all the other investors will “follow” into the deal. They act as the proxy to the interests of all of the other investors so that they are essentially negotiation on the other investors behalf.

The Lead Investor provides a few critical elements:

• Validate the Deal. A well-known investor that can vouch for the quality of the deal helps attract other investors because those investors trust the credibility of that investor.
• Perform Due Diligence. Takes lead on the deep dive analysis of the business and it’s people. This is super time consuming which is why a lot of investors would prefer someone else do it.
• Provide a Big Slug of Capital. A Lead Investor is usually providing 25% or more of the entire round themselves which indicates they have the most substantial single commitment.

You’ll constantly be asked “Who is your Lead Investor?” because every other investor is using that as a signal to see if a well-known investor has validated this deal, which means it’s worth taking a closer look at. “Hot Deals” typically aren’t running around with no Lead Investor, so it’s a pretty consistent signal.