What Does a Lead Investor Actually Do?
Lead investors set terms, write the largest check, and conduct diligence. Learn what leads do and why they matter.
A lead investor sets the terms, writes the largest check, conducts primary due diligence, and takes a board seat.
They negotiate valuation, draft the term sheet, and anchor the round, signaling to other investors that the deal is credible. Leads also coordinate closing logistics and typically provide the most hands-on support post-investment. Without a lead, most institutional rounds don't come together.
Why Lead Investors Matter
Rounds need structure. Someone has to set terms, conduct diligence, and coordinate the process. The lead investor takes on this responsibility in exchange for favorable terms and deeper involvement.
Other investors, called "followers" or "participants", rely on the lead's work. They invest based on the lead's conviction, often with minimal independent diligence. This dynamic makes finding a lead the critical step in closing any round.
Core Responsibilities of a Lead Investor
1. Setting Terms and Valuation
The lead negotiates the key deal terms:
Valuation (pre-money and post-money)
Investment amount and round size
Equity structure (preferred stock terms, liquidation preferences)
Pro-rata rights for future rounds
Board composition and governance
These terms become the blueprint for the entire round. Followers accept them as-is or don't participate.
2. Writing the Largest Check
Leads typically invest 50–70% of the total round. At seed stage, if you're raising $2M, expect the lead to commit $1–1.4M. Their significant capital commitment demonstrates conviction and reduces risk for smaller participants.
3. Conducting Due Diligence
The lead performs comprehensive evaluation:
Financial and metrics review
Customer and reference calls
Market and competitive analysis
Legal and cap table review
Team assessment
Followers often rely on this work rather than duplicating it. The lead's diligence serves as a stamp of approval.
4. Drafting Legal Documents
The lead's legal counsel typically prepares:
Term sheet
Stock purchase agreement
Investor rights agreement
Voting agreement
Other closing documents
Founders negotiate primarily with the lead; other investors sign onto existing documents.
5. Coordinating the Syndicate
Once terms are set, the lead helps fill the round:
Introducing other potential investors
Communicating timeline and process
Coordinating signatures and wire transfers
Managing closing logistics
A good lead makes closing smoother by organizing the process.
6. Taking a Board Seat
Most leads at seed and beyond take a board seat or board observer role. This gives them:
Formal governance involvement
Access to detailed company information
Influence over major decisions
Board involvement also means ongoing accountability, they're committed to helping the company succeed.
For more context on structuring rounds with different investor types, read our guide on angel investors vs VCs: building your seed round strategy.
What Leads Do After Investment
The relationship doesn't end at closing. Active leads provide:
Strategic guidance. Regular check-ins and advice on key decisions.
Hiring support. Introductions to candidates and help closing key hires.
Customer connections. Warm introductions to potential customers and partners.
Follow-on capital. Bridge financing or pro-rata investments in future rounds.
Finding the Right Lead
Not all leads are equal. Look for investors who:
Have relevant sector expertise
Can add value beyond capital
Have time to engage (not overcommitted)
Communicate transparently
Support founders through challenges
Use SheetVenture's intelligence tools to identify which investors actively lead rounds in your stage and sector. Check our coverage data to see recent lead investments and activity patterns.
The Bottom Line
A lead investor anchors your round, setting terms, writing the largest check, conducting diligence, and coordinating closing. Finding the right lead is the single most important step in raising institutional capital.
Focus your energy on securing a strong lead. Everything else follows from there.
Questions about finding lead investors for your raise? Talk to our team.
SheetVenture helps founders identify active lead investors, so you focus on the conversations that close rounds.