I’ve Got Angels Who Want To Invest But Not Lead – Now What?

Q: I have several angels that say the want to invest but non of them wants to lead. In your experience: 1) Is this a "call option" strategy rather than a serious investment intent? 2) any thoughts on how to turn "co investors" into lead? or should I try to get a lead of this "co investors" pack?

A: (Brad) While it’s hard to tell whether this is a call option or serious investment intent, it is not that helpful in getting the round pulled together.  When doing an angel round, you need two things: (1) a lead investor who is willing to negotiate terms and (2) supporting investors that won’t lead but are committed to participating on whatever terms the lead negotiates with you.

While you can’t contractually commit the supporting investors, you can usually separate the real ones from the tire kickers (or – more generously – the call option people).  Committed supporting investors are going to let you use their names with potential lead investors, will engage in active networking, and will name a specific amount they are willing to invest. 

These supporting investors are typically called "soft circles" – you’ve got a commitment from them, but it’s not a legally binding one.  A soft circle will always have a dollar amount attached to it.

So – don’t try to convert these "followers" into "leads".  Instead, try to get them into a supporting investor / soft circle mode.

  • as usual this is excellent advice. I have been in this situation before also and my experience was the same – getting the followers to step up and decide to lead was not going to happen, but I was able to leverage their participation commitments in the rest of the fundraising to find the lead. It was a bit of a 1+1=3 strategy but it paid off.

    If you are looking for a lead and have followers, don't take any more meetings with the latter types unless you need to still fill in the round. Focus on folks who will lead, and don't be shy about asking directly if they would (should they be compelled to invest). I've wasted countless hours pitching call-option investors because I was afraid to ask if they'd lead from the get-go.