Q: What does a lead investor do?
A lead investor:
- Is expected to lead any bridge round. This is super important. If the company does OK but Not Great, the investors will often be willing to do a bridge round (i.e., a smaller, second, all-inside round). But the lead investor has to … lead it. If they don’t do their pro rata or more, a bridge is really tough. Everyone loses confidence, etc. etc.
- Is expected to make the most intros for the next round. Often they don’t. But it’s a reasonable expectation. Next round investors will first look to the largest / lead investor to get a pulse on the company.
- Interviews most of, and ideally recruits some of, the executive candidates. The lead is expected to do the bulk of the interviewing of VPS and C-level execs.
- Does most of the board of directors-level work. Other investors may not come, or may not own any board-level responsibilities.
- Is expected to be the #1 champion of the company. If they aren’t, everyone will wonder.
- Has to recruit a replacement CEO, if ever necessary. If for any reason the company needs a new leader, the lead really has to be the one to get it done.
- Deals with a wind-down. Not fun, but if the start-up fails, someone in the investor syndicate has to deal with a lot of the issues. There are a lot of potential liabilities here, processes, etc. The lead has to take the lead here for the investor syndicate.
The non-”lead” investors generally won’t do much of this. The lead(s) sometimes won’t either, but you hope.
If you aren’t sure if you have a lead investor, ask. If you aren’t sure if they’ll do the above, ask. And if you don’t have a lead investor, don’t necessarily expect too much of the above.
A little more on the first point here: How Bridge Rounds Work in Venture Capital: Messy, Full of Drama, and Not Without High Risk | SaaStr
(note: an updated SaaStr Classic answer)