17.08.2022.– Tokeportal.com own content

Author: Nóra Szeles

The lead investor, also known as the primary investor, plays a crucial role in crowdfunding campaigns. Often, individuals or angel investors take on this role, which essentially represents the first investor—the person who initiates and kickstarts the campaign with their capital and reputation. They may not necessarily be the largest investor in the campaign (according to international best practices, they commit a minimum investment of 10,000 euros), but their presence signifies that they negotiated the investment terms with the campaign owner and will oversee and approve the due diligence. After the investment, they represent the interests of the crowd during company decision-making and ensure that the campaign owner spends the capital as requested during the campaign. Together with the campaign owner’s management, they are responsible for investor relations as well. Since crowdfunding ventures are small-scale, they provide updates on business progress at regulated intervals specified in the investment terms. In return, the lead investor receives several rights outlined in the term sheet. The lead investor is also referred to as a magnet investor or magnet funder – see the scientific research available in the link below.

Growing companies through the crowd often crowdfund additional capital at a later stage and higher valuation, but it is also common to attract institutional venture capital. Multiple institutions can participate in venture capital investments, with the lead role typically taken by the entity making the largest investment. It is becoming increasingly common for successful companies that have grown through alternative (non-banking) capital acquisition to ensure an exit for early-stage investors through domestic stock exchange listings, approximately 5-7 years after the initial crowdfunding round. Startups that achieve truly global success typically have a growth period of 10-12 years until the exit.