The role of the lead investor - Jon Gill



The term “lead investor” is often used when a syndicate of business angels is coordinating a potential investment (or just investment activity more generally). But what does it mean in practice for the “lead investor”, his fellow investors and the investee company?


There is no prescribed legal concept of a “lead investor” – it is purely a feature of the behaviour and/or legal structure that is agreed with between the investors and the company. As a result, it does not necessarily follow that the lead investor will be making the most significant financial investment (although this is often the case). Rather, it is more that the lead investor is willing to assume a more hands-on, active

and time-consuming role during some or all of the following stages:


Prior to the investment completing:

  1. Investment identification and term sheet negotiation;
  2. Due diligence; and
  3. Negotiation of the investment agreement and articles of association.


During the investment period:

  1. Giving approvals on behalf of the investor group;
  2. Information and reporting to the investor group; and
  3. Fulfilling the role of “Investor Director” or observer to the investee company’s board

Upon an exit:

  1. Negotiating key terms with the buyer; and
  2. Overseeing the legal process on behalf of the investor group.

Unless the lead investor also becomes an “investor director”, the role is typically unpaid, with the lead investor often being appointed within the investor group due to sector expertise, contacts or other valuable contributions he is considered best placed to make. As a co-investor, the lead investor’s interests are aligned with those of the investors he is representing, although it is advisable to include an “exculpation between investors” clause in the shareholders’ agreement to make it clear that no legal duty of care is assumed (some example drafting is in the new BVCA investment agreement).


Please contact if you have any queries on this topic or business angel investments more generally.

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