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- What to do when nobody will invest till you have a lead?
What to do when nobody will invest till you have a lead?
Read time 2.1 minutes.
We’ve spoken about this topic before, but I wanted to dedicate and entire issue to addressing it head-on.
In the past week, I’ve had 20+ people reach out asking for advice on how to deal with investors who won’t commit until they have a lead investor.
This is a common catch-22 that founders fall into as lead investors often won’t invest unless you have others willing to invest alongside them, and nobody else will commit till you already have a lead investor.
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In my experience, there is only one way to deal with this, which is to get soft-circled commitments from follow-up investors in writing.
What does this mean?
If an investor says they don’t lead but would invest if you did have a lead then you should follow up by email with them to confirm how much they would be willing to invest if you got a lead.
If you are able to get 3-5 investors who only follow to say they will put $50-100k into a round if you find a lead, then you can go to a lead invest and tell them that you have $250k soft circled and if they lead for $250k you already have enough mone soft circled to close the other half of your $500k round.
These soft-circled commitments mean nothing legally but psychologically they serve as social proof helping increase your chances of bringing a lead investor aboard.
Do you employ the strategy of soft-circled commitments to raise funds? |
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Onwards and Upwards,
P.S. Are you ready to take the next step in raising venture capital for your company? If so, you can book a 1:1 strategy call with me to help get you going in the right direction!
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