“Lead investors” are well-versed, experienced investors who spend the time conducting due diligence on a company, and then invest a large amount in an equity crowdfunding campaign. Lead investors are a catalyst for unlocking investment from others: the funds they commit give momentum to the offer and confidence to the additional investors that follow. They may also have additional networks of investors that they will tell about your campaign.

Finding that first lead investor is tough. Really tough. Smart money loves to be in the company of other smart money – once that initial investor is on board and validated the investment proposition, things become easier. But there always needs to be one that sticks their neck out before anyone else does.

The lead investor is the one taking the biggest risk, and often contributing the most money. Therefore, many investors prefer to follow, rather than lead. This can lead to a chicken-and-egg problem, where no-one will invest because no-one else has yet.

Some crowdfunding platforms are very strict on the need for an offer to feature a strong lead investor in order for it to “go live”. Precisely due to the fact that getting a lead investor is a hard thing to do is a way of screening through the numerous start-ups that come through the platform’s door – if they can’t get a lead investor, the platform doesn’t want to show it to their audience either.

It’s true that campaigns with a lead investor have a higher rate of success. But many founders are frustrated by platforms that insist on this requirement: “If we already had a lead investor, we wouldn’t need equity crowdfunding”, is the founder’s lament.

Crowdfunding will be easier if you have a lead investor. But not having one isn’t necessarily a deal- breaker. So if your company needs funding, but doesn’t have a lead investor, what should you do?

  1. Reconsider your need for funding

Perhaps the most obvious and overlooked thing to do is to take stock of WHY you can’t find a lead investor. If you’ve got a great pitch and spoken to enough potential investors, maybe the problem isn’t with your approach, but with your business. Maybe it just isn’t ready to be funded yet. Or maybe with the current business model, it will never be. A harsh reality to swallow, but equity crowdfunding isn’t a golden ticket to allow just any business to get showered with money.

Ask the potential investors that have told you “no” for the reasons why. Do this in a polite, non- confrontational way and you’ll be amazed at the insights they will reveal. You might even be able to return to the same investors once you’ve had the chance to address their concerns and hit a few more milestones.

Then, armed with their feedback, try to move forward even without their investment – bootstrapping, government grants, or using personal savings. Not all fast-growing start-ups require equity funding!

  1. Be more selective about the crowdfunding platform

There are many things to weigh up when deciding on which crowdfunding platform to use. Different platforms have different attitudes as to whether a lead investor is an absolute requirement, or more of a “nice-to- have”.

Some platforms have strong enough networks that they can make introductions to potential lead investors. Ask about this. If they can help you to find a lead investor, it will be a massive bonus to your offer.

If the platforms you speak to can’t help procure a lead investor, your decision over which platform to go with will be narrowed down to those that don’t have a lead investor as a hard-and- fast requirement. Then, to decide which one of these to go with, ask about their track record and ability to support offers without a lead investor.

  1. Be ready to answer the question: “why don’t you have a lead investor?”

Don’t be taken by surprise when platforms and investors you speak to pre-offer ask you this question, and make sure you have a good answer up your sleeve. Here are a few potential “good reasons” to get you thinking (of course, make sure what you say is actually true!):

  • We wanted to get the benefits of a large shareholder base, by seeking investment from lots of smaller backers, rather than a few larger ones
  • Our type of business isn’t hugely scaleable. It can be profitable, but the lead investors we reached out to were looking for a company that might go on to a large exit
  • We spoke to potential lead investors, but they focus on different industries than ours
  • The lead investors we spoke to would be more interested at a later stage of our growth
  1. Do more extensive valuation analysis

Entrepreneurs are optimistic. That’s why they’re entrepreneurs – they see the future as a place filled with success under a big, bright blue sky. Consequently, left to their own devices, they tend to over- value their company.

One thing that a lead investor typically does is bring the entrepreneur down to earth. Through negotiation, they provide a sensible valuation under which an investment is commercially acceptable. While a lower valuation may sound like a downer, having someone negotiate a fair valuation with the entrepreneur gives comfort over the terms to other investors, and leads to a greater chance of successfully raising the money.

If you run a crowdfunding offer without negotiating with a lead investor, you need to instead justify your valuation another way. Bringing in an external company valuation expert is one way to do this.

Looking at the valuations achieved in comparable past crowdfunding offers is another. Look for ways to produce the proof that your valuation is the result of robust thinking, and not just a number plucked out of thin air.

Remember that the outcome of crowdfunding is inherently self-regulating – if you use the fact you’ve got no lead investor as an excuse to set an inflated valuation, you stand a good chance of investors rejecting your offer.

  1. More engagement with your customers and other relationships

Campaigns that can do without a lead investor tend to be B2C companies selling something with high brand engagement, easily understood by the average person. Food and beverage, cosmetics, consumer electronics… that sort of thing.

When a campaign doesn’t have a lead investor, it needs to cast a wider net and use these channels more than ever. Your best source of funds becomes those who already know about, use, and love your product.

  1. Get them to commit early

The value of momentum is fundamental to all investments, especially in crowdfunding. If your offer can’t rely on a single large investor to generate this momentum, you will instead need to do it through lots more pre-commitments from smaller investors. Hustle, hustle, hustle.

Critically, you need to get people to sign up as close to the start of your offer as possible. In many equity crowdfunding campaigns there is no real incentive to do so – investors can wait until the last possible moment to decide whether to invest or not, with no penalty. This is a big problem for campaigners, because if everyone waits until the last minute, an offer doesn’t benefit from the positive perception that comes when the amount raised is constantly ticking upward.

To incentivise early commitments, try offering special rewards to investors who back your campaign on Day 1, and gradually decrease these rewards for people who sign up later and later in the offer.

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Plenty of equity crowdfunding offers have raised money with no lead investor, so don’t be discouraged if you can’t secure one. It can be done! Yes, you will need to work harder, and work smarter. But within every setback lies opportunity. Keep moving towards the outcome you want.