Startup Funding Espresso – Closing the Raise Without a Lead Investor

Closing the Raise Without a Lead Investor

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

There are more startups than there are lead investors.

Not every fundable startup will find a lead investor.

Here’s how to close your round without one:

Start your fundraise with a convertible note.

Make sure there’s a market-relevant valuation cap on the note.

The convertible note is a debt instrument that converts to equity later.

The valuation cap sets the upper limit of the valuation upon conversion.

There are many investors who are not lead investors but rather follow on investors.

Show how the valuation and final terms will be set on the next round and invite investors to join the fundraise.

The investments into the convertible note will help fuel the growth of the startup which in turn can lead to more investors joining.

Be on the lookout for a lead investor.

Look for an investor that wants equity and will invest at least $100K into the business.

For those investor prospects, discuss with them about leading the round.

Even if there’s no lead, the startup can raise the entire fundraise amount to carry on the business.

In the next round of funding continue in the same way.

Use convertible notes to fund the business till you find a lead investor.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding. Let’s go startup something today.

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