Leading a round as an angel: what you take on and what you get
What a lead does, the time it costs, how to set terms fairly, running the diligence the others will rely on, and the board seat — when to take it and what it obliges you to.
Most angels follow. At some point, with a deal you know well and a founder you believe in, you will be asked to lead — or you will see that nobody else is going to. Leading is more work, more responsibility and, done well, better returns: you shape the terms, you know the business better than anyone else on the cap table, and founders remember who went first.
What a lead does
- Commits first, and usually for a quarter to a half of the round.
- Agrees the valuation and term sheet with the founder.
- Runs, or instructs, the due diligence; shares a summary with the followers.
- Instructs the solicitor on the long-form documents (or agrees the company's solicitor's draft).
- Often takes the board seat or observer role.
- Is the reference call for every other investor.
The time
Twenty to forty hours over two or three months for a £300k–£750k seed round: calls with the founder, reading the data room, two or three rounds of term-sheet comments, reviewing the legals, talking to followers. Then two to four hours a month for as long as you hold the board seat. If you cannot give that, follow instead — a lead who goes quiet stalls the round for everyone.
Setting terms fairly
Start from market: ordinary shares, a sensible consent list, founder vesting with fair leaver terms, information rights for all investors, warranties capped at the investment. Negotiate the valuation from the evidence, not from what you can extract; a founder who feels squeezed at seed is a founder who will raise the next round from someone else and remember. Do not take a different price or a side deal from the followers — they will find out, and so will HMRC if it affects the share class.
The diligence the others rely on
Followers will put in their £10k–£50k on the strength of your work. Do it properly: the eight checks in the small-cheque guide, plus contracts, IP assignments, employment terms, a read of the forecast assumptions, and a conversation with two or three customers. Write a two-page summary: what you checked, what you found, what was negotiated. Share it. It is not advice — say so — and it is the most valuable thing a lead produces.
The board seat
Take it if you can give the time and know the sector well enough to be useful. Decline it if you are taking it for status. A board seat makes you a director: statutory duties, potential liability, conflicts to declare, and the obligation to act in the company's interest rather than your own as a shareholder. Get directors' and officers' insurance in place as a condition of the round. An observer seat gives you the information without the duties, and is often the better choice for an angel.
SEIS/EIS when you are a director
Becoming a director after investing is fine. Being a paid director at the time of investment can affect relief under EIS (the "business angel" rules allow it for a first-time director under conditions) — take advice before you take a salary.
Questions investors ask
"Should I be paid for leading?"
No fee. Your return is the investment. A lead taking a fee from the company is a conflict and, if it is a percentage of the raise, may be a regulated activity.
"The founder wants me to lead but I want a lower valuation than they will accept."
Say what you would lead at and why. If they find another lead at their price, follow or pass. Never lead at a price you do not believe; you will be the one explaining it to the followers.
"How do I find followers?"
On Find, the listing does it: once you have committed and the founder has named you, other investors see a lead in place. Off-platform, your own network and the founder's.