A round does not come together because ten investors each like you a little. It comes together because one investor believes enough to go first, set the price, write the biggest cheque, and let everyone else follow. That investor is your lead. Landing one is the single most important move in any priced round, and everything in this lesson is built around getting one and using them well.
Why you need a lead
A lead does three things nobody else will do for you. They negotiate and set your valuation, they issue the term sheet, and they run the primary due diligence. Angels and micro-funds are usually happy to fill a round, but very few will price it. Without a lead you do not have a round, you have interest: a stack of soft yeses and nobody willing to name a number.
A credible lead also de-risks you for everyone who comes after. Their diligence and their cheque are a signal that follow-on investors read as validation, which is exactly why the same money is easy to raise after a lead commits and nearly impossible before.
Convert interest into a lead that sets the price
Interested investors will happily take a meeting forever. Force the question: "Would you be open to leading this round?" An investor who cannot answer that is not your lead, and you should keep looking while staying warm with them as a follower.
The lead proposes the term sheet. It sets your pre-money valuation, the amount raised, the instrument, the liquidation preference, anti-dilution, pro-rata rights, and board composition. In India, priced institutional rounds are almost always done through Compulsory Convertible Preference Shares (CCPS) issued under the Companies Act 2013, which carry these preference and protective rights and convert to equity on defined triggers. Convertible instruments such as CCDs or SAFE-style notes are for genuine bridge or pre-pricing situations, so be clear about which one you are running.
The price is not purely a negotiation of conviction. If any investor in the round is a non-resident, the FEMA Non-Debt Instruments Rules, 2019 (Rule 21) require the shares to be issued at or above fair value, determined by an internationally accepted methodology on an arm's length basis and certified by a Chartered Accountant or a SEBI-registered Merchant Banker. Foreign capital can pay a premium above that fair value, but never a discount to it. Your posture should be that of someone selling a priced asset, not asking for a favour. Keep more than one party circling so the lead feels mild competitive tension, but never claim a term sheet you do not have.
Fill the round around your lead
Once a lead commits, commonly anchoring a meaningful share of the round, the rest gets much easier. Co-investors and angels take smaller cheques on the lead's terms, usually without governance rights. Give the lead the board seat and pro-rata you agreed, then allocate the remaining space deliberately to angels who add distribution, hiring, or domain credibility rather than just money.
Keep one number in your head at all times: how much room is left. Oversubscription is leverage and lets you choose. A half-empty round sitting behind a signed term sheet is a warning sign that newcomers will notice.
Close cleanly under Indian law
Angel tax under Section 56(2)(viib) of the Income Tax Act was abolished for all classes of investors by the Finance (No. 2) Act, 2024, with effect from Assessment Year 2025-26, so raising at a premium above fair value no longer triggers that tax. Valuation discipline still matters for FEMA. If you took foreign investment, file Form FC-GPR on the RBI FIRMS portal within 30 days of the allotment of shares, measured from the date of allotment and not the date funds arrived, or you will owe a Late Submission Fee. Have the valuation report, board and shareholder resolutions, and an updated cap table ready before you allot. A clean close is part of the pitch to your next lead.