Investment notes of the “richest man in Bitcoin”: Is the mechanism of lead investment and follow-up investment reliable?

This is a book written by Li Xiaolai about equity crowdfunding of early-stage projects. From being the "richest man in Bitcoin" to an investor, he shares his personal experience with everyone. In the previous article, he taught everyone how to identify founders. In this article, he will analyze the mechanism of leading and following investment and the risks of early-stage investment. Welcome to communicate.

Is the mechanism of lead investment and follow-up investment reliable?

The risk of equity investment in early-stage projects is very high, especially for amateur investors.

In the end, every investor in an early-stage project will know: it is easy to buy a project, but difficult to sell it.

It is easy to buy shares in a project because you are spending your own money; but it is not so easy to sell shares in a project because you are letting others pay for it.

Experienced investors often design a sales path before buying a project. They know who the next wave of investors should be if the project is successful. Silicon Valley investment institution A16Z is a model in this regard - they maintain a very large investor relationship database and employ many people to supplement, organize and analyze this database as an important basis for their investment decisions.

Amateur investors usually do not have such resources and capabilities. Therefore, most amateur investors choose to participate in crowdfunding, that is, to join the crowd.

Although this is a good idea, it should be noted that more people does not necessarily mean more power.

Whether it is the foreign Anglelist or various domestic investment clubs or crowdfunding platforms, they often adopt the "lead investment + follow-up investment" model.

This model certainly has its advantages, and it seems to be the best "last resort", but what are its shortcomings?

The fact that a well-known investor or institution is the lead investor has almost no impact on the success rate of the project.

It is undeniable that well-known investors or institutions have better "vision" - because they have more professional knowledge, research capabilities and connections, but the success rate of early-stage projects is very low, and the vision of investors often has nothing to do with the success rate. If the lead investor issues a guarantee, it will be different - of course, in the equity investment of early-stage projects, no one will do this, no one dares to do this, and no one needs to do this.

The financial risks for follow-up investors and lead investors are the same.

If the project fails, whether you are a follower or a lead investor, the risk is actually the same, the investment will be lost - you will not get more back just because you choose to follow the investment. At the same time, if the project is successful, the return will be less - because the lead investor usually takes a part of it according to the agreement...

Lead investors have additional risks.