0. The importance and prevalence of ”lead generation investing” has never been higher than it is today. (thread)

1. I define Lead gen investing as investing ahead of your ”core” round, where the goal is to generate leads for your core round. The core round is the round where you build your primary stake in the company / deploy a majority of your capital.

2. Lead gen investing has always existed as a core part of a fund’s capital deployment strategy. The cumulative amount invested to maintain one’s pro-rata across multiple rounds in a successful company can far outweigh the initial amount invested in the company.

3. Over the last couple of years, ”non pro-rata” lead gen investing as an explicit strategy is being formalized across all parts of the venture ecosystem.

4. Traditional Series A funds are investing openly through scouts and seed funds, to build a formal relationship, get on the cap table and become an insider in advance of the Series A.

5. Cross-over and growth funds are participating in - or even leading - early-stage rounds in order to get the right to deploy $100m+ in the growth round.

6. As an alternate lead gen strategy, some growth fund GPs angel invest in companies at the seed or A to build a deeper relationship with the founders and position the fund to lead the growth round.

7. Companies increasingly invest in other companies as lead gen for future M&A (which is their "core" investment stage). Stripe leading rounds is a good example here.

8. Seed funds have no earlier stage they can generate leads from. However, some seed investors are investing broadly across more companies with smaller check sizes, to preserve enough dry powder (10x original check size) to quadruple down on companies that are breaking out.

9. Heck, even the YC initial investment could be thought of as lead gen for YC series A or YC Continuity, which is where the fund takes 10%+ ownership stake.

10. Of course, just being on the cap table of a company is not enough. The investor needs to truly add value to secure the right to lead the next round. Otherwise, it’s a waste of time and energy.

11. Lead gen investing done well can be an effective way to build an evergreen company pipeline. Done poorly, it can be an expensive distraction that confuses entrepreneurs and dilutes your stage focus. As an investor, think carefully about how lead gen fits with your strategy.

12. (h/t @julienemery ) As a founder, it's important to know if you're taking a "lead gen" check or a "core round" check.