---
title: the first check
canonical_url: https://ensurance.app/guide/the-first-check
markdown_url: https://ensurance.app/guide/the-first-check.md
subtitle: "what an anchor investor does in a raise, and what it means for the protocol to be the anchor for a place"
category: ensurance
---

# the first check

*what an anchor investor does in a raise, and what it means for the protocol to be the anchor for a place*

In a Hong Kong IPO, some of the shares are sold before the public ever sees the book. **Cornerstone investors** sign up in advance to buy a fixed amount at the offer price, whatever that price turns out to be. Their names go in the prospectus, and the exchange's guidance has generally been that they hold for at least six months after listing. In India the same seat is called the **anchor investor**. Anchors are allotted their shares ahead of the public offer, and since April 2022, half of what they take is locked for 90 days and the other half for 30.

Private funds have the same seat under a different name. A fund that is raising money holds a **first close**, the point where enough commitments are signed for it to start investing. The investors who commit by then are the anchors, and sponsors pay for them. Management-fee discounts and priority on co-investments are the usual terms. Permira, raising a €6.5 billion buyout fund, offered a 5 percent cut on the annual management fee to investors who committed before the first close.

The market pays for that seat because the first check does something no later check can. It makes the raise real.

Now picture a raise that never had one. In June 2002 the Hayman Fire burned 137,760 acres of ponderosa forest southwest of Denver. On its second day it reached Cheesman Reservoir and burned 7,500 of the 8,500 forested acres Denver Water owns there. Then the rain came and carried the burned slopes downhill. Denver Water spent more than $26 million recovering from Hayman and the 1996 Buffalo Creek Fire: dredging Strontia Springs Reservoir, treating the water, and reseeding the forest. The people who paid that bill were the households at the end of the pipe in Denver, who had never been asked to pay for the forest while it stood.

That forest had been doing the work all along: holding soil, slowing snowmelt, keeping sediment out of the intakes. Nobody wrote the first check for it. The bill came anyway.

:::johnson
**a first check makes a price that everyone after it can see.** *The first check is not a bet on the price. It is the reason there is one.*

[see what a certificate pays →](/guide/how-conservation-fundraising-reaches-the-crew?from=guide)
:::

## what an anchor does in a raise

### what is an anchor investor?

An **anchor investor** is the first committed buyer in a raise. They sign before the others, take a large allocation, and accept terms that later buyers can read: a price, a size, a hold period. In public offerings the anchor is named and locked up. In private funds the anchor is usually rewarded with better economics. Either way, the anchor's job is to turn an offering into a book.

An anchor is not a donor. It invests for a return, and the return is whatever the market gives after the hold. What it buys with its place in line is the allocation, the terms, and a seat at the front.

### why do other investors wait for one?

Because an empty book has no price. A fund with no first close may never invest. An IPO with no cornerstone has no outside party named in the prospectus as having committed at the offer price. Followers are not being timid. They are reading the only signal a new offering has: whether someone with money and a name went first, in public, and accepted a lock-up.

So the first check carries information the later checks do not. It says the price was set by a buyer, not by a pitch.

## who is the anchor when nobody will go first?

For a headwater forest, the usual anchors never sign. Grant programs, mandates and funds mostly wait for someone else to go first, and the checks the sector promised for years did not come. That is a structural fact, not anyone's failure. The capital that cares about the outcome and the capital that moves on new rails mostly do not sit in the same room.

So on *[ensurance](/specific?from=guide)*, the protocol is the anchor for a place. "The protocol" here is not a single treasury. It is a population of accounts, each one an **agent** with a wallet, a written mandate and a name. Together they play three roles at once, and each one has a plain meaning.

| role | what it means in plain words | what it does for a place |
|---|---|---|
| **off-taker** | the buyer who commits to take the output | buys the first certificates on a named place |
| **balance sheet** | the holder that keeps what it buys in its own account | holds what it buys, onchain, where anyone can read it |
| **permanent bid** | the standing buyer that does not leave | keeps a buyer under the place's instruments, as [the permanent bid](/guide/the-permanent-bid?from=guide) describes |

A **certificate** is the instrument here. It is priced on what it costs to keep a place whole, and issued on the work the place does. When someone buys one, the price goes straight to the account the certificate names.

## the order of the first check

An anchor has an order of operations. So does this one. Three steps, each described as what exists or what is planned.

| step | what happens | what exists |
|---|---|---|
| **1. name the crew and the market** | the certificate's split names the steward or crew who keep the place, plus a leaf that funds the place's own market | split tooling and team accounts exist; the size of each leaf is set per certificate |
| **2. the protocol buys first, and says so** | a protocol account buys the first tranche of that certificate, in the open, labeled as seed | the purchase path exists; a scheduled, repeating purchase is planned |
| **3. send the priced ask to the dependent** | the utility, county or insurer downstream gets one price, under its own loss bill, with the steward's pay as the use of proceeds | the ask is planned as a written proposal for one named place and one payer |

A **split** is a contract that divides each payment among named recipients the moment it arrives. On a certificate it has a simple shape: the steward or crew, a team operating account that funds the place's market, and the protocol. The first buyer pays the crew and stocks the market in the same purchase.

Step 3 is the one an anchor exists for. A cornerstone makes the public offer possible. The protocol's first tranche makes the priced ask possible, because the ask now points at a certificate that already has a buyer, a price and a paid steward.

## seed payroll, not seed liquidity

Here is where this anchor differs from the one in a prospectus. The first check is not there to make a trading market look busy. It is there to pay the people who keep the place.

When the protocol buys the first tranche, the money goes through the split to the steward and the crew. That is payroll. A slice also lands in the team account that funds the place's market, so the quote side of that market comes from a real purchase rather than a treasury wire. (What owned liquidity can and cannot buy is its own post: [what protocol-owned liquidity can and cannot buy](/guide/what-protocol-owned-liquidity-can-and-cannot-buy?from=guide).)

That is the reason the protocol goes first on certificates and not on coins. A coin purchase fills a pool. A certificate purchase pays the account it names. The [crew-funding post](/guide/how-conservation-fundraising-reaches-the-crew?from=guide) walks through that difference for the person raising the money.

## pipe first, then payor

Be clear about what the first check is. Money that starts inside the protocol and lands in a steward's account is a **pipe**. It moves money. It does not bring any in. It is seed.

It becomes a **payor** when a dependent's own balance sheet refills the account: the utility that would otherwise pay for dredging, the county that would otherwise pay for trucked water, the insurer that would otherwise pay the claim. That is the design. The treasury check starts the account. The dependent's bill keeps it full.

Denver already shows the second half. After Hayman, Denver Water and the U.S. Forest Service began From Forests to Faucets, a cost-share for forest work upstream of the reservoirs; its 2017 renewal set $33 million over five years, matched with state partners, to treat more than 40,000 acres. Denver Water is not a buyer of anything on ensurance, and this post does not suggest it is. It is the clearest public record of a dependent deciding to pay for the forest instead of the sediment, after the bill had already come. Ensurance is built so the forest has an account, a price and a paid crew before that decision is made, not after.

When the dependent's bill refills the account, the anchor has done its job. It does not need to stay the largest buyer. In a raise, that is the point too. Nobody remembers the cornerstone once the stock trades. They remember that it traded.

## what the anchor does not do

A protocol that buys its own places first owes its readers some lines it will not cross.

- **It discloses.** The first tranche is bought by a named protocol account, in the open, and called seed. It is never dressed up as outside demand.
- **It does not set a price target.** The certificate is priced on the cost of the work. What anyone pays after that is the market's call.
- **It makes no claim on the land.** A certificate is based on the living place. It is not a deed, and it gives no one a claim on the land or on anyone's property.
- **It does not ask anyone to care.** The utility pays because its bill is smaller. The investor buys for a return of their own, on terms they can read. The steward is paid because the first check went through the split.

## where you sit

If you allocate capital, the protocol's first check means a place you look at already has a price, a buyer of record and a crew on payroll before you arrive. You are not the first check. You decide whether to be the second, on terms you can read. Where that seat sits next to the others is in [where you sit in a blended finance stack](/guide/where-you-sit-in-a-blended-finance-stack?from=guide), and how to think about the return on a cost-priced certificate is in [the value gap is where the money is](/guide/the-value-gap-is-where-the-money-is?from=guide). The [capital providers page](/solutions/capital-providers?from=guide&topic=the-cavalry-is-not-coming) and the [investors page](/solutions/investors?from=guide&topic=the-cavalry-is-not-coming) set out the instruments.

If you keep land you do not own, the order above starts with your name on the split. The [land stewards page](/solutions/land-stewards?from=guide&topic=the-cavalry-is-not-coming) shows how a certificate on your place is set up.

If you want to see the certificates that exist now, they are on [specific ensurance](/specific?from=guide). And if you have a named place and a named bill downstream of it, [tell us about both](/contact?from=guide&topic=the-cavalry-is-not-coming). The reply is a conversation about one place and one payer, not a price.

This post is part of [the cavalry is not coming](/guide/the-cavalry-is-not-coming?from=guide), a series on how capital forms for nature from inside.

## sources

[HKEX Guidance Letter GL51-13](https://www.hkex.com.hk/-/media/HKEX-Market/Listing/Rules-and-Guidance/Archive/Guidance-Letters/GL51_13.pdf) — cornerstone investors in Hong Kong IPOs: subscription at the offer price, disclosure of identity in the prospectus, lock-up of at least six months after listing (since folded into the Guide for New Listing Applicants)

[Nishith Desai Associates, "SEBI tweaks the regulatory framework for initial public offerings"](https://nishithdesai.com/research-and-articles/hotline/corpsec-hotline/sebi-tweaks-the-regulatory-framework-for-initial-public-offerings-5212) — anchor investor lock-in extended to 90 days for 50% of the allocation, 30 days for the rest, for IPOs opening on or after 1 April 2022

[Proskauer, "I Want You to Want Me – Achieving a Successful First Closing"](https://www.proskauer.com/newsletter/private-funds-in-focus-fall-2012) — first-close incentives in private funds: management-fee discounts, priority access to co-investment, less often carried-interest discounts

[Institutional Investor, "Permira offers fee cut for early investors"](https://www.institutionalinvestor.com/article/b150zbnxj8233v/permira-offers-fee-cut-for-early-investors) — 5 percent annual management-fee discount for investors committing before the first close of a €6.5 billion buyout fund

[Denver Water, "The legacy of Colorado's largest wildfire"](https://denverwater.org/node/15735) — Hayman Fire, 137,760 acres in 2002; 7,500 of 8,500 Denver Water forested acres at Cheesman Reservoir burned

[High Country News, "Communities help pay for ecosystem services provided by forests"](https://www.hcn.org/issues/44-3/communities-help-pay-for-ecosystem-services-provided-by-forests/) — Denver Water spent more than $26 million dredging Strontia Springs, treating water and reseeding after the Hayman and Buffalo Creek fires; the From Forests to Faucets cost-share with the U.S. Forest Service (the $33 million 2017 renewal is reported by the Colorado State Forest Service)

## the series

[the cavalry is not coming](/guide/the-cavalry-is-not-coming?from=guide) (start here)

1. [every market starts empty](/guide/every-market-starts-empty?from=guide)
2. [the first check](/guide/the-first-check?from=guide)
3. [who stands on the other side](/guide/who-stands-on-the-other-side?from=guide)
4. [what turns the flywheel](/guide/what-turns-the-flywheel?from=guide)
5. [the first print](/guide/the-first-print?from=guide)
6. [why the second buyer pays more](/guide/why-the-second-buyer-pays-more?from=guide)