Why does the investor want a lead investor?

I was sitting in the conference room looking out on the river. The investor was telling us he was interested in investing. It was a wonderful moment for me. The investor outlined the services they offered, people in their network who can help, and how they were there for the long-term. He accepted all the terms in the term sheet. Then, right at the end, he said they couldn’t be the first investor in any venture and that as soon as we had another institutional investor, they would co-invest.

I assume they are doing this to reduce their risk or is it some obtuse negotiating tactic?

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