January 21, 2011
There are numerous things that are different between Angel Funding and Venture Capital. This article will discuss just a few of those differences.
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Angel Investment can be different in size, but it is generally on the lower side and makes investment possible for initial small ventures. But on the other hand, for a majority of Venture capitalists, the 2 million dollar mark is usually the minimum amount that is invested. They would like to get a forty percent return on 2 million instead of a one hundred percent return on 50k. Venture Capitalists also have more money than Angel Investors for investment purposes. This is because Venture Capitalists are generally in groups that have large funds. Angel Investors, on the other hand, can be smart individuals who are searching for an opportunity to increase their sums of money.
Professional versus Nonprofessional
Venture Capitalists generally belong to a company and the employment process for that firm is extremely exhausting. As a result, Venture Capitalists are professional Investors that satisfy strict requirements of the Venture firm. This does not mean that Angel Investors are not considered to be professionals because a majority of them are. A Venture Capitalist’s duty is to locate investments, but Angel Investors are probably company owners or professionals in another industry that want to invest personal savings in a possible start up.
Borrowed Money versus Personal Money
Usually, Venture Capitalists are basically fund managers, who probably know how to make riskier investments. A majority of the money that Venture Capitalists utilize for investment purposes is derived from pension funds, corporations and well endowed people. However, the money that is derived by Angel Investors is generally funds that have been earned and saved up for a long period of time. Angel Investors, as a result, do not have a distinct rigid set of rules for investment such as a certain level of return. However, they can invest as much they want in companies that may not have the best return, but it helps the city or a particular cause.
Venture Capitalists will not always want to be a member of your Board of Directors in return for possible investment. Their main concern involves the made investments. Angel Investors may also want to get involved in your company if they think that they can add something in terms of human worth. However, Angel Investors are not really going to be board members before becoming a Venture capitalist first.
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