Venture Capital Firms

Do you need Angel Investors or Venture Capitalists?

Do you need Angel Investors or Venture Capitalists?

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What are the things that make angel investors different from capitalists?

Management/Advisory Participation

Whenever a venture capitalist invests in a startup, there will always be stipulations.

They will want at least one seat on the Board of Directors and a sub organization with the company that makes sure that investor money is safe and well accounted for.

They are usually very active participants within the operations of the company. Angel investors will sometimes want this same type of participation within the company, but not as much as a venture capitalist. This kind of participation can be good. Investors invest in companies where they have some experience in the industry. They tend to use this expertise to give advice and assist with maturing your business.

Your Money or Mine?

Angel investors are usually wealthy people who are looking for different ways to make more money. The money that they use comes from their own personal funds or from their family bank accounts. This is the reason that they are not as restricted and can invest as much money as they want to. Venture capitalists, on the other hand, are usually investing someone else’s money. A pension fund or network of wealthy families might give a venture capitalist permission to invest their money in particular ways. As a result, there usually restrictions on how venture capitalists can invest money. For example, they can get a particular rate on return or invest in certain industries only. In addition, they usually have more money to invest.

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Professional Amateur

Another big difference between an angel investor and a venture capitalist is the difference in professionalism. Simply put, venture capitalists invest money for a living.

The hiring process at a venture capitalist firm is very stringent. Angel investors have varied experience in business. At one end, they can be just as professional and experienced as venture capitalist. Also angel investors are usually casual investors looking for somewhere to invest their money.

Investment Size

This is probably the biggest difference between angel investors and venture capitalists. Venture capitalists tend to invest a much larger amount than angel investors. For example, a common investment made by a venture capital firm might be anywhere from five to ten million, with two million as the least amount. The reason for this is that they want a strong return, such as forty percent, on a large investment to a very good return, possible 100% on a small investment. Angel investors can invest any amount, but it is usually in the amount of 50k to 1 million.

Best,

Peter

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