Venture Capital Firms

Differences in Venture Capitalist and Angel Investors

If you have heard the terms Venture Capital and Angel Funding you may be wondering, just what the differences are. Here are just a few of the major differences:

Money : – )

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For the most part Angel Investment is used for small ventures, though these investments can vary in size. On the other hand, Venture Capitalists will invest at minimum around $2 million in a worthy business. The way they look at it, a 40% return on larger investments like this is better than a 100% investment on $50,000.

Another big difference in the two investment types is size, venture capitalists are larger they can be huge groups with access to practically limitless funds while an angel investor may be one individual seeking an investment opportunity.

Nonprofessional or Professional
Usually venture capitalists are a part of a large firm and these firms have stringent criteria for hiring. This means when you work with a VC you are working with someone who has gone to great lengths to earn their position. That does not mean angel investors are less than professional, they can be and in fact many are however their job does not depend on their abilities. Another thing you have to consider is the fact that a venture capitalist works at finding investments, while angel investors may simply be looking for an investment for their savings.

Follow the Money
A venture capitalist is usually a fund manager, which means they may make risky investments. A VC accesses money from corporations, wealthy individuals, families and pension funds. For the Angel Investor the funds generally come from their own personal accounts, savings they have amassed over a lifetime. Thanks to this, they have a bit more freedom, Angel investors can choose to invest in businesses that will not provide the best financial gains but that benefit a particular charity or the community at large.

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Seat on Board
Before they will invest, a venture capitalist will most likely require a seat on your board of directors for the funds. They prefer a hands on approach to investing. If an Angel Investor feels they can add value to your business they might ask for an active role, but as a rule, your angel investor will be less inclined to require a seat on the board than the typical venture capitalists.

All the best,

-Peter

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