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What's the Difference Between Angel Investors and VCs?

There are several differences between angel investors and venture capitalists.

The key differences relate to 1) the amount of money invested, 2) the professionalism of the investor, 3) whose money is being invested and 4) whether the investor takes a seat on your company’s board or not.

Amount of investment: venture capitalists differ from angel investors in that they typically provide more money (generally at least $2 million) and focus on companies that have achieved more operational milestones than companies generally funded by angel investors. Angel investors, on the other hand, typically invest less than $100,000 into a company, and will fund companies at an earlier stage of development.

Professional vs. non-professional investors: venture capitalists are professional investors. That is what they do for a living. Angel investors do not invest for a living. They often have other jobs or commitments to attend to.

Other people’s money vs. own money: Venture capitalists invest other people’s money in ventures. This money comes from pension funds, corporations and other sources. Conversely, angels invest their own money. As a result, angel investments are not always based on the potential return on investment (ROI) of the deal (the primary concern of venture capitalists) but may result from other factors such as simply liking the entrepreneur and wanting to help them out.

Board seat vs. no board seat: Angel investors may or may not want a seat on the company’s Board of Directors. For venture capitalists, taking a Board seat is the norm.

Finally, it is important to note that some venture capitalists also invest as angel investors. This often happens when they see a deal that is too early for, or otherwise not a good fit, with their venture fund’s goals, and decide to invest their own money into the company.

We recently released a report - the Step-by-Step Guide to Raising Capital from Angel Investors, which explains exactly how to find angel investors and successfully raise angel funding.

Click here to learn more about this special report.