There are many differences between Angel Funding and Venture Capital. The following are just a few of those:
The Amount Raised
Angel Investment can vary in size but is usually on the smaller side and provides investment for initially small ventures. Most venture capitalists however will generally invest $2 million at the minimum. They rather get a 40% return on $2 million than a 100% return on $50,000. Venture Capitalists also have more money than Angel Investors to invest since venture capitalists are usually in the form of groups with massive funds whereas angel investors can be lone savvy investors looking for an opportunity to grow their money.
Professional vs. Nonprofessional
Venture capitalists are usually a part of a firm and the process of being hired for such firms is incredibly arduous. Therefore venture capitalists are professional investors that meet stringent criteria of the venture firm. That is not to say Angel Investors aren’t consummate professionals since many of them are. A Venture Capitalist’s job is to find investment whereas Angel Investors might be business owners or professionals in another arena looking to invest some of their savings for a potential upshot.
Other People’s Money vs. Own Money
Venture Capitalists in most cases are essentially fund managers, perhaps making riskier investments however. Most of the money that Venture Capitalists invest comes from pension funds, corporations, and wealthy individuals and families. However, the funds of Angel Investors are usually money they have earned and saved over time. Angel Investors therefore do not have strict criteria for investment such as a certain level of return, but can invest as their heart desires, perhaps in businesses that might not have the greatest of returns but help the community or a certain cause.
Venture Capitalists will almost always require a seat on your board in return for investment. They are very involved in the investments they make. Angel Investors might also want to be involved in your business if they think they can add value by contributing their human capital. However, angel investors are less likely to become board members than venture capitalists.
Whether you’re raising money from angel investors or venture capitalists, the first step is to create your business plan…
How To Raise Funding from Angel Investors
If you want to raise your first $100,000 (or more), click below to learn my
battle-tested, 6-step funding formula for raising funding from angel investors