How angel investors differ from venture capitalists?

Ever wondered what is the difference between an Angel Investor and a Venture Capitalist? Well, if you did here's the answer. If you didn't, still absorb the knowledge and see how angel investors differ from venture capitalists

Angel Investors are successful business people, who invest their own personal funds into a potentially rewarding business opportunity. Whereas, Venture Capitalists are investors that use other people's money. Let's take a look at the main characteristics that differs the one from the latter -

• Angel Investor is an individual investor. Whereas, Venture Capitalist may be a company or business rather than an individual.
• If the business is at an early stage then Angel Investors are the most likely source of funding. Venture Capitalists may come on board at a later stage when the concept is proven and initial revenues obtained in order to more quickly expand the company.
• Angel Investors make decisions typically on their own and are not obliged to anyone. VCs can't sway on just one member's excitement over a deal. A venture capitalist has to take decisons mutually with their investment committee.

Also Read: A Quick Introduction To Venture Capitalist

• The amount of investment made by an angel investor varies but is usually smaller. It can be anywhere between £10k - £100k and can rise to even £1m. The amount invested by VCs is generally £1m and more than that.
• VCs conduct a thorough research on their investment prospects. They will not shy away in spending for the research. Angel Investor might include having coffee or lunch with an entrepreneur as a part of their research.
• When angels invest as a group, there will typically be an angel from the group who will sit on the board and represent the investors’ interests. If the angel is a significant contributor, then they may stay on the board even after venture capitalists invest. In other cases, the VC will take the seat representing the investors and the angel may stay on as a non-voting observer, or may retire from the board entirely.

Also Read: All about angel investors you need to know

• Venture Capitalists will always have an almost manic desire to flip every deal they do as quickly as possible. And they will not care where that return comes from as long as they are able to receive a massive bonus for the risk and skill that they have invested.
• Venture Capitalists will ensure that your business is built from ground up with the exit in mind by providing a highly effective network of professionals to move the business forward. Angel investment therefore represents an invaluable source of alternative funding. And one that is far more attractive and realistic for a start-up entrepreneur that is looking to build a business and stick with it for the longer term.
• Venture Capitalist will come with legal agreements that will inevitably always be biased with terms that almost seem utterly unfair and unjust. Whereas, Angel investment will be far more flexible and tailored to both sides.

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• Most Angels and VCs look for an early exit or liquidity event. Some investments may take longer, but angel investors need to get their money back and Vcs are even more under the gun.
• VCs and Angels want to see a return across their entire portfolio of investments which may be around 20-30% per year. Though angels have to face a higher risk since they invest earlier than VCs.

Angel Investor or Venture Capitalist choose wisely. Good luck!

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