Key Differences Between An Angel Investor And A Venture Capitalist
A Venture Capitalist (VC) is a professional money manager who gets paid to invest the funds of others, typically institutions. VCs are professional investors who deploy funds from corporate entities, institutions, investors into early stage/ high growth companies.
An Angel Investor is an individual person who invests his or her own money.
Range of Amount Invested
Angels typically invest smaller amounts of money (thousands to hundreds of thousands of dollars) earlier in the life of a company at lower valuations, taking on more risk.
VCs typically invest larger amounts of money (hundreds of thousands to millions of dollars), at a somewhat later stage and higher valuations, with slightly less risk.
Venture capitalists tend to have a financial management or professional investment background, while angels tend to be former or current entrepreneurs.
ENTRY STAGE & USE OF MONEY
VCs generally invest in companies that have launched their product/service and see that such product has gained some traction already. When you are ready to take your company to a large platform and you need funds for expansion/ marketing/ infrastructure/product development/manpower etc., you approach VCs.
Angel investors usually give money that helps the business take the idea off the ground to the market. There are startups that need a small amount to start their project and at this stage they are looking to manage the business without much input from investors – This is when Angels come in.
LEVEL OF INVOLVEMENT
Angel Investors might have valuable advice for you, but they would ultimately have limited control over how your run your business. They will have equity in your business but will not have a seat on your board unlike Venture Capitalists.
The moment you sign the term sheet of a VC is the moment you have agreed to bringing in more people into your business, which means you wouldn’t be the only one who has a say on how the business will be run.
It will take at least 6 months before a VC invests in a startup. This is because they will conduct due diligence, research and other aspects that will help them decide how viable investing in that particular business will be.
Angels on the other hand can make quick decisions as they’re often working alone or have a personal interest in the business.