Structure

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, and investors into early stage/ high growth companies.

An Angel Investor is just one individual 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.

Backgrounds

Venture capitalists tend to have financial management or professional investment backgrounds, while angels tend to be former or current entrepreneurs.

Entry stage and use of money

VCs generally invest in companies that have launched their products/services and see that such products have 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 small amounts to start their projects, and at the initial stages are looking to manage the business without much input from investors – then, angels come in.

Level of involvement

Angel investors might have valuable advice for you, but they would ultimately have limited control over how you run your business. They will have equity in your business but will not have seats 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 that you wouldn’t be the only one who has a say on how the business will be run.

Time

It will take at least 6 months before a VC invests in a start-up. 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.


This article was first published by Nairametrics on October 8, 2016.

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