Angel Investors vs. Venture Capital
Angels Investors and Venture Capital firms may ultimately end up investing in the same
deals, but they typically enter during different stages in the lifecycle of a business. There
are some important distinctions to note.
Angel Investors
- Individual, accredited investors
- Got coined “angel” from financers of theater productions in the early 1900’s
- Typically have industry expertise in the area they are investing
- Provide early-stage investment
- Serve as a bridge between Friends and Family and Venture Round
- Can tolerate loss of entire investment
- Typically invest 25K -1.5M dollars
- May invest individually or with groups of other angels
- Offer guidance and advice to management team
Venture Capitalists
- Typically general partners investing 3rd party money
- Do not typically provide early stage investment
- Diversified portfolio expecting a large home run on approximately 1 out of 10
deals
- Need to generate a specific return on investment (usually around a 25-30%
internal rate of return annually across the entire portfolio)
- Will remain active in the management of the business
- Typically will required a board seat and may seek majority control
- Investment size typically ranges between 1.5M and 10M
- Some venture firms are set up to invest in early stage companies and make
investments more similar in scope to those of an angel or angel group