The Difference Between Angel Investorsand Venture Capitals

The Difference Between Angel Investorsand Venture Capitals



Innovation and entrepreneurship are the driving forces of a capitalist economy. But new businesses are
usually risky and cost-intensive. As a result, startups often look for capital to spread the risk of failure. In
return for the risk they take on these companies, investors get equity and other rights. Investors and Venture Capitals Venture capital enable startups to get funding at the initial stage. Angel Investors and Venture Capitals This helps the founders to fulfill their mission





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Key Difference Between Angels and VCs:



What is the major differentiator between an angel investor and a Venture Capital? Is it the stage of
investing? Is it whether investing is a full-time job? All these factors are effects of the real difference
between the two categories of startup investors and



An angel investor invests his own money. Venture capital leverages other people's money. From this
insight, we get two different motives and processes.





Investing Options:



Consider this for a moment. You have been able to save $1 million after working for 30 years. You have a
choice whether to spend it traveling the world or buying vacation homes. Angel Investors and Venture Capitals Or you could invest in stocks or
real estate. On second thought, you could invest in startups.



Investors and Venture Capitals



Regardless of your decision, it remains your money. You are only accountable to your spouse and kids
since you have responsibility for their welfare. This is different from a venture capitalist who raises money
from investors. Other people's money comes from LPs, mostly retirement funds and wealthy families who
put some money aside to try other options.



Other People’s Money



Writing a cheque out of your own funds is a struggle. Investing other people's money is easy. There is no
emotion attached to writing $10 million cheques to startups. Even when your investments underperform,
you still get paid well.



But, with other people's money, you have a responsibility and you need to make reports. As an angel
investor, you invest because you want to support sustainability or assist a founder who deserves an
opportunity. As a VC, you don't have that luxury. A VC needs to communicate regularly and explain what
they are doing. Regardless of how well you are paid, you work for someone. You are investing on their
behalf and should reflect their investment strategy.





Venture Capitals Cheque Sizes



Angels are doing well, but most of them are not excessively rich. It is difficult to see an angel investor who
owns a private jet. They have money to invest, but not in the millions.



As for venture capital, every investment requires a lot of research. This takes time and effort. As a result
of this, they only do a few investments per year.



A fund worth $100M can support about 15 investments. This means the average size should be about
$6M. Billion-dollar funds go for bigger investments while those who are not so wealthy opt for early-stage
investments.



Investment Stage



If you have a check size of $25K, you can only invest in seed and pre-seed stages. As a result of this, angel
investors can invest mostly in the early stages. When the investment round is $10M, no one would look
at a $25K cheque. VCs typically invest in series A and later. They have a higher amount to spend.


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