Angel Investor Vs Venture Capitalist

angel investors vs venture capitalists

Everyone starting his/her own startup dreams of having a profitable one. However, it is very hard to do it on your own, as professional help is required. Take a look at the angel investor vs venture capitalist comparison below.

Angels Investors and Venture Capitalists: From Whom Should a Startup Take Investments

While startup founders keep the world of innovation spinning, the building materials for their castles in the air are funded by investors, venture capitalists, and angels (as well as accelerators, corporate investors, private equity firms, and a few others). It is angels and VCs that play the main roles in funding startups, so it is especially useful to be aware of the advantages and disadvantages.

In the case of small businesses or start-ups, funding is the main aspect through which a business can grow and take on the form of a business group. There is always a need for seed funding or seed capital that can turn an entrepreneur’s idea into reality. Thus, seed funding is an absolute must and a prerequisite that will provide the foundation for any business.

Considering the methods of angel investors and venture capitalists, it is necessary to mention another type of restructuring – corporate alliances. Corporate alliances are an association of legal entities aimed at a particular line of business or sector of the economy and seeking to obtain a synergistic effect only in this direction. In other areas of activity, the members of the alliance work independently.

What Is the Role of Angel Investors?

Angel investors got their name because few people other than them decide to invest in risky projects that do not have sufficient security. Sometimes a business angel makes a decision on financing based on a positive impression of the entrepreneur and confidence in the implementation of the project. And the task of entrepreneurs who want to attract investment in their project is to create such confidence in a business angel.

Angel Investors is responsible for:

  • deals with one person who invests from his personal finances and believes positively in the business idea;
  • investor angel finances startups that have huge potential in the future. Venture capital follows the same concept, but the capital is contributed by a group of partners who are professional investors;
  • they are a group of businessmen and are financed by a group of investors, corporate funds, and pension funds.

Basically, angel investors acquire a minority stake (stakes) in companies, as they are interested in the entrepreneur being sufficiently motivated to implement his project. To ensure control over their investments, they rarely buy less than a blocking stake. To do this, it is proposed, when assessing the compliance of a company with a stage of maturity, to use the parameters that most clearly differ among companies at adjacent stages of the life cycle. To adapt approaches to specifics, it is advisable to consider the proposed criteria in the context of activities.

But a business angel is not only about money. It is also personal mentoring, knowledge, and experience that a private investor transfers to a young company or project. Let’s take a closer look at what a business angel is in general, what a business angel means for startups, to whom, and under what conditions it helps. So, angel investors are wealthy people who personally (not through their companies) finance projects and start-ups and often look for the possibility of higher profits, albeit at the expense of riskier investments.