Difference Between an Angel Investor and Venture Capitalist

I have always interpreted VC as Vice Chancellor. Today I heard another interpretation of the abbreviation, Venture Capitalist. I laughed at the thought of finding myself in at cross purpose in a business talk.

In our previous post on how to raise funds for a startup business, we both angel investors and venture capitalists were mentioned as a way through which a startup can get funding. Today, let’s look at what sets them apart.

Angels Vs Venture Capitalist

Angel investor is someone who puts their own finance into the growth of a small business at an early stage, also potentially contributing their advice and business experience.

Venture capitalist on the other side, is  invested by firms or companies that use other people’s money. They raise that money by offering investors a chance to take part in a fund that is then used to buy shares in a private company.

The Heart of The Matter

When we bypass the meanings of the two terms and look deeply into each of the categories, this is what we find.

  1. Angel investor is normally an individual investor while Venture Capitalist funding is done by a company or business.
  2. Angel investors might be willing to invest as the startup sets off; Venture capitalists on the other side don’t easily invest in startups unless they see an exponential growth potential.
  3. When it comes to the amounts given, angel investors happen to give little amounts severally including seed money. Venture capitalists on the other hand, give a large sum of money for equity in the business.
  4. Angel investors don’t fear to get ‘dirty’.They involve themselves in the startup as if their own. Venture capitalists don’t involve themselves with the daily operations of the startup. They only invest financially.
  5. When it comes to decision making, angel investors are quick to make decisions because most are personal. For venture capitalists, it takes time as all key stakeholders have to be consulted.
  6. The motivation of VCs is to find good startups and make them better so they earn more money. For angel investors, they look to grow less experienced business to become better.

These are some of the key differences. I hope you have learnt something like I have. Have a great weekend!

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Amanullah is not your average writer, he understands concepts and turns ideas into words. He is a fan of characters and likes to play with letters in the alphabet.

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