Angel investing and venture capital investing share a common goal of financing and supporting startups and early-stage businesses. But these two forms of investing also have a number of important differences. These include:
1. Investment size
Angel investors typically invest smaller amounts of money, ranging from a few thousand dollars to a few hundred thousand dollars. Venture capitalists invest larger amounts, sometimes in the millions of dollars.
2. Stage of investment
Angel investors usually invest in the earliest stages of a business, often providing seed capital to help get the business off the ground. Venture capitalists, on the other hand, typically invest in later stages, after the business has an established track record of revenues and growth.
3. Level of involvement
Angel investors often take a more hands-on approach to investing, providing guidance and mentorship to the startup in addition to capital. Venture capitalists may also provide guidance, but they often have a more passive approach to investing.
4. Return expectations
Angel investors typically expect a higher return on their investment compared to venture capitalists, due to the heightened risks of investing at the earlier stages of a business. That’s not to say that venture capitalists don’t expect a high return on their investment…because they definitely will!
5. Portfolio diversification
Angel investors may have smaller portfolios and invest in a smaller number of businesses, while venture capitalists often have larger portfolios and invest in many startups to diversify their risk.
6. Exit strategy
Angel investors are often more flexible in their exit strategies, such as selling their stake to a strategic buyer or taking part in a merger or acquisition. Venture capitalists, on the other hand, often push for an initial public offering, or a sale to a larger company in order to realise a return on their investment.
Overall, angel investing and venture capital investing each have their own unique characteristics. If you are a startup founder, choosing the right type of investor depends on the stage of your startup, the amount of funding needed, and whether the specific investor’s goals and preferences align with yours.
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