So you’re looking into options to fund your business but you seem to have a hit a block when it comes to choosing between Angel Investors and venture capitalist and understandably so. The 2 seem to be doing more or less the same thing with Angels rising to more prominence within the last 10 or so years. But there are a couple of intricate differentiators between the 2 that hold the key to making your choice.
Processes
Due diligence when funding a business is important and both Angels and venture capitalists do take this seriously. The processes are however longer with a Venture capitalist due to their business model, pegged on taking higher risk. What this means is that it takes more time to evaluate these risks as compared to Angel investors who on most occasions are unwilling to take large risks hence less evaluation time.
Board Seats
A venture capitalist will on most occasion require a board seat and also the formation of a board in order to have a bigger say in business direction as compared to Angels who due to their more minimal investment into the business do not need a board seat and are usually aware of the risk and are willing to bet on it so to speak.
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Funding the idea vs Funding the company
Angel investors typically go for funding ideas and not the companies building the product. What this means is, Angel investors will invest much less than a venture capitalist and you would have to find another investor to fund the company building the product. For example, if you are working on a cosmetics brand, Angels, due to them not managing large capital pools, will seek to invest in the product but not in the plant developing the product.
All in all, your decision should be dictated by the needs of your company and the bigger picture you have for the company. Do you need a business unit to come in and help with managing things or are you capable of doing that yourself? Are you willing to give up board seats? Put down all the questions the venture dictates and answer the truthfully and voila, your decision will be much easier to make based on the traits of each option.
YOU CAN ENJOY A QUICK READ OF OUR GUIDES ON VENTURE CAPITAL AND ANGEL INVESTORS BEFORE YOU GET BACK TO WORK 😉