What’s the difference between a VC and an Angel Investor?

Angel Investors and Venture Capitalists are often interested in the same projected success of the company, but there are some differences between the two.

Here are the basic definitions of each term:

Angel Investor: An angel investor an individual with a net of $1 million or more (excluding their personal residence), or who has an income of $200,000 per year (or $300,000 for a married couple). They differ from close friends or family investors as these individuals don’t have a personal connection and choosing to invest in YOUR COMPANY rather than YOU.

Venture Capitalist: A venture capitalist is usually formed through Limited Partnerships where limited partners invest in the venture capital fund. The fund manager then invests in the best deals which will lead to the highest return for the limited partners.

Other notable differences:

  • Angel investors generally invest lower amounts ranging from $25K-$100K in a business while the average Venture Capitalist invests about $7 million.
  • Angel investors are more likely to invest in the earlier stage of development
  • Venture capitalists will generally spend more time researching investment prospects
  • Angel investors typically don’t consult anybody for decision-making while a venture capitalist will rely on a committee to help navigate decisions

Are you trying to attract investors to your business? If so, you’ll definitely want to be sure that the framework of your business is sturdy and you have organized your goals and expectations. Obtaining funding requires a certain level of organization in order to reach the best investors (no matter which type you choose to go with!).

LawTrades can connect you with a seasoned business attorney that can help you understand more about investors and ready your business for the investment phase. We offer complete project management from start to finish, affordable rates, and flexible payment solutions. Get in touch for a free consultation.