How do Angel investors and Venture investors differ?

Venture Capitalists take a healthy stake in the equity in addition to a healthy interest rate on the funds loaned. Angel investors are often people who have succeeded enough in life already and can afford to turn their attention to helping others so they fund a project if they believe in it and just expect a normal rate of return without a stake in the equity.

in general, vc's have a clear investment criteria and are looking to invest a minimum amount of money for a percentage of the company, so there might be many instances where good ideas are not funded by vc's because they do not meet those requirements. angels tend to invest smaller amounts at an earlier stage and are willing to take more of a risk because of that. angels normally are either individual investors or part of a small group of investors that are looking to find and fund good early stage ideas before they go to big vc funds...

Hi,

we are Atlanta,Georgia based company and what to have a captive call center offshore for that venture we are looking for a VC...Any recommendation and suggestion will be highly appreciated

The Small Business Administration estimates about 250,000 angels active in the country, collectively funding about 30,000 small companies each year. Invested amounts typically range from $150,000 to $1.5 million.

But if angel investors have so much capital to invest, why not become a limited partner in a Venture Fund? Well, many do. But as LPs, they will not have direct control of the investment decisions, and they may want to invest in early stage companies that their VC fund will not. Sometimes angels help the transition from the self-funded stage to the point where a business can raise venture funding at a better valuation. Also, many angel investors are part of a consortium of like-minded investors, and share common investment goals, a common background or experience, or even ethnicity.

Fun Fact: Angel investing was first coined in the early 1900's to describe the wealthy businessmen who invested in Broadway productions to get them off the ground. (More information on Angel investors here http://www.smallbusinessnotes.com/financing/angelinvestors.html)

-From http://ca.linkedin.com/in/alextveit

Angel investors are typically investing between $10k to $5M (usually their own funds). These are typically accredited investors who have either accumulated wealth through their careers, or through being an entrepreneur them self, and is now looking to give back. A lot of them would like to continue being in the "entrepreneur game", and therefore love following your business, often acting as a mentor. Don't get me wrong, you still need to have a sound business/idea, and have a proper presentation (incl business plan), but in the case with angels, though ROI is a big factor, it is not the only factor.

VC's on the other hand, usually raise funds from a pool of funds from pension/hedge funds, and are generally looking to invest $300k to $5M. That isn't to say they wont to smaller deals, but they are generally looking for a much bigger return on their money. Money and ROI is definitely their focus, and therefore your business/idea must run a very tight ship to be able to secure funding from them. VC's have definitely tightened up since the 2008 recession.

However, the above being said, you will also have angels acting more like VC's, and VC's that are funding very early stage startups, much like angels. There isn't a hard line between the two, but more of a floating scale.

I have attached a few links that will probably be helpful as well. Y-Combinator and Techstars are incubators that help startups through finding funding, as well as give advice/mentorship. Mixergy has excellent interviews with VC's, other startups, and is generally an excellent source of information for startups.

Good luck!
Links:
http://www.ycombinator.com
http://www.techstars.org
http://www.mixergy.com

Angels differ from VCs in several respects:

a) size of deal: angels typically do deals anywhere between 0-500K USD, with the average being between 3K-50K (source: Angelsoft); VCs get involved with the co. at a later stage and typically invest more than a million

b) timing of deal: angels get in first, at 'seed' stage while VCs get in later on (rounds A, B and so on)

c) involvement: some Angels are 'passive': they do not get involved with the daily running of the co.; VCs will always request a BoD member seat from the co., if not to install their own CEO

d) capital under management: VCs run 'funds', typical tier A VC funds have several hundred millions, funds being attracted from 'limited partners' - pension funds, university endownments, etc; angels invest their own money, typically they do not have as much money available for investments as VCs have; however, some angels are very very high-net worth individuals who could easily fund companies solely on their own.

Don't miss www.adwebix.com, an online service that connects Startups and Entrepreneurs with Angel Investors and VCs.

Members can create profiles, post funding request ads and contact other members. It's currently free and very easy to use. Members are: Entrepreneurs, VCs, Angel Investors, Startups, Established companies, professionals, advisers and supporters...The service was just launched and we have a promotion, the first 100 accounts being created in each category are free for life.

Go have a look!

Best regards,
the adwebix team.

This is quite an important question and should be considered by every startup that wishes to obtain outside financing. While all investors want an extraordinary return, Angel and Venture investors have some differences that it is best for a startup to understand.

Most Venture investors obtain their funds from large outside institutions such as pension funds, endowments and wealthy investors and have to provide such investors a strong rate of return. There are also venture firms funded by large corporations such as Intel who may focus on firms that meet a strategic need. Often Venture firms will focus on certain areas of technology, life sciences or Internet, however others will make general investments in all areas including consumer products. Generally minimum investments will vary by firm but are seldom less than $1 million and often quite a bit higher. The venture investor may wish to join the board of directors of the company and be quite active in management. Other venture investors that did not "lead" the round many follow and be more passive investors or have board observer rights. Venture firms may also specialize in round of investment, for example many may do seed or Series A rounds while others may prefer later rounds and after certain commerical criteria (such as minimum revenues or cash flows) have been met. Figuring out what specialization a firm has is important for the startup to maximize his/her chances of seeing a firm that is a match for their funding need.

It should be noted that large venture firms will see up to 1000 business plans per month and invest in only about one to two per month (including later rounds for existing portfolio companies), so entrepreneurs must be patient in following this channel. Most investments are made to startups with a mature team and compelling business idea. It is strongly recommended that any approach to a venture capital firm be coordinated by a person that the VC knows, such as a lawyer, who can speak about your firm and idea to them. Otherwise your plan is just one of the 1000 that are mailed in each month and won't get much individual attention.

Because there are thousands of Angel investors, it is much harder to generalize about them. Some form into groups, such as in Silicon Valley the Band of Angels, Sand Hill Angels or Angels Forum. Others invest as individuals. A typical Angel investor may offer from $50 to $75K, so any funding round may need to aggregate a number of them can take time. Angel investors are typically the first investors in a firm outside of friends and family. As the first in, Angels are quite concerned with the valuation of the company (i.e. how much of it they own) and whether or not the company will require VC rounds later and how likely this will be. Like the VC, they are quite concerned with the maturity of the management team and may or may not wish a board seat. Approaches to Angel investors should be by introduction, or application to the various Angel groups using their standard procedure. These groups may have screening committees and only allow those that pass to actually make a group presentation. I find that many firms I meet in Silicon Valley have attracted low amounts of Angel funding, but seldom enough to meet their objectives.

If you are a startup without experience in fundraising, I urge you to consult with more experienced persons who can include your lawyer, financial consultant or banker. They can often help you fine tune your business plan and make initial introductions to VC's and Angels. Plan on spending many months in your search for funds; it is a statistical thing. With so many startup firms and competition for attention of each investment firm, it will take you a while to get noticed and fine tune your presentation to make it compelling to an investor. I have known firms to make 30 to 50 presentations before hitting.