We’ve all heard about the importance of having a million-dollar idea. That brilliant business idea will completely turn your life around once it gets off the ground. And while ideas are priceless in our modern society, and the secret behind most millionaires in the modern world. Sometimes… those million-dollar ideas also need a million dollar backing them.
Getting any idea off the ground requires funds, and having a great doesn’t necessarily mean you have the budget for it. That’s why most starting businesses need investors to help get it started. And while this is a common practice that doesn’t change the fact that it can be confusing. If you are new to the idea of investing then all the options are going to confuse you. Thankfully we are here to help, by taking a look at two of the most common types of investors you’ll find. Today we’ll compare Angel Investors vs Venture Capitalists so you can know for sure which profile fits your company better.
What do these investors offer?
In broad terms Angel Investors and Venture Capitalists will largely offer the same for your company, that is to say, budget. Both of these groups count with investors that are willing to offer money to good ideas. Of course, this doesn’t come for free. There are conditions in place for anybody who receives a private fund, but the most common request is for an equity share. In short, the people funding your ideas will own part of the resulting company. This is perfectly normal and both kinds of investors will demand equity from you. So don’t feel surprised by this demand, just make sure that the amount they ask for is fair.
On top of that, both Angels and Capitalists bring more to the table than just their funds. They have access to large support networks and countless connections. Since their money will be on the line they’ll also pull their influences to ensure the success of your company. And often this is more valuable than the money itself.
So what are the practical differences then?
The most important difference lies in the investment life-cycle. Angel Investors are individuals who for the most part are actively looking for good ideas that can grow in scope. As such they tend to invest in the early stages. Venture Capitalists on the other hand manage a fund, which means solid results are more important. This means that Capitalists invest in established businesses that are expected to see growth, to reduce the risks.
Venture Capitalists also tend to invest more, but this usually comes with the demand of a seat on the board or a similar position. In general, you could say that Venture Capitalists are more driven by results. They want to see earnings that make up for their investment, and as such are more involved. While Angel Investors tend to value the ideas above the rest, and as such are willing to risk more and take a mentoring attitude towards your business.…