Venture Capitalists vs. Angel Investors

New or expanding businesses usually need to find a source of funding if they want to grow and succeed. New companies with a limited history may be too small to raise funds in public markets and too new to get bank loans. Thus, for these businesses, the two most common means of receiving substantial amounts of money would be through the equity financing provided by venture capitalists and angel investors.

A venture capitalist is a person or company that invests in a new or unproven business enterprise. These professional investors usually do not have practical business experience in the industry of the companies in which they invest. They usually invest over $1,000,000. They aim to take back what they invest with a higher return percentage than that of other investments.

An angel investor provides venture capital funds for small start-ups or entrepreneurs. Like venture capitalists, angel investors seek to make a solid return on their investments. The difference is that angel investors focus on working with smaller companies that are just beginning. Thus, they do not invest huge amounts in the millions. They usually provide from $25,000 to $500,000. Angel investors often have a background in business and want to have a say in the way the company is managed. They usually look for a personal opportunity.

If your company needs financial backing and you are trying to get the attention of a venture capitalist or angel investor, consider:

• The amount of money your business really needs
• The accuracy of your business plan
• The allocation of future given funds
• The financial option that would best meet your needs