What is the difference between a VC and an Angel?


7

What is the difference between a VC and an Angel?

Venture Capital Definitions Angel

asked Oct 14 '09 at 14:37
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Jason
152 points
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4 Answers


11

A rough bulleted summary of each:

A typical Angel:

  • Investing their own money
  • Smaller amounts of money $25K, $50K, maybe as high as $500K
  • Early stage / seed stage
  • Usually business person or retired business person, successful in their own right
  • Want to get a return, but it is more like a hobby
  • Want to help you build a successful business and help and ride along with you
Summary : A smart, successful business man with an expensive hobby.

A typical VC:

  • Investing other people's money via an investment fund
  • Larger amounts of money. $2M, $4M, $10M, and on up
  • Not usually seed money, parts of business have been proven in some way
  • Looking only for home runs. Need to see a path to 10X+ return on cash
  • Need to see path to business growing to $100M+ in enterprise value
  • Very concerned about exits and time frames to exits based on how the fund is structured
  • Has better clothes and hair (homage to Neil's answer)
Summary : A banker, managing an investment fund that invests in private companies.
answered Nov 25 '09 at 04:14
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Tall Jeff
1,406 points

10

VCs tend to invest other people's money (and more of it at any one time), but angels invest their own. Also, they have different motivations and different profiles. Angels aren't just in it for the money - they tend to want to be part of something successful, feel the thrill of being back in the game and have bragging rights with their mates (my investment is bigger than yours). Angels tend to be successful businessmen / entrepreneurs, but VCs have better hair.

answered Oct 14 '09 at 16:03
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Neil Davidson
1,839 points
  • Nice answer Neil. The last sentence of your answer is LOL funny at several levels. – Tall Jeff 9 years ago

1

VCs are professional investors, investing other peoples funds, expecting specific returns on their investment. Angels are private people with lots of money that believe in investing in small young companies.

The fact that VCs are professional means that they will add different elements to the term sheet (the contract under which they invest) that will not be in your favor, but they will have industry contacts that are very valuable, and raising money from them adds to your credibility, since they are trusted to invest only in things they believe will do exceptionally well.

If you need a seed stage investment (less then $1M) then an angel is what you need. VCs cannot invest small sums because they need to invest their funds in a limited number of companies (they don't have the manpower to handle many different investments). If your company is large enough to warrant a larger investment, and the growth potential is substantial, then you can give VCs a shot. Prepare well for the meeting, since they won't give you a second shot at it.

answered Oct 14 '09 at 16:52
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Ron Ga
2,181 points

1

Money has little to do with the difference. The biggest difference is attitude. An Angel is going to open up their roldex for you. A VC is not.

For the difference here:
Angel vs VC Good Luck,

Mark

answered Nov 24 '09 at 12:23
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Ideareview
61 points
  • Are you sure about that? I don;t see why a VC would limit information or help. – Tim J 9 years ago
  • Yes I am sure. Angels live by the motto: do some good, make some money, have some fun. This is more about help than anything else. A VC's job is to deploy cash and get the ROI. I have seen many instances where VC's come in, change management in order to get their return. You don't have to take my word for it, contact a local angel group and ask them how they feel about VC's. - Mark – Ideareview 9 years ago
  • +1 on the comment more than the answer, but, I think it is very important to pick VCs that you can work with, not just someone that offers money. The first one, from what I understand, is most important, as you are creating a relationship that may impact other VCs. A good VC should be willing to help with advice and doors, as it is in their benefit to have a successful business. If you give them the power to change management then you are in trouble, you should maintain control. – James Black 9 years ago
  • @ideareview. I am pretty sure you are wrong. VCs will do what they can to help their investment succeed. It sounds like you have a very limited experience with both and it is limiting your view of the world. I don't see how you c an make such a broad generalization. Of course you are right about some instances of VCs screwing up companies, but from my understanding there are plenty of counter-examples. – Tim J 9 years ago
  • Actually, in the link you provide the study authors state that they assume angels have LESS value to add and VCs have more. I don't buy ANY of the assumptions in that document, but your reference actually contradicts your opinions. – Tim J 9 years ago
  • link's broken. please revise. – Ron M. 7 years ago

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