Difference Between Angel Investor vs Venture Capital
Angel Investors deals with one man, who invests from his personal finances and has a positive belief in the idea of the Business. An Angel investor does the funding for the startups which has huge potential in the Future. Venture capital follows the same concept but the capital is contributed by a group of partners who are professional investors. Primarily they are a group of businessmen and are funded by a group of investors, corporate funds, and pension funds.
Let us study much more about Angel Investor vs Venture Capital in detail:
- In the case of small businesses or startups funding is the primary aspect and due to which the business can progress and take the shape of a Business group. Seed financing or the primary capital is always required which can transform the Entrepreneur’s idea into reality. Thus, seed funding is an absolute necessity and required which would provide thrust to any business. The primary stage of Business is almost nascent and the generation of revenue seems to be nil. The basic Research & Development period or the product manufacturing or the business setup period is an inherent part of a business and is known as break-even. The break-even part can also be classified into a few stages which indicate the viability of the business and indicates if it would likely sustain or not?
- Thus, at the seed funding stage, the Business requires assurance of capital, and most of the time the Banks do not provide loans to a new generation of ideas. So it’s always not possible to gather funds until and unless a group or individual investors step into the scenario. Those classes of investors could be classified as Angel Investor vs Venture Capital investors. The types of business are generally new to the economy and bear some amount of systematic risk within it.
- Agile investors are High Net-worth influential individuals who have the ability to contribute something innovative to society and can bear the risk of failure. These individuals are directly or indirectly involved with the business in lieu of a substantial amount of stake in the company.
- On the other hand, Venture capital is also known as Limited Liability Partners. They associate with the company from its primitive stage and are responsible to mentor the course of business. They connect the dots and supply the required resources and they watch if the business is occurring in a healthy and systematic manner or not. The primary concern is that the business idea has to be executed in a manner that should fulfill all the regulations of the business.
- Angel investors may or may not involve in each and every aspect of the Business. Primarily the Angel investor provides financial and Contacts only, he might not provide the technical support. Thus the level of involvement is limited to the sweet will of both parties. Whereas the Venture capital, once they are convinced with the idea and the product, provides all the resources right from marketing to the product development or the Human Resource support to the team who are conducting the Business.
- The involvement of Angel investors deals with early-stage funding, late-stage technology development, and early market product launch. But the Venture capitalists invest in early-stage businesses, more developed companies with respect to products and technology as per the motive of the venture capital firm.
Head to Head Comparison Between Angel Investor vs Venture Capital (Infographics)
Below is the Top 5 difference between Angel Investor vs Venture Capital
Key Differences between Angel Investor vs Venture Capital
Both Angel Investor vs Venture Capital are popular choices in the market; let us discuss some of the major differences:
- The primary difference between Angel Investor vs Venture Capital is the number of people associated with the business. In the case of an Angel Investor, there is only one person whereas the angel investor deals with an entire group who are experts in executing new business.
- Responsibility and due diligence are limited for Angel Investor, unlike Venture capital.
- The risk associated with the Business funded by Angel investors is generally high in comparison to Venture capital.
Angel Investor vs Venture Capital Comparison Table
The primary comparisons between Angel Investor vs Venture Capital are discussed below
| The basis of Comparison |
Angel Investor |
Venture Capital |
| Meaning | An Angel investor is a wealthy individual who is capable of taking a substantial risk of funding a business for the sake of higher profit if he/she hits the right product. | Venture capital is a group of individuals who invest in a business and guides it with all required resources so as to set an innovative business that could generate high profitability for society and high ROI. |
| Equity | A part of the stake is offered to the individual, who is funding the project. | Equity is also involved in the case of venture capital other than providing a platform in each stage. |
| Responsibility | An angel investor generally provides monetary assistance and contacts to the team who came up with an innovative idea. | The group is responsible for all courses of action right from supplying all sorts of resources to the team. |
| Risk | High risk is involved in this case as the individual is not capable to look after the business in each and every course. He is only involved in funding and providing contacts. The execution team and the Angel investors must have a list of activities regarding the responsibility of each party. | Generally, all the chain of activities and the course of action which need to be taken at each stage are should be well guided by the group. The resources, the marketing, and sales contact along with backup plans should be provided by the group in a systematic manner. As all the course of actions is done in a pre-decided procedure the risk associated with it is comparatively less. |
| Due Diligence | The due diligence is not guaranteed from an Angel Investor apart from funding the business and supporting in particular cases. | Incomparable to angel investors the Venture firms do due diligence as they follow a predetermined procedure. |
Conclusion
Both Angel Investor vs Venture Capital is equally necessary in case of new business opportunities due to the lack of funding done by a Bank or other financial institutions. In most cases, the banks or financial institutions do not pay any heed in the case of new generation business. Thus, the evolution of new generation businesses is possible by means of Angel Investor vs Venture Capital.
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