Angel Investor v/s Venture Capitalist: Who is Best For You?

Angel Investor v/s Venture Capitalist

You have the best idea. Your execution plan is ready. The team is almost built. Strategies are done. Now, all you have to do is fundraising. For funding, you need investors. But but but here comes the elephant issue. 

With a plethora of choices and financing platforms in the market, startup fundraising could be facilitated. But it’s significant to understand what, when, and how much these choices could help you. Thus, it’s of utmost importance to learn the difference between the 2 gigantic alternatives of startup fundraising. Thus, this article will dive you into the pool in the game of angel investing vs Venture Capitalist. Let’s start unwrapping these terms individually. 

 

Who is an Angel Investor?

Angel Investor is a prosperous and wealthy individual who supports startup founders in the very first stages of their business. They back them financially with their own money and in return, they ask to become either a part-owner or shareholder in the startup. The financial aegis provided by angels is called angel funding, seed investing, or private investing. 

 

Who is a Venture Capitalist? 

Unlike angel funding, the venture capitalist is a significant face of the rigorous group of financial experts and high net worth individuals. They organize a large pool of funds from insurance companies, annuity funds, provident funds, and richie rich people to boost small businesses and startups towards the skies. 

Like angel investors, their ask in return for funding is exactly the same i.e., equity shares or part ownership. 

Let’s understand the difference with details of every nook and corner of angel funding and venture capitalist. 

 

Angel Investing vs Venture Capitalist 

Both angel investors and Venture capitalists invest capital in the businesses. Of course, they hope for the best returns along with some calculated risks. But are they exactly similar? Nope. Thus to help you understand which one is best for your business, it’s important to understand what, when, why, and how much these 2 can provide you with.

 

Why do they invest? 

Firstly, let’s unwrap their WHYs. Angel investors’ sole purpose is to support an idea or cause. Often they are families or friends who are ready to financially back their loved ones’ ideas. Or sometimes, the reason for angel funding is when there is a match of values and goals. 

Whereas, venture capitalists invest to buy the startup in the coming time or to make a long-term high return. 

 

When do they invest? 

No doubt, both of them invest and bore risks. But their time of investment differs. So, the investor you approach differs according to your business stage. 

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Angel investors most likely fund the startups when they need the financial back extensively. That’s why the name is Angel. Because all they see is your idea and talent. Angels invest in startups even before they prove themselves. 

On the other hand, venture capitalists fund the businesses after they set themselves on the ground firmly. They tend to bore fewer risks. 

Thus, if you’re just starting out, grab angel investors. Whereas if you’re looking to expand your startup towards a full-blown brand, go for venture capitalists. 

 

How much do they invest? 

The amount they invest is another crucial difference between angel funding and venture capital.

Venture Capitalists invest way more than angels. If you want the investments of crores, VCs are the go to-go option. Otherwise, angels are the best. 

On the same note, VCs hope for returns of around 30% whereas angels yearn for 20% only. 

 

Bottom Line

The above-mentioned are the most vital differences you must know before approaching any of the investors. Because both are different and their way to help you would also be different. Thus, choose wisely. 

If you want to connect with the best angel investors of India, Lakhani Financial Services is a one-stop solution. With the best and world-class experts, we help you understand your vision better and connect you with the right investor at the right time. 

About the Author

Devansh Lakhani

Devansh Lakhani, the director of Lakhani Financial Services, clasps a rich experience of 5+ years in the finance industry. A Chartered Accountant by qualification, Devansh has expertly handled funds for HNI clients, been part of an IPO on SME platform to tune Rs. 10+ crores, conducted the right issues to tune Rs. 10+ crores, and accomplished block deals of Rs. 35+ crores in the past. Now, with a zeal to boost startups, Devansh's heart and soul lies in Lakhani Financial Services. To date, LFS has helped 85+ startups with advisory, business plan & pitch deck preparation. Devansh is one of the most respected people when we talk about startup funding, advising, and mentoring. With the support of Devansh, 6 startups raise funds to the tune of 4+ crores. He aspires and is on the mission to boost and scale 1000+ startups in the next 5 years.

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