How Do Angel Investors Differ From Venture Capitalists?

How Do Angel Investors Differ From Venture Capitalists?
25 Feb

For millions of potential investors, they really do not understand how venture capital investing differs from angel investing. It’s not hard to see why there is so much confusion as these two are quite similar in many aspects. Both sets of investors invest money but the way in which they invest can differ slightly. It’s quite important to know how they differ from one another, especially if you want to look into these investment options. Read on to find out a little more about how angel investors and venture capitalists differ.

What Is An Angel Investor And What Is A Venture Capitalist?

Usually, someone who wants to look into angel investing will have an extremely high net work of over one million dollars or considerably more. However, individuals do not include the value of their properties in their net worth and those with a high income of over two hundred thousand a year can also become an angel investor. A venture capitalist however is usually partnerships, a business really and the role of the general partner is to source important or good investment opportunities. These types of investors will look for the best possible returns on their investment.

How Much Do You Have To Invest?

The size of the investment for both these groups can vary considerably. Angel investors can choose to invest anything between five thousand and one hundred thousand dollars plus. For a venture capitalist investing money, they can usually invest millions of dollars at any one time. While most investment amounts vary, venture capitalists can choose to invest millions and the returns can be unprecedented. There are massive differences when it comes to angel investors and venture capital investors especially in terms of the size of the investment and the returns too.

Do You Have To Research Potential Investments?

To be honest, any investment must be thoroughly researched before any money is parted with. It doesn’t matter whether you want to invest a few hundred or a few million, due diligence is required so that no-one is scammed or lose money through sheer ill-researched advice. Angel investing is mostly done locally, such as someone turning to their friends or family to get their initial project off the ground and while these types of investments don’t require a huge sum of research, it’s still necessary. Some venture capitalists spend thousands to research investments so that you don’t lose huge sums on their investment.

Returns and Investment Decisions

For most venture capitalist investing, they have considerably less risk than angel investors as they hold off in investing until the initial stages of a project is over. Also, the returns they get can be anything up to ten times their original investment over the course of five or six years which is tremendous. However, the amount of money someone can get back can truly vary. Most investments don’t last any longer than ten years so it’s quite a long-term investment for most venture capitalists. Angel investors usually opt for a five year investment.

Choosing the Wise Investment

It’s hard to know which investing route to take but there are considerable differences between venture capitalists and angel investing. You might think there aren’t many things to be wary of but they are quite different in many areas. It’s vital to know about these so that you don’t rush into a decision and make a terrible mistake. Venture capital may look appealing but it has to look for you personally, so too angel investing.

Check out this link for more informations:

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS
« »