There are many kinds of investment opportunities available for businesses and investors. Two popular options are angel investors and venture capitalists. To discover which option is best for a particular situation, it helps to understand what makes the two different. A working definition of the two is the right starting place.

What is an Angel Investor?

An angel investor is a wealthy individual investor who invests in a promising startup company for a stake in the business. They act as a silent partner.

What is a Venture Capitalist?

A venture capitalist is a person or group of people who invest money in a business or startup and take an active role in the company, seeking to guide and assist the business to be successful.

Because of the inherent differences in an angel investor and a venture capitalist, it is critical to understand the underlying issues that set them apart. Below are six differences to consider.

  1. Venture capitalists invest considerably more money into businesses than angel investors. The average investment for an angel is between $25,000 and $100,000, while venture capitalists may pour millions of dollars into a company.
  2. Angels typically invest in startups only, while venture capitalists will invest in a business at many stages of their journey.
  3. Venture capitalists spend considerable time investigating the businesses that they are willing to invest in. Often, angel investors will not do as much due diligence.
  4. It is easier to pitch and receive funds from an angel investor than a venture capitalist. The reason may be associated with the issue of due diligence and the amount of funds at stake.
  5. Angel investors usually invest their own money. Venture capitalists, on the other hand, as they say, like to use OPM — other people’s money to finance the project.
  6. Angel investors may invest in a business because they like the concept or want to promote a particular type of business based on personal reasons. Venture capitalists are always looking for profit.

The amount of money needed, the stage of the business, the potential profitability of the business model, and the other factors mentioned above will help determine whether an angel investor or venture capitalist investor will better suit the business.