Angel Investors are generally interested in the very early stages of company formation. They are willing to invest money to help get ideas off the ground and/or bridge the gap in start-up financing between “friends and family” who provide seed funding and formal venture capital. Investment amounts can range from a few thousand dollars to a few million. Although Angel Investors make seek to offer advice or support to the business, they do not necessarily require any control over operations or a seat on the board of directors. Angel investments bear an extremely high risk, so they will often require a very high rate of return. However, an investment agreement is often reached without extensive investigation.
A Venture Capitalist is usually an entity that pools the funds of several investors to invest in growth companies. Venture Capitalists typically get involved in a start-up once an idea has been proven. They tend to invest at least $3 million and look for a large potential market and a unique product or service with a strong competitive advantage. They also look for opportunities in industries that they are familiar with, and the chance to own a large percentage of the company so that they can influence its direction. Before making a decision, Venture Capitalists will engage in exhaustive examination and analysis of the company and conduct multiple meetings with company executives. Once an investment agreement is reached, the Venture Capitalist will likely hold a seat on the company’s board of directors.
