How Venture Capitalists Differ From Angel Investors

A former attorney, Graham R. Taylor works as a reputable advisor and investor in international corporations. The principal of international business consulting firm, Marquis Advisory, LLC, Graham R. Taylor and his team advise clients on everything from crowdfunding opportunities to venture capital and angel investing.

Both angel investors and venture capitalists (VCs) play an essential role in helping startups find the capital they need for growth and success. However, these investors are not the same and have different expectations when it comes to return on investment (ROI), the amount of capital invested, and the timing of the investment.

Angel investors are high net worth individuals who primarily invest during the formation of a startup company. The money invested by such individuals is the angel investor’s funds and is given to a business in exchange for equity or convertible debt. On average, angel investors provide around $330,000 to startup companies, according to Patriot Software, but the size of their investment can range far below that to under $25,000. Larger investments may also be made by angel investors, particularly when it comes to investments from angel groups.

Meanwhile, venture capitalists are people or firms that use money from a pooled investment company or large pension fund to support startups. VCs generally do not invest their own money into such companies and, on average, invest $11.7 million in business. This larger average investment also comes with a higher expected ROI. While angel investors may only expect returns of 20 to 25 percent, VCs look for returns that are 25 to 35 percent. Further, VCs often get involved in companies that are in a later stage and are either ready to be acquired or go public.