TLDR

  • VC - Venture capital is private equity financing that investors provide to startups companies and small businesses.
  • VCs - Venture capitalists (VCs) are individuals or firms who manage a pool of money in a professionally-managed fund to invest in companies.
  • Angel - Angel investors are individual investors who use their own money to invest in startups and small businesses in return for an equity stake.

Venture capital (VC)

Venture capital (VC) is used to describe a form of private equity financing that investors provide to startups companies and small businesses that exhibit high growth potential and are thus thought to offer a strong return on investment (ROI). This capital is provided in exchange for an equity stake in the company or convertible debt.

Venture capitalists (VCs)

Venture capitalists (VCs) can be either an individual or a firm who manages a pool of money (venture capital) in a professionally-managed fund. Typically, VCs do not use their own money to invest in companies, instead pooling money into a fund from investment companies, large corporations and/or pension funds. Through this fund, VCs provide venture capital to startup companies and small businesses. These businesses tend to be relatively established, therefore helping the VC reduce their risk of losing investments. VCs also invest larger amounts than Angels, with investments starting from $1million and an average ticket size (amount invested) being $9.9 million.

Angel

An Angel or, more formally, an Angel investor, is an individual investor who uses their own money to invest in startups and small businesses in return for an equity stake. Though not all are, many Angels are accredited which requires them to have a minimum net worth of $1 million and an annual income of at least $200,000. Angel investors are more likely to invest in businesses that are just starting out, choosing businesses they are interested and see potential in. As a result, angels normally assume greater risk compared to VCs. Angels invest smaller amounts than a VC, with investments typically ranging between $10,000-$100,000. When a number of angels pool capital together to invest their money, this is called an Angel syndicate.


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