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When your business is ready for that next round of funding, you might start looking for angel investors or venture capitalists to help finance your growth. However, the terms are not synonymous – even though they both contribute to your business funding, their motivations and roles are often very different. Here are a few of the main differences:

  • Pay Schedule
    Venture capitalists (VCs) work for a group of professional investors who all contribute a portion of money to fund many projects. VCs will get paid a salary out of those contributions, regardless of how well their investment with your company does. Of course, they want your company to succeed but their own personal financial health is not jeopardized by your failures. Angel investors, on the other hand, put in only their own money.
  • Emotional Investment
    Because VCs invest other people’s money (or at least mostly others’ money) they often have less emotional attachment to your business and its mission. Most of them contribute less than 5 percent to the total funds. They are often oriented more toward the development of profit than your vision of the company. Angels, however, are making a much riskier investment because they have contributed 100% of the funding and therefore usually have great buy-in to your message and become emotionally charged about successes and failures.
  • Working Relationship
    VCs and angel investors may handle their relationship with your business differently. Angels tend to be more hands-on since they have a higher stake at risk, and venture capital investors can often take a more back-seat approach. This is not always the case though. Your working relationship with either type of investor will depend on how vested they are in your cause, and how well (or poorly) they think you are already doing.

When deciding whether to solicit business funding from venture capital or angel investors, it pays to know the diversity of their motivations and how their partnership will affect your style.


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources