For people who are not so savvy when it comes to early-stage investments in the startup ecosystem, let’s take a look at the difference between angel investors and venture capitalists.
Once we have successfully outlined and explained the subtle differences between these two startup investors, we will then provide examples and details on how to get access to both the angel investors and the venture capitalist.
What are angel investors?
We get into angel investors and angel investing in-depth in our previous article on the subject, but for the sake of clarity and direction in this article, we will outline what angel investors are.
Angel investors are early-stage investors with a focus on the startup ecosystem. They generally look to partake in startup projects, which they believe can provide them with a higher return on investment than traditional investments such as a blue-chip company in which the volatility and ROR on the underlying instrument can be rather mute.
Due to the higher risk associated with startup investments at such an early stage, angel investors will usually look for a significant equity stake in the company and aim for a 25 – 50 percent return within the stages on exit.
A typical angel investor is an individual who utilizes his funds/ savings to fund the startup and may or may not co-vest with other angels.
What is a venture capitalist?
A venture capitalist is a person or company which looks to benefit from the growth of an early-stage company, generally via equity investment. While angel investors can typically get involved at the ideation stage, the vast majority of VC’s will only consider a company that is just about to enter or has entered its growth stage.
A venture capital fund can consist of multiple investors who will maintain the level of investor, limited partner or general partner. As such, there will be an investment committee that will make the ultimate decision on which companies will attain investment.
What are the differences between angel investors and venture capitalists?
The three areas where angels and venture capitalists differentiate the most are as follows;
· Funding - Angel investors use their funds, while venture capitalists use funds that have been raised by a pool of investors. Usually, these are accredited, investors.
· Due diligence – while both investor types will generally perform due diligence checks on an entity. Angel investors sometimes do not complete an in-depth check on the startup. I am not to saying that they all do not perform due diligence, but some do not perform the required level. Venture Capitalists, on the other hand, will have an in-depth due diligence package that must be completed by all startups before any formal investment takes place.
· Stage – Angel investors tend to get involved in the nascent stages up to pre-seed and seed, while Venture Capitalists will typically look to invest in growth stages. That is not to say that some venture capitalists will not come in very early.
Where to find Angel Investment:
We have delved into this in the article, which covers Angel investing, but let’s look at them again here.
· Deck Sender – Deck sender is a unique new platform that allows its users to place their pitch deck in front of VC’s, incubators, Accelerators, and Angel Investors. While new, the platform works seamlessly and is worth utilizing.
· AngelList – I have to say, Angelist is not my favorite at all. I find it lacks many features which could enhance usability for the founder. On the other hand, the platfrom used by a vast number of VC’s and Angel Investors.
· Microventures – this is a Texan based platform equity crowdfunding platform, as such, the platform limited to US-based startups, but it does provide access to angels / accredited investors
· Angels Den Funding – This is a London based equity funding platform that is led by angel investors. All startups which would like to go in front of their pool of angels must progress through a vetting process.
· WeFunder – We funder is a little different from other platforms for angel investment because it allows retail investor (nonaccredited) investors to invest as smaller amounts in projects. Wefunder is also a US platform.
Please note, we are compiling a comprehensive list of platforms from across the globe, and once completed, we will link it here.
Where to find Venture Capital
Venture Capital insights and access is available on several platforms. Unfortunately, access to many of these platforms maintains high price ranges due to the depth of data and analysis features that are available. However, acquiring trial periods will give you some time to check out the latest funding rounds by VC’s and create preliminary lists that will provide you with segments and stage filtered hit list.
I will also bring your attention to some facts about VC’s and approaching them.
1. Do not expect an answer straight away.
2. The majority will not even confirm receipt of your deck, executive summary
3. Make sure all your documents are ready for when they do come back.
4. They like warm approaches – try to get a direct intro.
So, let’s get down to where to find venture capital, the following platforms will give you access to VC’s
· Deck Sender – they have direct access to many VC, though it would seem it is more European VC’s at present. Give them a shot; it is free atm.
· CBS insights – they provide insights into deal flow, which will show you where VC's are placing their bets.
· Prequin – another highly analytical platform
· Linkedin – yep many Venture Capitalists on the platform, try interacting with threads they are involved in, and, thereafter, send a connection request.