Angel Investors vs Venture Capital
There are basically five differences between angel investors and venture capital investments, also called venture capitalists. These:
1.Investment Amount:
It provides smaller investments to angel investors compared to venture capitalists. In addition, the returns expected from the investment by angel investors and venture capitalists also differ. Namely; While angel investors generally invest between 25,000 and 300,000 USD, this figure can rise to millions of dollars in venture capitalists. As the amount of investment increases, the expectation of return decreases. For example, an angel investor who invests $50,000.00 expects 100% profit from his investment, while this rate drops to 20% as the investment amount increases.
2. Professionalism:
Venture capitalists consider investing as a profession and continue this business on an ongoing basis. Angel investors can be professionals as well as people who invest with an amateur spirit.
3. Source of Investment:
Angel investors provide the investment they set aside for a startup through their own earnings and savings. On the other hand, venture capitalists invest by managing funds brought together by different stakeholders such as pension investments, individuals and companies. Therefore, while angel investors make the investment directly from their own pockets, in venture capital, it is the business of converting the funds collected into investment and executing this process.
4. Management Type:
Venture capitals form a board for each startup they invest in. This board supervises the startup as responsible to the people who provide the capital and can intervene when necessary. In angel investing, the investor, as the partner and mentor of the entrepreneur, will support the entrepreneur in every decision taken by the entrepreneur.
5. Spiritual Expectation:
The majority of those who choose to be angel investors are people who expect not only financial but also moral satisfaction. Therefore, angel investors who want to help a startup and watch that startup grow and institutionalize also want to take an active role in company management. On the other hand, venture capital investors, on the other hand, take a more professional approach as we mentioned above.
As a result, an entrepreneur should consider these differences and decide whether angel investing or venture capital investment is more suitable for them and act accordingly.
You may be interested: What is seed funding? 5 Step For Get
What is Angel Investors?
An angel investor is a high-net-worth investor who usually provides financial support for start-ups or small entrepreneurs. Typically, angel investors are found among an entrepreneur's family and friends. Funds from angel investors can also be a one-time investment to help the company grow quickly, or an ongoing investment to support/move a challenging, early-stage company.
Angel investors are people who want to invest in the early stages of start-ups. Such investments are risky and usually make up a maximum of 10% of the angel investor portfolio. Most angel investors already own a large number of mutual funds and therefore seek higher rates of return than they get from traditional investment opportunities.
Angel investors focus on entrepreneurs taking their first steps rather than potential returns and profits. These features distinguish them from venture capital investors.
What is Venture Capital?
The concept of venture capital is also expressed in different terms such as courage capital and venture capital. Venture capital, which initially emerged in countries where industrialization strategies were adopted, is now defined as an investment finance benefited by entrepreneurs who are creative and dynamic but do not have sufficient financial power for the functioning of the business process, to realize their investment ideas.
Venture capital, a type of private equity investment, is startups and businesses that are newly established and need financing to grow. Venture capital is not a credit financing system. Businesses or startups that receive investments do not make a monthly repayment to the venture capital company. In venture capital, it is aimed to expand the funding provided by the company or individual investor by means of ventures that can grow in the long run, and to achieve significant long-term gains by the successful investment of the ventures or businesses.
You may be interested: What is Venture Capital? Export Information
Best Known Venture Capital Firms
Here are a few examples of the largest venture capital firms:
24 REAL ESTATE AND ENTREPRENEURSHIP CAPITAL A.Ş.
A1 PORTFOLIO MANAGEMENT INC.
AK PORTFOY MANAGEMENT INC.
ALBARAKA PORTFOLIO MANAGEMENT INC.
ARZ REAL ESTATE AND ENTREPRENEURSHIP CAPITAL A.Ş.
ATLAS PORTFOY MANAGEMENT INC.
AURA PORTFOY MANAGEMENT INC.
AZİMUT PORTFOLIO MANAGEMENT INC.
DENİZ PORTFOLIO MANAGEMENT INC.
HEDEF PORTFOLIO MANAGEMENT INC.
How Should Venture Capital Investment Be?
Venture capital is an asset formed by the contribution of companies or people who can be considered as qualified investors to the fund. Entrepreneurs can benefit from such funds in more than one way.
We can summarize venture capital models under three main headings as informal, corporate and traditional venture capital.
Informal venture capital: Informal venture capital based on angel investors is one of the most preferred models. Entrepreneurs and SMEs have come to trust angel investors more than banks and formal venture capital industries. The reason for this is that the investor is in direct contact with the entrepreneur or SME without any intermediary institution. In order to benefit from this capital model, it is necessary to reach groups or platforms with angel investors.
Corporate venture capital: A model run by CVC Capital Partners, corporate venture capital allows companies to invest in ventures outside their scope. Rather than merely providing financial resources, the goal is to achieve strategic goals. Large companies in venture capital investment partnerships support entrepreneurs by purchasing stocks or with certain loan amounts. It is possible to reach these institutions through various platforms and learn about their requirements.
Traditional venture capital: Traditional venture capital, which is one of the oldest venture capital models, is formed by the combination of funds collected from banks, insurance companies and similar institutions. Entrepreneurs who want to benefit from this model, where the identity of the companies managing the fund and the investors providing the fund is unimportant, can apply to official institutions.
Content Related:
