Is there a difference between angel investors, and VCs? At the end of the day, they are just people that can provide you with the funds you need to keep your company running, right? Well, there’s way more to it than that. Angels and VCs think quite differently. Once you have a better understanding of the differences between them, it will be easier for you to decide who to approach.
Angel investors invest their own personal money, and as a result, their own time as well. In most cases. they are genuinely interested in your company, and will even be willing to tap into their networks and do some dirty work to help ensure your success. On the flip side, you have to understand that if/when things don’t go as well as planned, the angel investors will also be more emotional about it.
The investment in your startup will be the riskiest investment for them. They typically also have a portfolio that consists of stocks, real estate, and items they feel will drive returns. But why are they interested in investing in your company in the first place? This is where you have to determine their motivation. Maybe they are doing so out of goodwill. Maybe you inspired them. Maybe they are up for a challenge. Maybe they just want to do something for the community. Find out what the reason is for each angel investor you talk to, and see if you can level with them based on that.
VCs are professional investors who receive salaries regardless of what happens with your startup. They don’t usually invest their own money into the rounds. As such, they are also (generally) not nearly as involved as an angel investor would be. Many VCs tend to have a knack of quickly determining the future success of companies. In addition to personal experiences, they acquire this sense upon intense studies on IPOs and acquisitions.
VCs also tend to focus within certain industries that are of particular interest to them, from fintech, to SaaS, to mobile tech. There are also VCs that would invest in certain companies- not because of the product/service, but because of the people behind the company. Do your research before reaching out to VCs, to ensure they will find you relevant and interesting.