what’s the difference between angel and
venture capital investors it’s a great
question and one that came in from one
of my YouTube viewers
JGI g7 284 thank you on YouTube and it’s
really important I remember when I had
my first business I felt like I needed
help and I felt like I needed funding
and I didn’t know if I needed to go to
an angel investor or venture capital I
didn’t know how much money they wanted
to spend they didn’t know who would be a
good fit for me and the problem is if if
you don’t know the difference and if you
don’t know who you should bring on it
could not only waste your time like
raising capital is almost a full-time
job for your business and so you don’t
want to spend your time going in the
wrong direction but also bringing on the
wrong person can really sink your
company raising money really is like
getting married you have to really pick
who you bring on because again the wrong
person could destroy your company and
everything that you’ve worked so hard to
build the vision everything that you
believe in could be torn apart because
you brought the wrong person on board so
really tread carefully and do your
homework so here are the main
differences an angel investor is an
individual they’re one person they
either do it as a profession so they are
a professional angel investor they’re
sophisticated they’d like invested in
the companies as their main business but
there’s also a lot of people who are not
professional who are unsophisticated who
have no idea what they’re doing they’re
wealthy individuals there’s an industry
term called DDI which is doctors or
dentists with disposable income a lot of
these ancient Buster’s are like dentists
who hate their lives who don’t find
satisfaction in their in their career
anymore and they invest in companies as
a way to tell their friends about the
things that they’re doing and and live
an exciting life through you they’re not
professional investors and so angels are
all over the map and you really want to
do your homework to find the ones that
will give you not just money but
connections experience ideas wisdom
beyond that you never want to bring on
money just for money you need somebody
who can bring more to the
table and also who believes in what
you’re trying to do they don’t just see
an opportunity to make cash but they
believe that the change that you’re
trying to make in this world is a good
one
it’s super important typically angel
investors do have a higher tolerance for
risk they are looking at a longer
horizon typically five to eight years
before they’re gonna get their money
back so they’re they’re in it more for
the long term and if you’re looking at
raising less than half a million dollars
for your business and you’re probably
dealing in the angel investor territory
so the angels are the the first capital
that gets you going
it could also be your friends and family
or your own startup money but if you’re
going for like a professional investor
then you’re going after an angel if you
need half a million dollars or less the
next step up is looking at VCS and
venture capitalists typically we’ll look
at half a million dollars plus the
reason is it’s the same amount of work
to do a fifteen million dollar deal as a
half a million dollar deal and so VCS
don’t like to spend their time working
on these small deals because the payoff
isn’t there they’ll only do it if they
really see a lot of opportunity with the
company and they’ll be involved in
future rounds so they’ll work with you
on a small scale because they think they
can take you through a couple rounds of
financing and by getting in with you
early then they’ll you’ll want to go
back with them you know they they’re
they’re getting their foot in the door
at the start but typically VCS don’t
like startup companies pure startup it’s
really really hard to get them they want
to see some momentum with your business
some traction they want to see a little
bit of revenue at least to show that hey
you’ve done it this far with some money
you can go beyond typically they’re
looking at a shorter horizon so they
want three to five years and they’re
gonna exit they’ll never invest to buy
out and in another investor so if you
had a really bad angel investor and now
you’re trying to raise more money to buy
out that angel they’re not going to do
it this is why it’s important right you
get the wrong investor they’re stuck
with you forever it’s really really
really hard to get rid of them and
nobody’s gonna want to come in just to
buy them out with VCS they want to see
that there’s a clear exit strategy so
the two most common ones are
you’re gonna go public so there’s a
there’s an IPO your company goes public
or you get acquired so some big
company’s gonna buy you up and pay you a
good price for it
the third less common one is a
management buyout so you buy back the
shares from the VCS but they don’t want
to see that they want to see massive
growth they want to see that you’re
gonna go out and build something
humongous make tons of money and
someone’s going to want to buy you up
VCS are professional they pool money so
they have people who give them money and
then they’re in charge of going out and
investing it and they typically focus on
specific areas angels are all over the
map again some will invest in an area
that they have expertise in and others
will just invest because they think they
can make money but with VCS they’re
usually really targeted so they want to
see a tech company or they want to see a
green company or whatever it is they
have specific criteria that they’re
looking for VCS are looking to make
thirty percent a year return on their
investment and it’s not going to come in
the first year second year but by the
time they exit after three to five years
they want to see that made 30% per year
on their investment so you have to have
a type of company that will grow that
quickly where angels they want to make
money but it’s not as set right so they
may invest in something that they
believe in personally they have some
kind of affinity with but it’s not going
to yield as big a return because they
like it and they’re okay with a lesser
return maybe there’s more safety to it
where VC wants to see massive rapid
growth and so it lends itself to
software companies to technology
companies because it’s easier to scale
those types of businesses if you look at
a consulting business for example a VC
wouldn’t touch that because it’s it’s
too hard to scale quickly the returns
aren’t there we’re an angel investor
might invest in that kind of business
because they see a way to make a little
bit of money and they may believe
strongly in what you’re doing so
hopefully that helps with some of the
main differences again when you are
looking at raising funds I would start
by thinking about how much money do you
need and a half a million dollars a good
mark if it’s less you’re looking at an
angel that’s more you’re looking at
Abby’s
but really scrutinize the person that
you’re bringing on because I know it’s
exciting to get money right I know it’s
exciting finally somebody believes in us
finally we’re able to rapidly grow this
thing up you know you’ve been struggling
and grinding it out and and just making
ends meet and not paying yourself very
well and finally somebody believes in
you and there’s so much excitement
around that but it’s easy to get locked
into a bad deal everybody’s on their
best behavior when things are going well
especially at the beginning but when
things get rough which they’re gonna get
rough with your business you need to
have somebody there who will still
support you who will really still
believe in what you’re trying to do with
your business and so I just urge you to
scrutinize strongly everybody that
you’re bringing on as a potential
partner or investor into your business
because if you do make the wrong
decision that could really sink your
company they need to be bringing more to
the table than just money
they need to belief in your business and
they need to have some kind of expertise
that they can share or contacts
experience something that helps your
business go beyond just the money great
question I hope that helped for those of
you watching you like the video please
give it a thumbs up below it always
makes me want to do more for you guys
and I love the Hurriyet to think please
leave a comment underneath let me know
what you’re thinking about this video
and if you want me to do a video
response for you you have a business
problem leave it below I’ll create the
video thank you guys I’ll see you soon
venture capital investors it’s a great
question and one that came in from one
of my YouTube viewers
JGI g7 284 thank you on YouTube and it’s
really important I remember when I had
my first business I felt like I needed
help and I felt like I needed funding
and I didn’t know if I needed to go to
an angel investor or venture capital I
didn’t know how much money they wanted
to spend they didn’t know who would be a
good fit for me and the problem is if if
you don’t know the difference and if you
don’t know who you should bring on it
could not only waste your time like
raising capital is almost a full-time
job for your business and so you don’t
want to spend your time going in the
wrong direction but also bringing on the
wrong person can really sink your
company raising money really is like
getting married you have to really pick
who you bring on because again the wrong
person could destroy your company and
everything that you’ve worked so hard to
build the vision everything that you
believe in could be torn apart because
you brought the wrong person on board so
really tread carefully and do your
homework so here are the main
differences an angel investor is an
individual they’re one person they
either do it as a profession so they are
a professional angel investor they’re
sophisticated they’d like invested in
the companies as their main business but
there’s also a lot of people who are not
professional who are unsophisticated who
have no idea what they’re doing they’re
wealthy individuals there’s an industry
term called DDI which is doctors or
dentists with disposable income a lot of
these ancient Buster’s are like dentists
who hate their lives who don’t find
satisfaction in their in their career
anymore and they invest in companies as
a way to tell their friends about the
things that they’re doing and and live
an exciting life through you they’re not
professional investors and so angels are
all over the map and you really want to
do your homework to find the ones that
will give you not just money but
connections experience ideas wisdom
beyond that you never want to bring on
money just for money you need somebody
who can bring more to the
table and also who believes in what
you’re trying to do they don’t just see
an opportunity to make cash but they
believe that the change that you’re
trying to make in this world is a good
one
it’s super important typically angel
investors do have a higher tolerance for
risk they are looking at a longer
horizon typically five to eight years
before they’re gonna get their money
back so they’re they’re in it more for
the long term and if you’re looking at
raising less than half a million dollars
for your business and you’re probably
dealing in the angel investor territory
so the angels are the the first capital
that gets you going
it could also be your friends and family
or your own startup money but if you’re
going for like a professional investor
then you’re going after an angel if you
need half a million dollars or less the
next step up is looking at VCS and
venture capitalists typically we’ll look
at half a million dollars plus the
reason is it’s the same amount of work
to do a fifteen million dollar deal as a
half a million dollar deal and so VCS
don’t like to spend their time working
on these small deals because the payoff
isn’t there they’ll only do it if they
really see a lot of opportunity with the
company and they’ll be involved in
future rounds so they’ll work with you
on a small scale because they think they
can take you through a couple rounds of
financing and by getting in with you
early then they’ll you’ll want to go
back with them you know they they’re
they’re getting their foot in the door
at the start but typically VCS don’t
like startup companies pure startup it’s
really really hard to get them they want
to see some momentum with your business
some traction they want to see a little
bit of revenue at least to show that hey
you’ve done it this far with some money
you can go beyond typically they’re
looking at a shorter horizon so they
want three to five years and they’re
gonna exit they’ll never invest to buy
out and in another investor so if you
had a really bad angel investor and now
you’re trying to raise more money to buy
out that angel they’re not going to do
it this is why it’s important right you
get the wrong investor they’re stuck
with you forever it’s really really
really hard to get rid of them and
nobody’s gonna want to come in just to
buy them out with VCS they want to see
that there’s a clear exit strategy so
the two most common ones are
you’re gonna go public so there’s a
there’s an IPO your company goes public
or you get acquired so some big
company’s gonna buy you up and pay you a
good price for it
the third less common one is a
management buyout so you buy back the
shares from the VCS but they don’t want
to see that they want to see massive
growth they want to see that you’re
gonna go out and build something
humongous make tons of money and
someone’s going to want to buy you up
VCS are professional they pool money so
they have people who give them money and
then they’re in charge of going out and
investing it and they typically focus on
specific areas angels are all over the
map again some will invest in an area
that they have expertise in and others
will just invest because they think they
can make money but with VCS they’re
usually really targeted so they want to
see a tech company or they want to see a
green company or whatever it is they
have specific criteria that they’re
looking for VCS are looking to make
thirty percent a year return on their
investment and it’s not going to come in
the first year second year but by the
time they exit after three to five years
they want to see that made 30% per year
on their investment so you have to have
a type of company that will grow that
quickly where angels they want to make
money but it’s not as set right so they
may invest in something that they
believe in personally they have some
kind of affinity with but it’s not going
to yield as big a return because they
like it and they’re okay with a lesser
return maybe there’s more safety to it
where VC wants to see massive rapid
growth and so it lends itself to
software companies to technology
companies because it’s easier to scale
those types of businesses if you look at
a consulting business for example a VC
wouldn’t touch that because it’s it’s
too hard to scale quickly the returns
aren’t there we’re an angel investor
might invest in that kind of business
because they see a way to make a little
bit of money and they may believe
strongly in what you’re doing so
hopefully that helps with some of the
main differences again when you are
looking at raising funds I would start
by thinking about how much money do you
need and a half a million dollars a good
mark if it’s less you’re looking at an
angel that’s more you’re looking at
Abby’s
but really scrutinize the person that
you’re bringing on because I know it’s
exciting to get money right I know it’s
exciting finally somebody believes in us
finally we’re able to rapidly grow this
thing up you know you’ve been struggling
and grinding it out and and just making
ends meet and not paying yourself very
well and finally somebody believes in
you and there’s so much excitement
around that but it’s easy to get locked
into a bad deal everybody’s on their
best behavior when things are going well
especially at the beginning but when
things get rough which they’re gonna get
rough with your business you need to
have somebody there who will still
support you who will really still
believe in what you’re trying to do with
your business and so I just urge you to
scrutinize strongly everybody that
you’re bringing on as a potential
partner or investor into your business
because if you do make the wrong
decision that could really sink your
company they need to be bringing more to
the table than just money
they need to belief in your business and
they need to have some kind of expertise
that they can share or contacts
experience something that helps your
business go beyond just the money great
question I hope that helped for those of
you watching you like the video please
give it a thumbs up below it always
makes me want to do more for you guys
and I love the Hurriyet to think please
leave a comment underneath let me know
what you’re thinking about this video
and if you want me to do a video
response for you you have a business
problem leave it below I’ll create the
video thank you guys I’ll see you soon
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