Angel Investor vs Venture Capitalist: Difference and Comparison

Finance is a big part of any business endeavour, and growing a business without proper financing is nearly impossible. It is incredibly challenging for small businesses in the sprouting stage because most banks do not lend capital to any company based on their future potential.


Business Quiz

Test your knowledge about topics related to business

1 / 10

Cash flow is:

2 / 10

Modular furniture __________.

3 / 10

Planning and control are _________ functions of an office.

4 / 10

Small scale firms are ____________ flexible in their functioning.

5 / 10

A building jointly owned is called office________.

6 / 10

Which of the following is not an economic activity?

7 / 10

Importing goods for the purpose of re-export is termed as ___________.

8 / 10

A firm which outsources its works requires ___________.

9 / 10

Which of the following countries are part of the WTO?

10 / 10

What is an Economic Activity?

Your score is


Key Takeaways

  1. Angel investors are high-net-worth individuals who fund startups or small businesses; venture capitalists are professional investors managing funds that invest in multiple companies.
  2. Angel investors invest their funds and make individual decisions; venture capitalists represent firms with pooled resources from various sources.
  3. Both angel investors and venture capitalists provide funding and guidance to businesses, but angel investors invest earlier in a company’s lifecycle, while venture capitalists invest at later stages.

Angel Investor vs Venture Capitalist

An angel investor is an affluent individual who provides capital to start-ups in exchange for ownership equity, investing their personal funds. A venture capitalist is a professional investor or part of a firm that invests in start-ups or small companies, pooling money from various investors.

Angel investor vs Venture capitalist

In this circumstance, angel investors and venture capitalist firms can become very helpful. In exchange for equity or convertible bond, they often invest in businesses with a high growth potential.

Unlike banks or other financial institutions, there is no requirement for collateral for funding.

Many businesses in Silicon Valley took advantage of angel investors and venture capitalist firms and became large corporations within a few years. After successfully becoming a large entity, they went for public offering and returned the profit to their angel investor and venture capitalist firms.


Comparison Table

Parameter of ComparisonAngel InvestorVenture Capitalist
Type of investorWealthy Individuals.Investment firm.
Ability to invest capitalLess.More.
Time of investmentAt the beginningWhen the company show an indication of growth
Control of the businessSometimes they demand control over the business from the founder.None.
Source of investmentPersonal.From limited partners.
Commonly known asInformal investors, private investors, angel funders, seed investors, business angels, etc.VC.


What is Angel Investor?

Angel investor is those people who invest capital in the early stage of any business or startup. Most angel investors are affluent individuals investing in exchange for equity or convertible debt.

Depending upon the scope of the business, the investment money may vary widely. An angel investor can invest much less capital in the industry than other investment institutes.

Angel investors are known by other names like informal investors, private investors, angel funders, seed investors, business angels, etc. Although anyone can become an angel investor, most angel investors are qualified as accredited investors.

According to the Securities Exchange Commission (SEC) report, the worth of most angel investors is over $1 million.

Compared to other financial institutions, an angel investor takes a higher risk at the time of investment. Their proportion of shares also dilutes with a further round of investment.

For this reason, they demand large portions of the share in the business. The angel investor often takes some control of the business from the company’s founder.

Although most angel investors are not bound to any due diligence, some of them track the company’s financial activity and provide valuable advice to the business.

angel investor

What is Venture Capitalist?

Venture capitalists are one type of financial firm that invests in emerging companies and high-potential startups. In the market, they are commonly referred to as VC.

Most Venture capitalist firms hold large amounts of capital, and they are made up of a group of professional investors.

Most venture capitalist firms raise their capital from their Limited Partners, also known as LPs. After gathering large amounts of money, they search and invest in companies with a high growth rate or chance of success.

Before investing in any company, they verify its financial statements and estimate its potential. Most of the time, the company founder or the CEO has to explain their future guidance to the venture capitalist.

Unlike institutional investors, most venture capital firms only invest in the company before it goes public through an IPO. Venture capitalist firms also take large portions of the company share, but they do not take control of the company.

However, they can sell their share to other venture capitalist firms.

Depending upon the financial requirement of the company, the venture capitalist firm may do multiple rounds of investment in the company. When venture capitalist firms profit from the investment, they share the profits with their Limited Partners.

venture capitalist

Main Differences Between Angel Investors and Venture Capitalists

  1. According to the Securities Exchange Commission (SEC) report, most angel investors are wealthy. At the same time, most venture capitalists are a group of financial investors.
  2. The capital investment capacity of an angel investor is pretty limited, but venture capitalist firms can invest much more capital in the business.
  3. Most angel investors endow their capital at the beginning stage of the business when the company is sprouting. On the other hand, most venture capitalist firm only invests in business when they see the potential for growth in the company.
  4. Angel investors utilize personal capital for their ventures. But venture capitalist firms get their funding from limited partners.
  5. Sometimes angel investors might demand control over the business from the founder. However, a venture capitalist firm never takes any power from the founder.
  6. In the financing world, most angel investors are informal investors, private investors, angel funders, seed investors, business angels, etc. While venture capitalist firms are known as VCs
Difference Between Angel Investor and Venture Capitalist
One request?

I’ve put so much effort writing this blog post to provide value to you. It’ll be very helpful for me, if you consider sharing it on social media or with your friends/family. SHARING IS ♥️

Leave a Comment

Your email address will not be published. Required fields are marked *

Want to save this article for later? Click the heart in the bottom right corner to save to your own articles box!