See the ? above.
learned it. Thank you!
Angels tend to be people who have an interest in helping new companies (perhaps a former startup success) or have a large amount of money and are willing to take a riskier venture for a large return. The appeal of angels is that they are thought to be less demanding, less in the business, and more of a silent investor, of course this depends on the angel and the agreement and could be completely false. Because angels tend to be individual investors they generally have more limited resources and can only invest up to a certain point.
VCs on the other hand are generally established firms with a large fund of capital that they diversify around different sectors and business types. They have an established setup for evaluating companies, providing funds and managing their returns. VC funding is also high risk so VCs tend to bring a lot of ideas, connections, even help in hiring and finding management ideas with them. Again stereotypes suggest that VCs are more controlling but a successful company, or specific firm could be very hands off, it all depends. VCs come with deep pockets and can often continue to invest, even in a company that is not trending, to help get things back on track.
Many investors start with an angel or friends & family, grow a business and then seek venture capital for larger support.
I am not sure about the legal definition but a loose way to define the two would be:
Angel investor is a rich guy who is investing in your startup from his own pocket. Itβs somewhat informal mode of investment just as investment from your friends and family is. Venture capital, on the other hand, is a professionally managed company that routinely invests in companies from a pool that is composed of money from other people or funds. Even though angel investors might have a organized and formal structure, they do not have it to the same degree as venture capital funds do. Therefore, they fill the gap between self funding (including friends and family) and venture capital.
A general rule of thumb is: angel investor is a person (or a small group of persons), venture capital is a company. The amount of capital, therefore, invested by VC usually tends to higher than that by an angel investor. Consequentially, the investment process is more rigorous too.
Thanks Kailash for the clear explanation!