Angel Investor or VC : An entrepreneur’s dilemma

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While pitching for the money entrepreneurs don’t really care about the “Who”. If you ask any starting entrepreneur, he will argue that color of money is same whether they get it from a Venture Capitalist (VC) or an Angel investors. But the decision is very important as one says “Foundation should be strong to build a stronger building…”

Let’s start with the difference between an Angel Investor and a professional VC.

Angel investor is one who doesn’t have very high amount of experience in the field and invest his own money. But, on the other hand, VCs are one who have almost full command over the area you are trying to build your venture. They can sense the success even without getting started.And VCs don’t invest their own money.

On the money part, VCs generally invest a very large amount of money at least $1 M while Angel money can be as low as $25K.

That doesn’t mean that if you are getting big bucks from VCs so you should opt them. There are other aspects of the issue which you should consider. VCs generally don’t invest in early stage startups or new entrepreneurs while Angel Investors are one who will be happy to invest in your nascent startup.

Apart from money there are other important aspects for choosing a VC or an Angel Investors. Some of those areas may follow under following:

Control & Ownership

It depends on you that what amount of ownership are you willing to compensate. VCs generally want a good amount of control over your startup. They would like to have themselves on Board of Directors with voting rights. On the other hand Angel investor will likely agree to have better valuations and lower controls.

Expected Financial Returns

VCs know that the probability of getting your startup successful is only 10% hence VCs generally expect 10X return in 3-5 yrs. while Angel Investors generally expect 5X returns. You are the one who know the worth of your enterprise better than anyone else. So, decide accordingly.

Help and Mentoring

VCs and Angel Investors both are able to give you guidance. But VCs generally don’t invest in any idea they only invest in the area where they have expertise in. So if you have enough expertise in-house then you can compensate for the same.

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Mohit Bansal(23) is B.Tech in Electronics and Communication Engineering from Indian School of Mines, Dhanbad, India. He has interest in business and entrepreneurship and has published couple of research articles. He is also associated with various NGOs. He is with Techaloo when it was just in concept stage. The Techaloo site was not existing even then. Currently Mohit is working with Mu Sigma as a Business Analyst Profile.

One Comment

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