Angel Investment Essay

870 Words4 Pages
6 Angels are not venture capitalists

You should also know that angel investors are not venture capitalist. It’s an important, but often forgotten, distinction. You do need to learn the difference, as it can make raising money just slightly easier – you don’t want to be pitching to angels when you actually need a VC.

Above, I already gave you to short introduction to angel investing.

So, what about VCs? Why are the two different?

Much of the difference is down to the way the investors operate and invest.

Let’s compare the two in three of the most common areas of divergence: the amount of money invested, the desired terms and conditions, and the involvement after investment.

The two investors would approach the three topics like this:
…show more content…
Why?

Because an angel investor won’t ever sign one so you’d be wasting your time.

I mean, sure, you could talk about it when you are dissing the startup that ask an angel to sign one. Just don’t be the startup that asks for one.

I’ve written a post about why investors won’t sign NDAs and it fully applies to both venture capitalists and angels.

Essentially it all boils down to the nature of angel investing – and venture capital, for what it’s worth. You see, angels have an investment portfolio that they are constantly thinking about expanding. They will be contacted by numerous hopeful startups, looking for investment.

They will talk to businesses that might be similar to yours. It just isn’t possible for them to take the risk of you thinking they leaked your ideas. That’s costly and time-consuming.

Your relationship with the angel will be built on mutual trust and respect.

They trust and respect you to be transparent and do what you’re planning with all you can and you need to trust and respect the angel to not steal your ideas.

The bottom line is that you shouldn’t waste time and breath talking about NDAs with angels – they simply won’t write one.

8 Angels expect making a return through an exit sale

Now, angels are investors so they are seeking for a return.

For an angel, the return comes through an exit strategy rather than waiting on for the profits to start rolling in from sales.

Your angel will
Get Access