Venture Capitalists / Angel Investors
Angel investors provide financial backing for small startups or entrepreneurs, generally in exchange for equity in the company. Generally, angel investors are wealthy individuals who enjoy mentoring young companies that are poised for growth. The Securities and Exchange Commission’s (SEC) definition of an accredited investor mandates that the investor have a net worth of at least $1 million U.S. dollars and must make $200,000 a year ($300,000 a year for a married couple).
Most angel investors require a portion of legal ownership of the company in exchange for their investment – meaning the business owners relinquish some control of their company in exchange for capital. Fortunately, angel investors will always want the company to succeed, but do not seek to make massive profits or to turn around and sell the company. It is said that angel investors invest in the business-owner to mentor them, rather than seek quick profits.
Venture capital is similar to angel investment: an investor provides capital in exchange for a portion of ownership in the company. Venture capitalists, however, generally invest more money and tend to invest in companies in a high-growth phase. Venture capitalists generally demand a larger share of ownership in the company than angel investors. Additionally, venture capitalists tend to be less involved in the company because a management team is already in place. Venture funds tend to correlate with a higher risk investment and the need for a greater return. A business owner should be ready to sell the company to satisfy the profit motives of venture capitalists.
If you want to know more about how to find the right VC or AI and how you prepare, please go to our brief VC/AI information sheet and fill it out. We will go back to you with more information and how we can help to find the right VC/AI without trying hundreds.
Read more about VC’s by visiting our blog “Venture Capital – Blessing or Curse?”
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