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Angel funding vs. Venture Capital. Which one is preferable?


Topic Expert
Kent Thomas
Title: Founder
Company: Advanced CFO Solutions
(Founder, Advanced CFO Solutions) |

It depends on the stage of your business, how much money you need to raise and the terms that you are hoping to secure. Venture capital is usually not available to pre-revenue or very low revenue businesses or in amounts lower than $2 to $3 million. As a result, if you are very early stage or need a smaller amount of cash, venture capital investment may not be an option. Angel capital is typically used to help a company prove out its technology and/or business model, secure customers and start its growth trajectory. Angel investors will invest smaller amounts and tend to be more patient with their investment (i.e., willing to wait a bit longer for an exit than a VC) and offer somewhat more company favorable terms.

Topic Expert
Ken Kaufman
Title: CFO
Company: Community Dental Partners
LinkedIn Profile
(CFO, Community Dental Partners) |

As usual, Kent is spot-on with his comments. I'll add a little more info on some of the similarities and differences.

Angel investors can often take on more of a mentor/advisor role than VCs, and it has become pretty common for them their investment to made via a convertible debt instrument, allowing for expensive valuations and other equity-based legal/accounting due diligence to be put off until future rounds.

Venture capital is usually a little more structured, or institutional, and the one-on-one mentoring is less common. VC investors want to invest in management teams who are open to advice but have experience and connections of their own upon which to rely.

Of course, these are generalizations. Each angel and VC group does things a little differently, so it is always most important to do your due diligence on them and find the best fit for your needs.

Best of luck!

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

While both Kent & Ken answers are correct, Angels vs VC is just another way to call the kettle black. They both provide the same, just their thresholds are different.

They may or may not be more structured or institutional as Ken states, and he is correct these are generalizations.

The big difference is Private Equity and Venture Capital/Angel Investors.

Derek Quackenbush
Title: CFO
Company: Rising Data Solutions
(CFO, Rising Data Solutions) |

Friends & family, angel investors, VCs--these are all funding sources. Regardless of the source, it's imperative to find the right partner. As Ken pointed out, some folks will be willing to spend more/less time acting as mentors/advisors. And don't take too much too soon. When your valuation is low, take less...just enough to get to the next milestone where your valuation will be higher. Take too much too soon and you can give too much of your company away. I would strongly encourage anyone looking for money to engage an experienced law firm as an advisor who can help navigate the process. The last thing an entrepreneur should do is sign a term sheet from anyone without good legal advice and guidance.

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

Very sound advice. Life is not TV's "Shark Tank".

Gary Honig
Title: President
Company: Creative Capital Associates Factoring Co..
LinkedIn Profile
(President, Creative Capital Associates Factoring Company) |

By their very nature, Angels are individuals and VC's are managed funds. Angels have to prepare their own due diligence and decide for themselves whether they want to write a check. VC's raise money in bulk and manage that money for a fee.

The more recent trend toward angel rounds has somewhat to do with the lack of stellar performance from the funds. But the rule of thumb is angels early, managed funds later.

What is critical though is giving an entrepreneur a true sense of the high degree of effort it takes to raise equity these days. No matter what the idea is, the team must have someone closely associated who has successfully raised equity capital, AND a bunch of people need to be out there trying out and liking the model - in order to have any chance at succeeding.

Having a good CFO on board is always a plus.


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