According to one of my favorites, Investopedia.com, an angel investor is typically a family member or friend that invests in small startups and/or entrepreneurs. Angel investment strategies differ in one time investments and continuous, broken down investments. The catch and major difference between Angels and Venture Capitalists is that an Angel typically invests in the entrepreneur(s) rather than the viability of the business itself.
A Venture Capitalist on the other hand evaluates the idea, management team, and business model - because their main goal is overall return. Businesses seeking capital in such a manner don’t have access to traditional equities markets because although they have high potential growth, their risk is simply too high. Hence the caveat associated with these businesses - how much risk is too much - what are our losses if this fails? Well, generally most venture capital firms collectively pool their money into a single fund. Each partner of the firm has part ownership over the fund - therefore collectively mitigating effects of financial loss.
Jeff Bezos, Founder, Chairman, President, and CEO of Amazon, is one of the most active and wealthiest angel investors today. As we all know, Amazon is the largest retailer on the web. This was done through his leadership; and through his ability as a CEO according to Harvard Business Review (2nd best CEO behind late Steve Jobs). As of 2013, Bezos had made 11 angel investments and has since used massive amounts of capital to acquire additions to his ever growing empire. Bezos most definitely considers return to be a factor - as anyone would - but is arguably more interested in the impact of innovation and entrepreneurs behind the product.
Jeff Clavier, Founder and managing partner of SoftTech VC/ Uncork Capital, is a highly active venture capitalist. The venture capital firm has closed more than 250 deals since inception in 2004 - an average of nearly 20 deals per year. The firm has pooled over $300M from limited partners and other sources, and is primarily concerned with return, as is traditional of most VC firms. Venture Capitalists are more involved with the companies they invest in, and thus expect a higher rate of return. In the long run, the firm may sell its shares back to the company in an IPO.
Personally, I enjoy the roles and responsibilities that venture capitalists take on more so than angel investors. I consider helping the company to propel in the right direction is ultimately helping your investment to grow. However, objectively, angel investors are needed to help startups through the very difficult early stages that most companies, if not all, come across. Although very different in function, angels and venture capitalists create the perfect balance for a good success story.
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