Angel Investment vs Venture Capital – Which would you choose?

VC's vs Angels
This morning I read a great post by Venture Spring. Venture Spring is a hugely well respected ‘venture development’ company which “helps Fortune 500 companies innovate like startups” according to their company mantra. The article is about the differences between venture capital funding and funding from angel investors.

Startups are often all too eager to take one option over the other based on their own preconceptions. It’s important to realise that one may be more suited to one type of startup over another (and vice versa. So, understanding the points of difference could be crucial to the way in which you approach your fundraise; and how your company ends up being run down the line. So it’ll be worth your while familiarising yourself with the key points…

You can read the full article on their site here. (It’s a 5-10 min read).

Or, I’ve summarised the key differences for you here and (added in a few that they missed!):

Angel Investors:
– are private individuals investing their own money
– can make quick decisions regarding investment
– can be flexible in the amount they invest
– can provide expertise, contacts and support as well as capital
– can feel personally attached to your business
– can be as hands-off or hands-on as you require
– can qualify for tax breaks like SEIS and EIS
– do not have to be given board positions

Venture Capital Firms:
– are whole companies that invest in startups
– are run by professional investors investing money from corporations, individuals, funds and foundations
– take board positions and have a strong say in how the company is managed and grown going forward
– invest much larger amounts than angel investors
– do not usually invest at seed stage
– generally invest not less than £1million
– take a longer time to make investment decisions and broker deals

What’s your take on the issue? Do you have any experiences you’d like to share? Comment below or hit me up on Twitter

AIN on IntelligentCrowd.tv

Xavier Ballester, the co-director of our brokering division, appeared on Intelligentcrowd.tv offering some pearls of wisdom to investors and entrepreneurs alike, including:

– How we evaluate startups worth working with
– Why we exchange part of our cash success fee for equity shares in our clients
– Recent exits and hot prospects including Brightnorth, Superawesome and What3Words
– How we raise money for our clients

Check out the interview below:

Calling all UK angels to help with a quick survey

Hi everyone,

We’re helping out with a research study on angel groups in the UK.

The study is being conducted by Tiago Botelho and Prof Colin Mason from the University of Glasgow’s Adam Smith Business School, and should allow us to see how our members see syndication in general and how we can improve our network.

We’d be really grateful if any UK angel investors could take the time to complete the survey (it is completely anonymous and should take around 10 minutes).

Here is the link for the survey, which will be open until the end of June:  https://qtrial2014.az1.qualtrics.com/SE/?SID=SV_ehryzeOsCGAS4hT

Also, it would be great if you could share this link with any other UK angels that you know.

Barbara Corcoran’s Angel Investor Checklist

Shark Tank star and angel investor shares the hard-hitting questions she asks entrepreneurs before investing in their business.

Jeff Clavier on how to be an Angel Investor

Leena Rao interviews SoftTech VC Jeff Clavier about the way he became an angel investor and how to become one yourself at Disrupt SF 2011 day three.

We’d love to see you at our next Pitching Event

Top 5 US Angel Investors Over the Last Year

Angel investors have been playing a pivotal role in the American economy for almost half a century, particularly in shaping up the technology industry. Silicon Valley, for instance, has been built and developed by and on the foundations laid by many angel investors. All major tech giants today were start-ups at one point in time.

This infographic shows the Top 5 US Angel Investors of 2013.  Between them, they have invested in more than 700 start-ups so far, out of which more than 150 were in 2013 alone.

Top-5-US-Angel-Investors-Over-the-Last-Year-min-2

2013 Halo Report: US Angel Investment Year in Review

CB Insights, in conjunction with Silicon Valley Bank and the Angel Resource Institute, recently released the 2013 year-end Halo Report. The full 27-page angel investing report includes breakdowns by industry and geography as well as valuation trends. In addition, the report includes a ranked list of the top 10 most active angel groups in 2013.

To download the entire 27-page 2013 year-end Halo Report, login here. The underlying angel investment data is also available and proprietary to CB Insights. (note: the report is available to anyone with a free CB Insights login)

Highlights of the 2013 year-end Halo Report include:

  • Syndicated Deals Produce Larger Investment Rounds.  Overall median deal size in 2013 was $600k, but when angels co-invested alongside other types of firms (including VCs, etc.) that median shot up to $1.7M.
  • High Valuation Deals on the Rise.  While 2013 median angel deal valuations held consistent with last year at $2.5M, the top quartile of angel deals carried valuations of $4.2M or greater. This represents a stronger showing at the top versus 2012.
  • Golden Seeds is #1.  Golden Seeds topped the leader board for most deals completed in 2013 – up from 5th place in 2012. Meanwhile the 2012 winner, New York Angels, fell to the 7th spot in 2013.

A bit of a laugh for everyone…

According to Study, Angel Investment’s Future Is In Group

If you’re an experienced angel investor looking for new opportunities, you may find what you’re looking for by investing with a group instead of individually or with a few friends. According to an article published on Phys.org, the benefits of working as a group include better deal flow, diversified portfolios, due diligence and evaluation, along with social interaction with other investors. If you’re just getting started with angel investing, participating in a group gives you the ability to learn from more experienced investors, helping you limit the risk of going in blind or unprepared.

The Basics of Group Angel Investing  

An angel investor is an individual who provides capital to start-up businesses in exchange for ownership equity or convertible debt. In an angel group, you’re still able to provide capital to start-up businesses, but you do so with other investors as part of a larger group. This provides you with access to better research, evaluation, and due diligence, enabling you to make more informed decisions about where to invest your money without relying solely on online reputation and individual research.

Investing as part of an angel group promotes individual investors to pool their money together, allowing for larger investments over a longer period of time. For businesses, this means access to deeper pockets without the need to include venture capitalists for initial or follow-on funding. Businesses also benefit from a more streamlined and professional funding process, as angel groups have a “gatekeeper” or group administrator who handles the administrative process. Having a group administrator is another benefit for inexperienced angel investors, as well.

Looking for Positive Returns

In an article published on Forbes, research conducted by the Kauffman Foundation found that the average return for angel investors is 2.5 times the initial investment. Unfortunately, the odds of a positive return at all is less than 50 percent. While this type of investment risk is on par with that of venture capitalists, there are better ways to increase your odds.

A diversified portfolio is a great start, a benefit that angel groups can provide. In addition, joining an angel group can give you access to higher quality deals that aren’t available as an individual investor. With over 330 active angel groups in the United States and Canada, finding one to join may not be as hard as you think.

Joining an Angel Group 

With better research, evaluation and due diligence, access to higher-quality investment opportunities, a group administrator to take care of funding and administrative work, you’re probably looking for the sign-up sheet. Keep in mind there are usually requirements for joining angel groups, and yearly investment requirements aren’t uncommon.

Investing as an individual usually allows you to choose the amount of time you want to commit to your investment business. This may not be the case when participating in an angel group. In addition to attending a mandatory screening process, many groups have events you must attend throughout the year.

Before you investment money in a new start-up business, take a look at angel groups in your area that may have access to better opportunities. With more diversified portfolios, group administrators, and the expertise of other investors, you may end up with a better return on your investment.

This article was written by Brian Flax, a freelance writer based out of the Washington, D.C., area. He holds a master’s degree in education technology and a bachelor’s degree in entertainment business. Brian is experienced in a variety of topics, including technology, finance, business management, and what to look for when you’re looking for an article writer.