There are some differences in the types of businesses venture capitalists will fund versus what angel investors will fund. You may be able to secure funding from one but not the other.
Angel investors are generally wealthy individuals interested in helping small businesses grow. The TV show Shark Tank is a reality TV representation of angel investors—individuals looking for companies that fit well into their networks and expertise.
Venture capitalists, on the other hand, are institutional investors from much larger conglomerates comprised of financial groups. These groups are interested in helping well-established, high-growth-potential businesses expand into large corporations. And these conglomerates often consist of financial firms, insurance companies, pension funds, and university endowments.
So with their individual goals, venture capitalists and angel investors tend to lean toward different business types:
- Venture capitalist groups tend to invest in experienced companies with established revenue growth.
- Angel investors typically prefer younger companies with strong growth potential.
Deciding whether to approach an angel investor or a venture capital group largely depends on the age and profitability of your business, but you should also factor in how much funding you need to reach your next growth stage.