It is a common confusion for people, regarding Venture Capitalists and Business Angel Investors – after all, they both are investors into private companies, who earn private equity from doing such an act.
(‘’Private Equity’’ = shares, securities, equity into a company that does not list on the stock market.)
Notably though, differences do exist…
- Business Angel investors are individuals who invest their personal funds into business opportunities which they see as potentially rewarding. They tend to be successful business people. (Dragons Den is a televised television programme with Business Angels involved i.e Deborah Meaden, Duncan Bannatyne and Peter Jones).
- It is often that business angels have experience and contacts to contribute, hence they usually invest in early/start up businesses (though not exclusively, so established companies still can benefit).
- Venture Capital refers to investments from firms or companies, by use of other people’s money, instead of personally inputting funds. Money is raised by offering investors the chance to participate in the fund that is used to buy shares in private companies. It is usual for such investors to provide finance when businesses are more established and concepts have been proven, as this allows faster company expansion. An example of Venture Capitalists are Citi, Novartis and Verizon.
- Due to the sources of the investment, the amounts of capital that can be invested varies i.e business angels are assumed to have less due to it being personally funded.
- Venture Capitalists : investments tend to be £1M
- Business Angels : investments tend to lie between £10K and £100K