What are the differences between business angels (angel investors) y venture capital (VC)?

BUSINESS ANGELS Y VENTURE CAPITAL

 

 

 

 

 

 

 

 

 

 

 

Often the terms are used business angel, venture capital or investors in general when they have very different characteristics and performance.

 

The main differences lie in the amount of money they invest each project and the origin funds.

The Business angels o angel investors, typically invest their own money. The venture capital (VC) invest money from their own investors.

Generally Business angels are people with resources to invest, who have experience in the business world, and curiosity and concerns to look for interesting projects.

The venture capital invest larger amounts and this next to that usually do not invest the money of the people who are part of your team but to their investors (who are your customers), determines that the behavior is different.

Overall, considering the amount of investment we can distinguish:

  • Hasta 20.000€: At these levels of investment, normally is the entrepreneur who puts his own money.
  • Of 20.000 The € 100,000: This is the level at which the generally invest "friends and family”: family and friends. From the first semilla, generally seeks funding the circles close, typically invest through capital.
  • Of 100.000 The € 1,000,000: This is the area in which they move primarily Business angels. They can invest individually or they can make it through the collaboration of redes de Business angels. The legal requirement level is already high, must be making a covenant partner and investment strategy for both the business as the forecast for the output of the same.
  • Two of € 1,000,000 10 million: We entered the territory of firms Venture Capital. Such firms sometimes invest in its first round of capital a part that can map, and if the startup is developed in line with expectations, They provide more capital in successive rounds.
  • Above 10 million: These amounts are only it reversed by large companies venture capital, when entering startup has surpassed the early stages of development and has a certain robustness.

Most startups remain in the first state and very few reaching the final. Broadly, the 25% of the startups are financed by family and friends, the 2.5% receive investment Business angels, a 0,25% are subject to investment by small firms venture capital and less than 0,03% reach the levels required by the large VC.

The "mix" of Business angels with VC investors as a startup in the early stages is questionable, the imbalance of economic power between them. Generally firms VC outputs require a multiple of its initial investment 10 a 30 times. This may pose a difficulty for Business angels or even entrepreneurs, they can get a lower exit multiples. You can also drag out the process for years. Signing VC has a portfolio of "maturation" of projects, and lengthen one not a serious problem. But by 10 years to sell the stake of one of the entrepreneurs, of a family member or Business angel may be too long for their personal potential.

The investment VC also involves "information effect": Investors tend to watch the movements of the VC that regard are those with better information. The entry of a VC you can generate a pull effect to attract other investors. But at the same time, not you VC does not enter a second round, can foster the belief that the startup does not meet expectations and greatly hinder the entry of new investors.

However, the junction between Business angels with VC You can also bring benefits:

1.- The Business angels can facilitate the entry of VC funding in subsequent rounds.

2.- Some companies VC prefer to invest in startups in which Business angels experts and specialists in their sector have put their money.

At the end of the day, so Business angels as venture capital want the startup succeed.

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