Differences Between an Angel Investor and a Venture Capitalist

What is an angel investor?

An angel investor provides a significant cash infusion to an early-stage startup. In return, the angel investor receives equity ownership or convertible debt.

Terri Maxwell, an angel investor, entrepreneur, mentor and author, noted that angel investors are often driven by passion or mission, using their capital to fund early-stage concepts in industries they care about. “Angel investors are uniquely interested in what I call ‘meaningful money,'” Maxwell explained. “[This] means they feel as if they are doing something meaningful that also makes money.”

Many angel investors are accredited, though not all are. Accredited investors must meet one of the following two criteria set by the U.S. Securities and Exchange Commission:

• Earnings: Accredited angel investors must have earned at least $200,000 annually for the past two years, with a strong likelihood of similar earnings in the near future. If the angel investor files taxes jointly with their spouse, their required annual earnings increase to $300,000.
• Net worth: Accredited angel investors must have a total net worth of at least $1 million, excluding their primary residence, regardless of marriage and tax filing status.

Angel investor benefits and downsides

Angel investors can bring the following benefits to your venture: 

• Passion and interest: Angel investors invest where and how they want. They assume more risk than banks or venture capitalists and aren’t beholden to banks or institutions, so they can invest their money solely as they see fit. What traditional funders view as a high-risk business loan may be a worthwhile investment to the right angel investor.
• Less borrower risk: In many cases, angel investors don’t require repayment if your startup fails, making them a lower-risk option for growing your company.
• Business expertise: Angel investors typically have ample business knowledge they can share to help your startup succeed. 

However, angel investors do have some downsides: 

• Startup stake: Angel investors often require a large stake in the startups they fund. If you accept their money, you’ll essentially own less of your company and may see reduced profits or less money if you eventually sell your business.
• Loss of decision-making power: Giving up equity often means giving up some control. Angel investors may want a say in strategic decisions. If you disagree, conflict could ensue.
• High expectations: Angel investors often expect high returns on their investments. You may feel pressured to scale faster than you’re comfortable with or employ aggressive growth strategies you don’t agree with.

What is a venture capitalist?

A venture capitalist (VC) is an individual or group that invests money in high-risk startups. Typically, the potential for the startup to grow rapidly offsets the risk of failure, incentivizing VCs to invest. After a set period, the VC may exit the investment by selling their stake, either by fully acquiring the company or selling a large number of its shares in an initial public offering (IPO).

“Most venture capitalists have extensive finance experience and backgrounds in equity research analysis,” Maxwell explained. “They are more risk-averse today, yet notoriously bet on big return potential unicorns.”

Venture capitalist benefits and downsides

Some benefits of venture capitalists include the following:

• Significant cash infusion: Venture capitalists typically supply startups with large investments. If you need a substantial cash infusion to get started, venture capitalists might be your best funding option.
• Low borrower risk: Like angel investors, venture capitalists often do not require repayment if a venture fails.
• Business expertise and connections: Like angel investors, venture capitalists have extensive industry experience and wide-reaching networks, including other investors, industry leaders and strategic partners.

However, venture capitalists do have some downsides: 

• Loss of control: Venture capitalists often require a majority stake or significant influence in your startup, which can limit your ability to make independent decisions.
• Pressure for rapid growth: Venture capitalists typically seek high returns, which may translate into pressuring startups to scale quickly. New ventures may feel pressured into unsustainable expansion, operational inefficiencies or focusing on short-term gains over long-term stability.
• Strict exit strategies: VCs typically expect a return on their investment within a set timeframe (often five to 10 years). If your business doesn’t meet their growth expectations or align with their exit strategy, such as an IPO or acquisition, you may be forced into an early sale or restructuring.

What are the differences between angel investors and venture capitalists?

As two of the most common alternative funding sources, angel investors and venture capitalists share several similarities. Both fund innovative startup businesses and often favor companies in the technology and science sectors. However, there are some crucial differences between the two.

An angel investor works alone, while venture capitalists are part of a company.

Angel investors, sometimes known as business angels, are typically wealthy, often influential individuals who invest their own money in high-potential companies in exchange for an equity stake. Because they use their personal funds — which carries an inherent risk — they are unlikely to invest in a business owner who isn’t willing to give up a portion of their company.

In contrast, venture capital firms consist of professional investors who pool funds from multiple sources, including high-net-worth individuals, corporations, pension funds and foundations. These investors (known as “limited partners”) provide capital but do not actively manage the VC firm’s investments. The firm’s “general partners” do — they’re responsible for raising funds, selecting startups and working closely with entrepreneurs to support business growth and ensure strong returns.

Angel investors and venture capitalists invest different amounts.

Typically, angels invest between $25,000 and $100,000 of their own money, though amounts vary widely. When angel investors collaborate in a group or syndicate, their total investment may exceed $750,000. 

To provide a clearer picture, here are some 2023 figures from the 2024 Angel Funders Report:

• Average investment per deal: $243,000 (median: $104,000)
• Average investment per company: $245,000 (median: $115,000)
• Average total dollars invested per angel group: $4.4 million

While angel investing can be a relatively quick solution, a more ambitious or wide-ranging startup may not get all the money it needs. 

Meanwhile, VCs can invest staggering amounts that vary widely based on a startup’s potential, needs and development stage. For a better idea of the numbers involved, here are some average deal sizes according to the AlleyWatch 2025 U.S. Venture Capital Funding Report: 

• Early-stage investments: $4.4 million
• Series A investments: $16.6 million 
• Series B investments: $37.3 million
• Late-stage investments (Series C and beyond): As high as $182.3 million  

Angel investors and venture capitalists have different responsibilities and motivations.

Angel investors primarily offer financial support. While they might provide advice if you ask for it or introduce you to important contacts, they are not obliged to do so. Their involvement level depends on the company’s wishes and the angel’s personality and methods.

In contrast, venture capitalists look for startups with a strong competitive advantage, a talented management team and a large potential market. Once they invest, their role extends beyond funding — they actively work to build successful companies.

Venture capitalists can help establish a company’s strategic direction, recruit C-suite executives and advise CEOs on future moves. 

Angel investors and venture capitalists are interested in different stages. 

Angel investors specialize in early-stage businesses, funding late-stage technical development and early market entry. Their funds can make all the difference in getting a company up and running.

In contrast, venture capitalists invest in early-stage companies as well as more developed businesses, depending on the VC firm’s focus. If a startup shows compelling promise and growth potential, a venture capitalist will be keen to invest.

Venture capitalists also seek businesses with a proven track record, ensuring they have the necessary foundation for success. Once invested, VCs provide funding to accelerate development and scale growth rapidly.

Angel investors and venture capitalists differ in due diligence.

The role of due diligence has been a topic of debate among angel investors for years. Some angels conduct little to no due diligence — and since they invest their own money, they are not required to.

In contrast, venture capitalists perform extensive due diligence due to their fiduciary responsibility to limited partners. They often spend more than $50,000 researching potential investments to mitigate risk and ensure strong returns.

When to seek an angel investor vs. a venture capitalist

Your unique venture and circumstances will determine whether an angel investor or a venture capitalist is the better funding option. Here are some general guidelines to help you decide.

You should seek an angel investor if:

• You have an early-stage startup: Angel investors are more likely to fund businesses that are still refining their models and developing their products.
• You prefer more control: Angel investors typically trust the entrepreneurs they support and are less likely to interfere in business decisions.

You should seek a venture capitalist if:

• Your venture requires significant funding: If your company has ambitious growth goals, venture capitalists can provide the capital needed to scale.
• You want access to a strong network: Venture capital firms have extensive industry connections and resources that can help expand your customer base.
• You welcome strategic guidance: Working with venture capitalists opens the door to new and often valuable insights into your strategy, leadership style and other important aspects of your business.

How to pitch to an angel investor

An angel investor may be more interested in your startup’s ideas or team than its immediate profitability. Be sure you can communicate that vision effectively. “As an angel, I was drawn to founders who had a clear, authentic vision and the passion to back it up,” said Carrie Colbert, CEO at Curate Capital. “Make sure you show them why you are the right person to bring this idea to life.”

Here are some tips when pitching to an angel investor:

• Find the right angel investor: Many angel investors specialize in a particular area, so target those with experience in your sector.
• Have a compelling sales pitch: A confident sales pitch to an angel investor should showcase what makes your team a strong bet while covering key business factors like market size, product or service offerings, competitor weaknesses, and, if applicable, current sales.
• Network in advance: Building relationships before you need funding can improve your chances of securing an investment. “Usually, by the time a founder needs capital, it is harder to secure it,” Maxwell cautioned. “Angels typically invest in areas they know and/or are passionate about, so networking in industry forums is key.”
• Tell a story to your angel investor: Brand storytelling is vital when pitching to an angel investor. They’re more likely to invest if they respond to your passion and emotion. Share how you conceived the idea, proved your concept and why your startup matters. 
• Showcase your vision:Present your ideas to the investor while showcasing your venture’s exciting possibilities. To illustrate your vision effectively:
  • Demonstrate market research and commitment to the business idea. 
  • Use visual media and show physical product mockups if you have them.
  • Highlight your team’s diverse skills, collaboration, shared vision and expertise. 
  • Impress them with a well-thought-out startup marketing plan. 

How to pitch to a venture capitalist

While an angel investor pitch leans more heavily on “the sizzle,” pitches to venture capitalists rely more on presenting “the steak,” or concrete facts and figures. “Passion matters, of course, but VCs are ultimately looking for data-driven results and a clear path to success,” Colbert explained. “Be ready to dive into the details — customer acquisition, unit economics and your long-term vision for the company.” 

Here are some tips for pitching to a venture capitalist. 

• Demonstrate how your offering solves a problem: Present the problem your company addresses clearly and why the solution is urgently needed. Show how many potential customers will demand it and back up your claims with a well-prepared business plan and pitch deck.
• Project your income: During your pitch, you’ll need a four-year projection of your company’s revenue and expenses. Your goal is to convince the VC that long-term returns outweigh short-term risks. Be ready to discuss the numbers in detail, including factors that could impact financial performance.
• Show barriers to entry: You’ll also need to demonstrate that there are significant barriers to entry, so it isn’t easy for well-capitalized companies to copy your business model and steal your market share. This evidence may include proprietary technology, copyright protection, patents or exclusive access to a coveted resource.
• Share the business’s growth potential: In addition to revenue projections, explain how your company will scale rapidly. VCs look for high-growth opportunities that can generate significant returns within three to five years. Be prepared to discuss strategies such as co-marketing partnerships, investing in new business locations and increasing production capacity.
• Be honest about what you’re lacking: If there are areas where the company is lacking in key personnel, vendor relationships or distribution, be honest. Venture capitalists often have these resources at their disposal and will want to know how they can contribute if they decide to invest.
• Focus on potential “exits”: Venture capitalists are more focused on potential “exits” than angels. “Knowing why and how you’ll exit (and get them a return) is key to communicate,” explained Maxwell.
• Don’t give up: Be well prepared, but if the answer is no, don’t give up. Learn from your experience and refine your pitch for the next venture capitalist opportunity. 

Anna Baluch contributed to this article.