Should I Go After a VC, or an Angel?
Just finished a 2-hour skype call with Tehran talking to one of the Iranian tech startup founders in the mobility domain. A smart young man, nice business model, good use of planning and phasing the growth. The founder of this startup is looking for $500,000US funding to be spent over the next 12-18 month.
One of the questions that he had was “should I go after angels or VCs?”
Here is a bit of guidance…
Both Angel Investors and Venture Capitalists hold private equity from having made investments directly into private companies.
Angel Investors are individuals, often successful business people, who are investing their own personal money into a potentially rewarding business opportunity. Whereas Venture Capital is invested by firms or companies that use other people’s money.
The fact that business angels are using their own money and venture capitalists are using other people’s, affects their overall profile, some of them being:
Business Angel Investor
- Investing his/her own money: $10k – $100k, sometimes co-funding with other angels for bigger investments (e.g. Series A/B)
- Invest at early-stage (when the risk is the highest); focus on product development, test the market, etc.
- Usually, have contacts and network to support the business strategy
- Can be hands-off or hands-on
- A company or business rather than an individual: $1.0M+
- Invests at the Series A/B/C i.e. growth phase
- Seldom interested in early-stage, unless compelling reasons (eg. high tech with already successful founders)
- Have contacts and networks
- Require seat on board and brings in auditors and people to make sure their investment is well managed
- Usually demands sophisticated investment terms e.g. KPI driven staged-investment, veto rights, etc.
Generally, if the business is at an early stage then Angels are the preferred options for funding. Venture Capital firms may come on board at a later stage when the concept is proven and initial revenues obtained in order to more quickly expand the company.
My recommendation: Seek smart-money; bring in an angel who can help with funding, but also complement your team in a domain of knowledge/expertise that your team lacks; give him/her a non-executive board position and involve him/her as much as you can in the planning and business strategy discussions. The right angel could also help negotiate with prospect VC in future funding rounds.
Contact us if have doubt about funding your startup.
Tags: #IranStartup #VentureCapitalVersusAngel #TehranTechStartup #InvestIranTech
A community builder, facilitator, startup mentor and angel investor. Koorosh has inspired and built teams in Canada and the UK as well as several emerging markets. He consults with VCs, funds, angel groups and startups on funding, financial planning, deal structuring, niche validation, pivoting, and go-to-market strategy.