Angel Investor Groups vs. Venture Capitalists

Previously on My Blog…Individual Investors vs. Investor Clubs…

That sounds like the first line of a really boring Netflix Original Series.

But it’s not for 3 reasons:

  1. Netflix is awesome and does not do boring!
  2. I’m actually talking about my previous post “Individual Investors vs. Investor Clubs.”
  3. “Individual Investors vs. Investor Clubs” is a boring post, but if you’re reading this one you will probably like that one, too. It’s all about Individual Investors vs. Investor Clubs. Who knew?!

This time let’s talk about Angel Investor Groups vs. Venture Capitalists and how you can understand and work with both. I’m trying to keep it short here so ask questions in the comment section below if you want to dive in deeper.

Angel Investor Groups:

Typically more sophisticated than Investor Clubs, Angel Groups often have a professional business analyst or investment advisor leading the group. Angel Group members typically commit dollars to the group and act as one with the group. If the group decides to invest, everyone invests. The goals of the Angel Group are to build a diversified portfolio and collectively own parts of multiple businesses at one time.

Tip: Be prepared to present your business on their terms. This often means completing worksheets that capture the details about your business in a standard format so they can compare your opportunity with others they are considering. Again, relationships always matter. Yet with Angel Groups you will start feeling more of a data driven approach and less relational warmth. This is not a bad thing. Just be ready to strengthen the interpersonal relationships whenever you can by communicating well in your live pitch, professionally on the phone, and clearly and concisely in emails. They need good data to make a decision. You need to make sure they feel that you actually care about their success as a group and as individuals.

Venture Capital:

Now you are playing in the startup big league. Venture Capitalists (VCs) can be individuals, groups or huge international corporations. They are typically very sophisticated investors often with thousands of opportunities. VCs have the big pile of cash and get the biggest number of “asks.” But don’t let this scare you. You’ll get their attention if you have the right business in the market space and they feel you have a strong chance for growth. VCs often require that you have strong and sustainable income or a strong and sustainable user following before they want to talk. They simply don’t want or need to take chances on early stage businesses that don’t have a customer base. They want to invest in you and your team once you have proven that you can use money and resources well to get market traction or revenue.

Tip: Go in strong, confidently, and as a nice person. You already are a nice person so you’ve got this! They are still real people with weekend plans, dogs to walk, and a list of things to pick up at Whole Foods on the way home. The difference is that VCs have different requirements that need to be addressed before they can move forward. Help them get there. Make their job easy. Find out what they need and get it done. They may turn you down, but often it’s only because you are not able to meet their requirements yet. YET! Stay with it and keep them in the loop as you grow. Make them part of your story. They need to know there is an upcoming chapter in your book that has their name in the title.

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