Distinguish Angel Investment From Venture Capital

Angel investment is a kind of informal venture capital, which comes from the accumulation of personal wealth of angel investors.

Angel investors usually invest in early start-up enterprises in the form of equity. The average holding period is about 5~8 years.

Besides providing funds, angel investors will actively participate in the management of entrepreneurial enterprises, and guide and help entrepreneurs with their own entrepreneurial experience or professional skills.

Angel investment is mainly invested by highly developed high-tech start-ups, and the risk of investment is high. Therefore, it requires high return on investment.

In Europe and America, the average annual return of angel investment is 30% to 40%.

"Angels" usually refers to investors who invest in very young companies to help these companies launch quickly.

In the field of venture capital, the term "angel" refers to the first batch of investors of entrepreneurs who invest funds before the company's products and businesses are formed.

Angel investors are usually entrepreneurs, entrepreneurs, friends, relatives or business partners. Because they believe in the entrepreneur's ability and creativity, they are willing to do so before the business is far from coming in.

Characteristics of venture capital:

1, the investment targets are small and medium enterprises in start-up, and most of them are high and new technology enterprises.

2, the investment period is at least 3-5 years or more. The investment mode is generally equity investment, which usually accounts for about 30% of the invested enterprises.

3, investment decisions are built on highly specialized and procedural basis.

4, venture capitalist generally actively participates in the management and management of the invested enterprises and provides value-added services. Besides the seed, the risk investors generally satisfy the financing needs of the invested enterprises in different stages of development.

5, since the purpose of investment is to pursue excess returns, venture capitalists will withdraw capital by means of listing, merger and acquisition or other equity pfer, and realize value added.

Characteristics of angel investment:

Usually, angel investment does not have a high expectation of return, but 10 to 20 times returns are enough to attract them. This is because they decide to invest in 10 projects in one industry at the same time, and only one or two projects can be successful. Only in this way can angel investors share risks.

Its characteristics are as follows:

1: the amount of angel investment is generally small, and is one-time investment, it is not strict to the risk enterprise's examination.

It is more based on the subjective judgment of investors or on the personal likes and dislikes.

Usually, angel investment is invested by one person, and it is easy to get good results.

It's an individual or small business activity.

2: many angel investors are entrepreneurs themselves and understand the difficulties faced by entrepreneurs.

Angel investors are the best financing targets for start-up companies.

3: they are not necessarily millionaires or high-income people.

Angel investors may be your neighbors, family members, friends, company partners, suppliers or anyone willing to invest in the company.

4: angel investors can not only bring capital, but also bring contact network.

If they are celebrities, they can also enhance their reputation.

Angel investment is often a kind of participatory investment, also known as value-added investment.

After investing, angel investors often participate in the strategic decision and strategic design of the invested enterprises, provide advisory services for the invested enterprises, help the inviting enterprises to recruit managers, assist public relations, design exit channels and organize enterprises to exit;

However, different angel investors have different attitudes towards management after investment.

Some angels invest and actively participate in post investment management, while other angel investors do not.

Angel investment is a member of venture capital family, but it has the following differences compared with the conventional venture capital.

First, investors are different.

Angel investors usually exist in the form of individuals.

Two, the amount of investment is different.

The investment of angel investment is relatively small. In China, each investment amount is about 50 thousand US dollars to 500 thousand US dollars.

Three, the procedure of investment review is different.

Angel investment is not very strict in the examination of entrepreneurial projects. Most of them are based on the subjective judgment or preferences of investors. The procedure is simple, and investors generally do not participate in management.

Four, angel investment pays more attention to providing value-added services.

For angel investment, there are still many non economic factors in its investment motivation besides the economic benefits of investment.

These non economic factors mainly include the desire to teach entrepreneurial experience, the enjoyment and passion, the establishment of interpersonal networks through investment, the challenge of their minds, the ability to maintain an agile business thinking, and the creation of social welfare through investing in the health industry.

Of course, different angel investors will have inconsistent economic pursuit.