Key Takeaways
- Angel investors are typically wealthy individuals who invest early in startups and sometimes act as mentors.
- Venture capital firms typically invest larger sums of pooled money in more developed startups.
Full text
Two common sources of investment for startups are angel investors and venture capitalists. Both invest money into businesses and take calculated risks.
Angel investors are typically accredited investors, meaning they have a minimum net worth of $1 million and an annual income of at least $200,000 pursuant to current regulations (which may change from time to time pursuant to SEC rules and regulations). Angel investors are often family and friends of founders and are more focused on helping build someone’s business. They are more likely to invest earlier in businesses that are starting out and can sometimes act as mentors.
Venture capitalists are typically people or firms who invest in small companies using pooled money that is not their own. They typically invest once a business is more established. They often invest more money but expect higher returns.
Startups will likely approach both kinds of investors in search of funding over the course of their lifecycle. Having an experienced startup lawyer may be helpful in navigating various forms of investment.
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