...NAME: SIMENI ENEYI GABRIEL DEPT: ECONOMICS TOPIC: DIFFERENCE BETWEEN VENTURE CAPITALISTS AND ANGEL INVESTORS EMAIL: gabrielsimeni@gmail.com DIFFERENCE BETWEEN VENTURE CAPITALISTS AND ANGEL INVESTORS Both are affluent individuals who provide capital for a business start-up, usually in exchange for convertible debt or ownership equity. However, they differ from Friends and Family who will typically invest very early when all one has is an idea. The prevailing challenge is people would rather invest in the company rather than the individual. In this regard, it is okay to say that Angel Investors look for same things as Venture Capitalists, but their differences play a hard role in shaping the financial strategies and the future of the business. Venture Capitalists are one way to raise serious amount of capital but as you may imagine there are pitfalls. The final vote on ‘the right of sale’ will also most probably be a mandatory right for them. Since Venture Capitalists main motivation is “Return on Investment as Soon as Possible” they always have an almost manic desire to take over every entrepreneur as quickly as possible and they care less where that return comes from as long as they are able to receive a massive bonus for the risk and skill that they have invested. More appealing to an entrepreneur starting-up is to seek out a business angel investor that is interested in the line of work you are involved in, as they will either take an equity position...
Words: 1601 - Pages: 7
...Entrepreneurial Finance MN50577 Case Study: Angels in British Columbia Presented to Dr. Christos Kolympiris By Kreangkai Suktavorn ID: 159180705 Words : 998 Semester 2/2015-2016 Angels in British Columbia The primary objective of this report is to provide a recommendation for change in existing British Columbia tax programs. The principle of these proposals is to increase qualifying angel and venture capitalist investment to encourage economic growth and development, as well as preventing market failure in BC. In this report, an analysis of the VC programs will be demonstrated, and it will select “Simplify” option as a recommendation for change. BC's economy heavily bases on the creation of new small business and expansion of existing ventures. These SMEs represented 98% of all business in the province. To enhance and diversify BC’s economy, the Investment Capital Branch administrated Equity tax credit program. There were four major equity tax programs, which are (1) Employee Venture Capital Corporations (EVCCs), (2) Retail Venture Capital Corporations (Retail VCCs), (3) Angel VCCs, (4) EBC program (see Table 1). Table 1: Overview of BC Tax Credit Programs We conclude that Venture Capital programs are fundamentally beneficial to both federal and provincial governments. This conclusion bases on two reasons: (1) firms in VC programs generate more taxes than they utilize equity tax credit, and (2) firms continually create new jobs. However...
Words: 1230 - Pages: 5
...Create a Wholesale Enterprise for Gram Vikas: The business success of a social enterprise lies in the self-sustainability; however, Gram Vikas is under financial distress and is highly dependent on often-delayed government grants and decreasing donations. These situations restrict Gram Vikas’ ability to expand its societal impact, and further undermine the creation of social value to the target stakeholders. (Nicolas Pless). To make Gram Vikas more sustainable and less reliant on donor money, while not restricting the access to original funding streams such as Government grants and donations, a stand-alone profit-generating company could be set up to ensure a more steady revenue stream for Gram Vikas. This stand-alone company would complement current GV’s activities and help both GV and the villagers sustain their income revenues. Thereby proposing a wholesale enterprise that integrates the distributing process for household individual income generating activities. Business Description: Currently, GV provides skill-building activities and advices on sustainable forestry, agriculture, and livestock husbandry to ensure food security and generate additional income for the villagers. Plantation of agriculture commodities, such as cashews, pineapples, mangos, jackfruits and vegetables is highly encouraged by GV, as these crops enable a steady source of income. (p.6) On top of that, many families have started income generating activities with the loans from Self-help Groups...
Words: 913 - Pages: 4
...Angel and Venture Capitalists Mildene Faulkner Angel vs Venture Angel investors and venture capitalists operate in the same market, but they both provide a different type of service. The two depend on each other to make business work. These types of investors would be looking to make money fast by investing in someone else’s idea. Entrepreneurs need the financial backings to start up their business and constant set of investor to keep it going thru the start phrase. With Angel investors and venture capitalists, startup businesses had a sure change on thriving in a tough economy. The person who comes up with the idea to start a business would usually need a sales pitch. They would tend pitch the idea to a group of business people who had money. Angel investors would be in charge of the funding the initial startup of the business. Angel investor usually invests their own to startup a new business. Angel investments are high risk and usually are subject to dilution from future investment. Angel investors also require a very high return on their investment. Angel investors are usually often retired entrepreneurs or executives, who may be interested in angel investing for reasons that go beyond pure monetary return. In order to really keep the business going, angel investors seek venture capitalists to provide more financial backing. Venture capitalists are a group of business that provides funds to early stage, high potential, high risk growing startup companies. The venture...
Words: 400 - Pages: 2
...points to see patterns clearly. What we're seeing now, everyone's probably going to be seeing in the next couple years. So I'm going to explain what we're seeing, and what that will mean for you if you try to raise money. Super-Angels Let me start by describing what the world of startup funding used to look like. There used to be two sharply differentiated types of investors: angels and venture capitalists. Angels are individual rich people who invest small amounts of their own money, while VCs are employees of funds that invest large amounts of other people's. For decades there were just those two types of investors, but now a third type has appeared halfway between them: the so-called super-angels. [1] And VCs have been provoked by their arrival into making a lot of angel-style investments themselves. So the previously sharp line between angels and VCs has become hopelessly blurred. There used to be a no man's land between angels and VCs. Angels would invest $20k to $50k apiece, and VCs usually a million or more. So an angel round meant a collection of angel investments that combined to maybe $200k, and a VC round meant a series A round in which a single VC fund (or occasionally two) invested $1-5 million. The no man's land between angels and VCs was a...
Words: 625 - Pages: 3
...Walnut Venture Associates: Case Questions (HAND-IN) (1)Angel investors are affluent individuals who provide capital(money) for a business start-up. Angel investors usually receive convertible debt or ownership equity in return for their investment. Angel investors are different from venture capitalists since angels typically invest their own funds meanwhile venture capitalists manage pooled money of others in a professionally-managed fund. There are 2 forces exacerbating the trend towards the prominence of angel investing which include the fact that a generation of entreprenuers had “cashed out” and were looking to utilize their wealth and expertise by investing in start-ups, and that venture capitalists usually deployed capital in larger amounts that $1 million or below. An entrepreneur would seek financing from an Angel because Angels not only have the money to help finance the company, but they also have knowledge and experience that is very helpful to start-ups. The experience and track record of Angels (who usually have started their own company, served as a CEO, etc) is an asset that can’t be matched by a venture capitalist. Part of the reason of this again is because the Angel investor is investing his or her own money, something that will truly incentivize the Angel do to everything in his or her power to make the company succeed. 1) What is your first impression about the RBS opportunity based on the business plan? My first impression about the RBS opportunity...
Words: 482 - Pages: 2
...their variability easily. B) EndoNav has not many competitors rather it has no competitor who is offering that kind of device. Since OTS devices reduce the risk associated with the procedure that will help EndoNav in getting Regulatory approval. EndoNav has a target market of teaching hospitals, where barriers to entry are very low, where getting a feedback is easy. EndoNav also planned to target HMO’S, who are early adopters of new technology. C) As far as fund raising strategy is concerned they need to focus on Pitching first then go for business plan. They should reduce the time-to-market span. They need to focus on bootstrapping the finances required to get in to the market. So that they can go to angels rather then VCs. EndoNav need changes in its investor presentation in different aspects. One is It should not put too much information in the presentation. Don’t put too much technical details in the presentation. EndoNav needs to follow 10/20/30 rule. Means ten slides, Twenty minutes and 30 point font. EndoNav should ensure that the plan is properly integrated with the real-world knowledge, with less jargons and list...
Words: 1234 - Pages: 5
...beverage sector. Their unique idea of a microbrewery and fine dining restaurant stemmed from a law amendment of California in 1983 which allowed brewing and serving of beer in the same locale. They envisioned the concept of providing high quality fine dining with outstanding service in an attractive ambiance featuring exceptional German-style lagers in on-site breweries. Their target market was the fairly sophisticated, yet not so young natives of Palo Alto as well as the Stanford University faculty, staff and graduate student body. Their unique idea came to realization in July 1988 after rigorously detailed planning pertaining to atmosphere, food selection and German-style brewery. The capital was raised by the contribution of five investors, (Dean’s family friend...
Words: 5459 - Pages: 22
...Angel investments bear extremely high risk and are usually subject to dilution from future investment rounds. As such, they require a very high return on investment.[9] Because a large percentage of angel investments are lost completely when early stage companies fail, professional angel investors seek investments that have the potential to return at least 10 or more times their original investment within 5 years, through a defined exit strategy, such as plans for an initial public offering or an acquisition. Current 'best practices' suggest that angels might do better setting their sights even higher, looking for companies that will have at least the potential to provide a 20x-30x return over a five- to seven-year holding period.[10] After taking into account the need to cover failed investments and the multi-year holding time for even the successful ones, however, the actual effective internal rate of return for a typical successful portfolio of angel investments is, in reality, typically as 'low' as 20-30%.[11] While the investor's need for high rates of return on any given investment can thus make angel financing an expensive source of funds, cheaper sources of capital, such as bank financing, are usually not available for most early-stage ventures, which may be too small or young to qualify for traditional loans. Profile of investor community The term "angel" originally comes from Broadway where it was used to describe wealthy individuals who provided money for theatrical...
Words: 817 - Pages: 4
...couple hundred thousand dollars, not a couple million. [1] The opportunity is a lot less unexploited now. Investors have poured into this territory from both directions. VCs are much more likely to make angel-sized investments than they were a year ago. And meanwhile the past year has seen a dramatic increase in a new type of investor: the super-angel, who operates like an angel, but using other people's money, like a VC. Though a lot of investors are entering this territory, there is still room for more. The distribution of investors should mirror the distribution of startups, which has the usual power law dropoff. So there should be a lot more people investing tens or hundreds of thousands than millions. [2] In fact, it may be good for angels that there are more people doing angel-sized deals, because if angel rounds become more legitimate, then startups may start to opt for angel rounds even when they could, if they wanted, raise series A rounds from VCs. One reason startups prefer series A rounds is that they're more prestigious. But if angel investors become more active and better known, they'll increasingly be able to compete with VCs in brand. Of course, prestige isn't the main reason to prefer a series A round. A startup will probably get more attention from investors in a series A round than an angel round. So if a startup is choosing between an angel round and an A round from a good VC fund, I usually advise them to take the A round. [3] But while series...
Words: 4010 - Pages: 17
...customer bases to potential investors, companies in their initial stages often cannot. This poses the challenge of obtaining capital sources from entities that may or may not have many reasons to believe in a new company’s ability to perform. However, despite the extensive challenges, there are multiple potential sources of capital that entrepreneurs can strive to obtain. Whether relying on smaller players like friends and family or crowd funding, or reaching out to larger, institutional investors such as angel investor networks or venture capital firms, business owners do have options when it comes to finding the capital they need to get their business off the ground. However, some routes make more sense than others depending on the specific company’s situation and objectives. Typically, a new business begins with something very simple: an idea. Sometime the individual spends years developing and tweaking the idea, and other times it simply comes to them in an instant. However it comes, once it does the entrepreneur needs to begin turning that idea into a more tangible concept. This almost always requires capital, whether for manufacturing a product, developing software, or hiring outside consultants to help develop the idea. There are many ways to acquire this capital. According to TechAloo, 63% of start-up phase funding comes from self financing and friends and family, 22% from banks, 9% from state finance corporations, 3% from angel investors, and another 3% from venture...
Words: 1878 - Pages: 8
...Johnson Angel Investments Investment Criteria Investment Size We typically do not invest in companies seeking early stage capital). Our investment size ranges from $100K - $250,000. Anything over $250,000, we will need additional angel investors before we will invest in the entrepreneur’s idea. The investments must show great promise for return. If we feel as though the investment does not have the upside of 10% or higher than we simply are not interested. If the concept is not proven, and if they don’t have more than $100,000 a year in sales, we will not invest in the business venture. Location Generally near our home base. We need to be able to visit the business venture from time to time. So location is a key to the investment Management Team At Joe Johnson Angel Investment, LLC, we are looking for quality management teams that have a high quality track records working with entrepreneurs. We need to see that that the leadership qualities and performance in the companies that we invest in, whether they be in specific industry or other entrepreneurship teams, have high standards and great accounts. We will consider investing in management teams with limited experience but the teams must be able to display great leadership qualities. We also want to see that a team has passion and heart whenever they bring forth a business idea. There needs to be a way to prove that the team can stimulate confidence in the future stake holders. They also need to be able to...
Words: 1096 - Pages: 5
...LAZARSKI UNIVERSITY Bachelor of Arts in Business Economics Introduction to business Research project on the topic What is entrepreneurship? Done by group Zamość Kohutnytska Olha 39094 Anastasiya Shkut 38599 Tetiana Revenko 38771 Patrycja Kornet 38396 Marta Zając 38135 Warsaw 2014 What is entrepreneurship? Our main goal was to find out who can become entrepreneur and how people from varied backgrounds pursue entrepreneurship. Moreover, we had to make some conclusions about key findings from project. We asked five people from different countries about their business, customers and challenges with which they faced. Let us introduce the first entrepreneur. #1 Monika Karkowska Our first entrepreneur has her own oculist clinic and a shop in Zamość. We interviewed Monika by the personal meeting on October 16th. Monika has been working as an oculist for 5 years. She studied medicine in Lublin and in 2005 received her diploma. During her studies, she had already known that she wants to start her business, so after studies she found a place and established a little optical clinic, where she checked people’s vision. ‘In the first months of working, I had a wide range of tasks: get a credit, get contacts with new partners and make some advertisements,’ – she said. Moreover, she felt a need in getting more medical certificates, to be more competent in her occupation. When Monika got a credit, she doubted whether it was a good idea, because usually everything develops...
Words: 2266 - Pages: 10
...Timbuk2 began like many entrepreneurial businesses—it was started by someone whose need wasn’t being met by the marketplace. A San Francisco bike messenger designed a rugged and stylish shoulder bag to carry during his workday. It was so popular with friends and acquaintances that he soon quit his job to start making the custom bags. The new company attracted devoted customers among young professionals both male and female—and fellow bike messengers—but within a few years it was nearly bankrupt. Backed by private investors and a venture capital firm, Mark Dwight bought Timbuk2 a few years ago and swiftly turned the company around. It now produces more than 30 different products, and its San Francisco factory turns out a bag every 15 minutes. Business has been so good that Timbuk2 recently distributed a total of $1 million in bonuses to its 40 non-management workers to celebrate a banner year with sales of more than $10 million. Production has doubled; more than 1000 specialty retailers in the outdoor, bicycle, and personal computer markets carry Timbuk2 bags nationwide. The company’s e-business arm has tripled in size. Most important, the firm now operates with a positive cash flow and is solidly profitable. When he bought the ailing form, Dwight knew he would have to bring in experienced managers and impose a carefully thought out vision for the future. He put together a team of industry veterans and with their help mapped out a detailed five-year plan that...
Words: 320 - Pages: 2
...Ice Delights Case Study 1. Evaluate the “Deal” as it is presented in the case As outlined below, ICEDELIGHTS is willing to provide an acceptable option to the franchisees due to their inability to commit to the venture immediately. The revisions to the deal allow the franchisees flexibility in their timeline for raising capital and financing the deal. Regardless of the timeline, the situation presents a concern with the franchisees ability to raise the amount of capital required to open their first three stores in a timely manner. • ICEDELIGHTS did not want to be legally bound to the Florida franchise because they felt they might not have sufficient resources to accommodate the franchisees. • A deal was proposed that would provide the franchisee and franchisor security o Pay $200,000 up front for development fees and franchise fees for the first five stores o Pay $20,000 per store opened after the first five stores o Pay a 5% royalty on sales • ICEDELIGHTS would then allow the franchisees to use their brand name and product, would train the franchisees and one manager per store, and would provide support for finding locations and construction of the stores. • The deal would come with an option because of ICEDELIGHTS inability to commit to the Florida franchise up front o The franchisees would make a deposit of $75,000 up front o The remaining $125,000 up front charge would not be owed until ICEDELIGHTS provided...
Words: 1696 - Pages: 7
