Startups need money and resources to grow and expand. Without
enough capital, it’s hard for startups to develop products,
research markets, and hire new team members. Fortunately,
venture capital injects funds into startups and small
businesses that have high growth potential.
Therefore, raising money through venture capital will keep a
company afloat and help it expand. Furthermore, venture
capital doesn’t have to be money. Venture capitalists will
also provide managerial assistance, technology, and other
Find out more about venture capital and how it helps startups
What is Venture Capital?
Venture capital (VC) is an investment fund that’s managed by
an investment firm. The firm generates a pool of revenue and
invests in startups for periods of 8 to 12 years. With venture
capital, the goal is to purchase a stake in the company and
profit after the company grows.
Venture capital is also used in other ways. While it’s
effective for helping new startups, venture capital is also
used during later funding stages (like Series A or Series B)
to help firms expand. Venture capital is used during later
stages because more money is raised through venture
capitalists than angel investors.
When do Startups Need Venture Capital?
Venture capital is not necessary for the early rounds of
funding, like pre-seed and seed rounds. This is because
venture capitalists shy away from companies that don’t show
evidence of growth. Venture capitalists want to help companies
expand for a percentage of the profits and many firms plan to
exist within a set period.
To attract the attention of venture capitalists, your startup
needs to be past the pre-seed and seed rounds. Once you enter
the Series A and Series B funding rounds, venture capitalists
begin to take interest.
There are some cases where venture capitalists invest in
startups early. These situations are rare and most likely to
occur when you use a reputable database like AngelMatch.
What are the Benefits of Venture Capital?
Venture capital comes with many benefits that you won’t find
with angel investors. Furthermore, you don’t always have to
pay venture capital back. This is what makes it attractive to
startups and other small businesses.
The benefits of venture capital are listed below.
- Venture capital is legitimate and regulated
- No obligations for repaying the investment
It’s easier to find venture capitalists than to secure
other types of funding
- Venture capitalists offer knowledge and experience
It helps expand companies overseas and into other markets
What are the Drawbacks of Venture Capital?
Venture capital is one of the best assets for an expanding
startup. That said, it’s not perfect. In fact, you’ll notice a
few flaws you find in other fundraising methods.
These flaws are listed below.
- Reduced ownership and control over the company
Venture capitalists will often redeem investments within a
shorter period of 3-5 years, which places financial strain
on the startup
It takes a long time to secure venture capital funding
It’s hard to find venture capitalists without a resource
Venture capitalists will take a long time to process a
request and get you an answer
What are the Most Well-Known Venture Capitalist Firms?
Several well-known venture capital firms exist. However, some
are more prestigious than others. Depending on the startup,
these firms will invest generous amounts of capital.
Unfortunately, getting in touch with them is challenging, and
reaching an agreement is even harder.
Below are the most reputable and well-known venture capital
- Accel Partners
- New Enterprise Associates
- Andreessen Horowitz
- Lightspeed Venture Partners
- Khosla Ventures
- Index Ventures
- Union Square Ventures
- Founders Fund
- Fred Wilson
- First Round Capital
Depending on your startup, it’s possible to receive funding
from larger firms during the seed round of funding and Series
A round of funding. Still, startups in the Series B round of
funding are more attractive to venture capitalists.
What is an Angel Investor?
An angel investor is someone who invests their money into a
new startup or small business. In some cases, angel investors
will fund startups by pooling their money together in groups
to raise more capital.
Angel investors differ from venture capitalists because
they’re not affiliated with large firms and contribute less
money (on average). These investors will fund a startup until
it begins to generate revenue without their help. From there,
larger investments are sometimes made.
When do Startups Need Angel Investors?
Startups need angel investors in the beginning phases of a
startup. Many angel investors prefer to invest in startups
that are in the seed round of funding. However, some angel
investors will invest during the pre-seed rounds.
Angel investors have less money than venture capitalists (on
average) because they’re not affiliated with a firm.
Therefore, angel investors want to make the most of their
investment by buying in early.
Unfortunately, angel investors are challenging to find,
especially without a network. Fortunately, AngelMatch gives
you access to hundreds of reputable angel investors.
What are the Benefits of Angel Investors?
Angel investors offer unique benefits you won’t find anywhere
else. For example, angel investors are known for making quick
decisions and moving faster than venture capital firms.
We’ll take you through the benefits of angel investors below.
Angel investors make quicker decisions than venture
They make it easier to learn about contracts and will
provide them for you
Payment with interest is not necessary because many angel
investors look for equity instead
Angel investors are easy to find with the right network
When a startup receives funding it intrigues other
companies and investors, which leads to more capital
- Some investors add credibility to a startup
- Flexible agreements
Funding is provided during the pre-seed and seed rounds of
- Less risk-averse
Overall, angel investors provide capital faster and with less
red tape. However, you need to do your due diligence and
verify them. That said, angel investors are great for early
rounds of funding and supply capital during periods where
venture capitalists won’t.
What are the Drawbacks of Angel Investors?
Using angel investors is the only option for many startups but
it’s not always the best choice. Unfortunately, many risks
come with using angel investors.
We’ll take you through these risks below.
- Reduced availability and hard to get in touch with
- Angel investors aren’t always regulated
There’s always an option for angel investors to convert
debt to equity
Angel investors enter investments believing that growth is
Roles are unclear and founders might lose control of the
Limited support and guidance outside of financial
Who are the Most Well-Known Angel Investors?
There are a few people that come to mind when referring to
angel investors. These individuals are some of the
most well-known investors in the industry, so their reputation
isn’t something you need to verify. While they might be harder
to connect with, they’ll invest in the right startups.
Some of the most well-known angel investors are listed below.
- Jason Calacanis
- Naval Ravikant
- Fabrice Grinda
- Dave Mortin
- Keith Rabois
- Dave McClure
- Mark Cuban
- Matt Mullenweg
- Benjamin Ling
- Ron Conway
While these are some of the most popular angel investors,
they’re not the only ones. Using a network like AngelMatch
will help you connect with thousands of angel investors.
Raise Capital Today
Raising capital for a startup isn’t easy, especially if you
don’t have a lot of money. Furthermore, it’s even harder if
you don’t have wealthy friends or family members. In these
cases, angel investors and venture capitalists are your only
hope. Unfortunately, matching with investors has always been a
Luckily, the process doesn’t have to be challenging or
time-consuming anymore. AngelMatch makes it easy to match your
startup with some of the most well-known angel investors.
Plus, finding investors is quick and painless. Give AngelMatch
a try and watch your idea come to life.