Comparing Angel Investors to VCs

Earlier today I was talking to an entrepreneur that was thinking about raising money. His technology startup is near break-even and he sees a market opportunity to accelerate growth. We talked for a bit about his sales and marketing progress before jumping into fundraising. After I asked about pre-money valuation, current revenue run rate, and amount he wanted to raise it was clear he hadn’t thought through the differences between raising money from angel investors vs. venture capitalists. Here’s what I offered up:

• Angels are typically more hands-off while VCs typically take a seat on the board and are hands-on.
• Angels are typically happy with a 3-5x return while VCs focus on results with 8-10x returns.
• Angels are typically satisfied with dividends providing some liquidity while VCs want profits reinvested to maximize growth.
• Angels typically don’t make big investments while VCs can provide significantly more equity.
• Angels typically don’t have as many strings attached with the investment (e.g. anti-dilution, liquidity preferences, etc) compared to VCs.
• Angels typically want to invest an amount they’re comfortable with (say $50K) without budgeting for follow-on investment. VCs however, start with an amount (say $1M) and want to put more money to work in the same company in later rounds (e.g. plan for several rounds of financing with the VC route)

These were most of the main points that I thought he should consider. My recommendation for entrepreneurs looking to raise money is to truly understand the differences between typical angel and VC investments.

What else? What other differences between angel investors and VCs would you note?