What is Venture Capital?

Venture capital ("VC") is a type of private equity financing that investment firms provide to startups and small businesses that are deemed to be high potential or have demonstrated rapid growth.  Venture capital firms raise capital from limited partners ("LPs") to create funds out of which they invest in early-stage startups and entrepreneurs.  Limited Partners can include institutional investors, family offices, and high net worth individuals. VC firms make money through management fees (2.5%-5% of the total fund raised from LPs) over the life of the fund and from selling their equity stake in the startup if/when the company is acquired or goes public.

In layman's terms, VC firms invest other investors' money into startups in exchange for equity or convertible notes. They are responsible for managing the portfolio of startups they invest in. 

VC financing can be provided at various stages of a startup's evolution from pre-seed to Series E.  Check sizes can range from \\\$50,000 to \\\$500,000,000 depending on your stage, industry, and company.  More does not necessarily mean better.

Although sector- and stage-agnostic venture capital firms do exist, most venture capital firms tend to specialize in specific industries (e.g. AI/ML, SaaS, healthcare) as well as a section of the startup evolution journey (e.g. seed to Series A, or Series B and higher).  Consider these factors when identifying which investors and VC firms you talk to for your own startup.

What is Angel Investing?

Angel investors tend to be high net worth individuals who are often the first to invest in an entrepreneur's venture, hence why they are called "angels."  Entrepreneurs often seek angel investments when their business venture has not yet been proven and are deemed "too risky" by other investors i.e. venture capital, private equity, bank loans.

Angel investors tend to invest their own money into these ventures in exchange for equity or convertible debt, more often the latter.  Convertible debt (or "convertible note") is a type of bond, where the holder (in this case, the angel investor) has their loan paid off at the next round of financing by converting the loan into equity, often with a capped valuation.

Convertible notes are often used at the earliest stages of venture investing (angel, pre-seed, and seed rounds) when risks are high and valuation of the company is less clear. Angel check sizes tend to range from \\\$25,000 to \\\$100,000.

Check out this post​​​​​​​ to see a list of VC firms and Angel investors who are well versed in helping hardware startups.