What Is the Difference Between Angel Funds, Micro Funds, And VC Funds?
Startups often raise funds. When your startup raises funds, you surely want to get optimal benefits. For this, you need to focus on finding the right investors. It is essential for the startups to know the differences between different types of funding groups who can help in raising funds for business development and growth.
Angel funding comes from sole investors as an individual or as a team. They use their private funds to invest in a startup business. These investors usually make smaller investments at the early stages of funding round, which ranges anywhere from $10,000 to $250,000. The options of investment structure for angel investors are broad, but deals are often time structured as equity, convertible note, or even a safe note.
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A majority of the angel investors are accomplished entrepreneurs, corporate managers or business professionals interested in the potential growth of startup businesses. They make investments in the early-stage startups, fund their technical development at later stages and support their early entry into the market. They usually invest for up to five years and may exit the investment after this period.
Micro VC Funds
Micro or small funds are invested at the early seed stage in the startup companies. However, the number of micro funds provide is more than angel funds and less than traditional venture capital. The micro VC funds are generally between 25 and 50 million, though at times they may be smaller or larger. This funding can be labeled as a part of a series A funding round.
The typical value of micro VC funds writes checks between $25K to $500K. The micro VC funds make investments on behalf of third-party limited partnerships. Micro VC investors may focus on investing in B2B startups and lean more towards their own area of expertise. Through Micro VC funding, they may also show it as a proof point for raising more significant VC funds.
Venture funds or venture capital (VC) is an entirely new level of funding which arrives at the later growth stage of the startup. At this point, the startup has developed and exhibited its product worth in the market. A VC fund comprises of pooled money from the influential or established group of businessmen or investors to fund an emerging startup.
The amount of VC checks is the biggest of all other investment types. It can range from anywhere between $1 million to 5 million and can even go beyond this depending on business requirements and VC investor decisions. VC investors tend to make investments in a startup business at a later growth stage for at least ten years before they decide to exit. They look for companies who already have some recognition in the market, and their business already has significant traction.
Whether you are seeking angel funds, micro-funds or VC funds, the choice depends on different factors and stages of development your startup business is undergoing. As every company is unique, there is no determined rule which dictates that you seek a specific type of capital at a particular business stage.