Angels are high-net-worth individuals who invest in private companies. According to SEC guidelines, these people are "accredited" investors, who must have a net worth of at least $1M or earn >$200K annually. The typical angel invests between $25K and $100K at a time in one company. Angel financing is most practical when the entrepreneur needs <$500K and can wait to raise more significant funds from venture capitalists later on. $500K or less may be what is needed to secure license agreement, CEO, etc. The best angels to have as investors are those who have started their own companies in the past in your industry and can give you valuable guidance. They can help recruit people, raise additional funding, help to identify customers, and prepare for negotiations. Often Scientific Advisors and Board of Directors will be a company's angel investors.

Angels will occasionally form networks or groups that may meet regularly to review potential investments. These groups tend to be local associations of angels who meet regularly to hear entrepreneurs pitch their ideas and to discuss investment opportunities. In most cases, an individual member will pre-screen a startup on behalf of the group. Each angel in the group decides independently whether to invest in a particular deal and can be an active or passive investor.

Venture Capital (VC):

Venture capital (VC) is most commonly referred to as a type of investment in which the individual investor or group of investors assists in the further expansion of a rapidly growing company or a commercial organization that will require a lot of capital to get going, which is most often called a start-up company. VC is also known as risk capital. Since this capital is invested, typically, by an outside group, individual or business, who is not directly involved in the overall operation and management of the business, the added risk of a large-scale investment increases. These firms often provide more than just money to start up companies and can serve as advisors, helping to guide a new company through many phases of growth. They often have extensive networks and can help recruit employees, executives, directors, customers, and other investors. VCs often specialize in particular industries and, at any one time, are likely to prefer a company with a specific business model, technology, disease focus, etc.

A company seeking funding from a VC firm, should look at what companies the firm has previously invested in. Be careful of approaching VCs who have already invested in a competitor. The amount of funding provided and terms for obtaining that money vary from firm to firm, and are part of what needs to be looked at when selecting to work with a firm. Before a firm should seek out venture capital it should have: