How are venture capitalists different from Angel Investors?
Jane loves coffee. The smell of roasting beans, the rich, creamy deep flavour. Sitting in the window of her favourite independent coffee shop, reading, working, talking, and hanging out.
Lucy loves Starbucks coffee. She loves the predictability of getting a coffee just the way she wants it every single time in her home town, at the airport and on her frequent business trips. She loves how she feels at home instantly in every Starbucks she visits.
Jane values the small moments, Lucy, the consistency.
What is an Angel investor, and what is a VC?
GENERALISATION ALERT #1
Jane is an angel investor.
Lucy is a venture capitalist.
Jane and Lucy both love coffee and the game of business. They both seek out the BIG risk-free rewards. They crunch the numbers, spend hours at events listening to pitches, talking to founders, having calls, networking, watching the market, and keeping up with world events.
They both live and breathe startups.
So how are Jane and Lucy different?
GENERALISATION ALERT #2
An angel investor has probably been a founder, successfully exited and is re-investing the rewards of her hard work.
A Venture Capitalist is probably highly qualified, joined a fund, and is scaling the career ladder.
An angel shares the same view of startups as Jane does with coffee shops. Believing strongly in a founder’s drive and passion. Loves the vision and the ‘why’. Wants to be actively involved, share advice, coach, mentor, and feel the daily rush.
And Lucy is more like a VC and feels comfortable around the traction, growth, scale, progress updates, and keeping an eye on the bigger portfolio.
Of course, this is a massive simplification and generalisation – my goal here is to highlight how Lucy and Jane are very different audiences.
And different audiences need different information to make a decision. The goal of a pitch is to start a conversation that ends with a clear “Yes, I’m in.” or “No thanks, I’ll pass”.
Both result in progress and growing momentum.
Whereas pitching to a VC when you should be talking to an Angel is like wearing a suit to the beach, a total mismatch, uncomfortable, embarrassing and a waste of effort.
The difference between Angles and VCs
These are the things I’ve heard investors say:
Angels invest early stage, sometimes pre-revenue. Making decisions based on passion, vision and belief.
VCs invest when the startup has demonstrable traction – usually in the form of MRR.
Angels often invest their own money, doing it equally for the thrill as much as the reward, and they like to get involved.
VCs are often investing other people’s money. They are looking for 🦄 returns and could be less likely to want to get involved as much as angels.
Either way knowing your audience is critical.
You have complete control over who you pitch to. Spray-and-pray strategies don’t work anymore. Posting a flyer through everyone’s letterbox is more likely to annoy people and get you permanently blocked than make a meaningful connection.
Success comes from knowing where you are in your journey and making the right choice for whom you pitch to.
And you have complete autonomy over this. There is no need for consultants or coaches.
Alignment is the goal.
Having shared values, goals, outlooks and expectations.
If your business is like an independent coffee shop with big goals, you should pitch to Angels.
If your business is ready to expand far and wide like Starbucks, then make sure your pitch is going to VCs in your space or with a history of investing in a business which shares qualities with you.
Get this the wrong way around, and time is wasted. Nothing closes a door faster than the audience feeling they are not understood or recognised.
Both Angels and VCs want ROI.
They start at different points in the journey, and good investors will have their investment thesis easy to find on their website or social media channels, so it is the founder’s responsibility to make the right pitch to the right audience.
A solid research stint will tell you clearly who is likely to invest in you at your current stage of growth and progress.
Conviction, no matter the pitch.
Then when you pitch, pitch with conviction, passion, heart, smarts and charisma.
Because people buy from people.
Do all you can to be seen, be heard, and have conversations. Make connections. Pitch like there is no tomorrow.
Ask for feedback, ask for advice. Books to read accounts to follow. Iterate your pitch as much as any part of your business.
You, the founder, are the one any investor is ultimately placing their trust and money with, and if they don’t know you, they won’t even consider investing in you.
How do you pitch differently to angels vs venture capitalists
Angels – ideas and early growth.
VCs – traction and scale.
Pitching to an angel, lean into your founder’s origin story. Share a story of how you or someone you know experienced a pain point. Pitch a clear problem statement with tons of relatable pain, a solution that makes people smile and nod, a neon sign over why now, and buckets of passion, drive and ambition. Your ability to make this happen is what everyone is betting on.
Pitching to a VC, lean into your passion for scaling the vision. Be specific about the improvements you are making, the traction you have, the growing value to the customer, how to attract and retain customers, your defensibility, the unit economics, and the A-team contributions.
An angel and VC are different, like an independent coffee shop with a global franchise.
But both angles and VCs want a risk-free ROI, a stress-free life, and to have fun.
Time for a coffee?
So whomever you pitch, share an emotional, concise, specific story that ignites your audience’s imagination. Create shared ownership in the same way Lucy loves her unique local coffee shop, and Jane loves the reliability of Starbucks.
The one universal rule – don’t over-pitch the product. This is a typical startup pitch miss-step.
Angels and VCs are professional pitch listeners; they see 1000’s of (terrible) pitches.
As soon as the pitch stops talking directly to your audience, their phone will, and that’s never out of arms reach.
Avoid carrying a tray with too many coffees filled to the brim; less is more, and don’t spill the coffee and have to wipe up a mess.
Pitch to build trust, spark the imagination, start a conversation, and invite angels or VCs to have a coffee meeting with you.
If you want clarity on your audience and goals for your next pitch, check out this free checklist of 20 presentation discovery questions (no email required).
Have any questions about presenting to investors?
Connect with me on LinkedIn!
Hopefully you will find more value in our other blog-posts:
How many slides for a 10-15 minute presentation
How to start a presentation? Start your pitch like an Olympic sprinter