Angel Capital vs Venture Capital vs Private Equity

David Cummings on Startups

Last week I was talking to an angel investor that had invested in a couple idea stage startups and he mentioned that he was also interested in small private equity deals. Curious, I probed deeper and asked what a small private equity deal looks like. He responded that it might be a startup with $500k in revenue. Hmm, I realized we were talking about different things. Here’s how I see it:

Angel Capital

  • Idea stage through seed stage
  • $0 – $1 million in revenue
  • Not profitable
  • Minority stake
  • Insanely risky
  • No debt component

Venture Capital

  • Early stage through growth stage
  • $1 million+ in revenue
  • Not profitable
  • Minority stake
  • Very risky
  • Moderate debt component

Private Equity

  • Growth stage
  • $20 million++ in revenue
  • At least $5 million in profits
  • Majority stake
  • Moderately risky
  • Heavy debt component

So, the gentleman I was talking to was really looking for angel deals where the company was…

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