Difference between Angel investor and Seed funding

Difference between Angel investor and Seed funding

Seed funders and angel investors have different limits of investment. Seed capitals can give you initial assistance from investors at the beginning stage of your business ideas. On the other hand, angel investors are those with better business experience and a high net worth who contribute a substantial sum of money to your business.

A startup is an idea of a product or service with good prospects of growth and expansion. Any business idea needs money to take flight. Borrowing money from external sources is an uphill task and it impacts the longevity of your entrepreneurship.

Seed Funding vs Angel investors

Both have a lot of similarities in their functioning. They tend to lend a helping hand to the high potential startups struggling to generate growth due to a shortage of capital. Startups can obtain investment from either of them depending on their requirement. However, you can distinguish between the two on the following grounds-

  • Angel investors are more experienced than the businessmen providing investment through seed funding.
  • Angel investors can form a syndicate at the time of investment, on the other hand, the investors providing seed funding provide monetary assistance only in an individual capacity.
  • Angel investors do not provide the first round of investment whereas Seed funding is mostly done in the first round of investment.   
  • Seed funding requires ‘due diligence’ by the startups whereas angels investors do not demand any such compliance.

Read Also: Raise Seed Capital for your Startup and Grow

Why do you need a seed funding?

Funds are important for the growth of your business. There are instances where you need funds at the early stages of your business cycle. Seed funds fulfill your quest for monetary requirements to make way for your business idea to grow and prosper. As an entrepreneur, the strength of your business idea helps in the strong pitch of your initiative. You can dig deep and attract investments to your enterprise to survive the budgetary hindrances in your growth. You need Seed funding for the following purposes-

  • Give actual form to your startup
  • Survive initial stage of capital shortage
  • Attain the status of a minimum viable product
  • Become dependable and worthy
  • Gain the trust of the investors for higher investment in future
  • Attain  growth to attract potential investors

Seed Funding helps you survive the initial hiccups and you are able to place your product or service among the competitors. Your business idea does not face any monetary hiccups and you get an opportunity to overcome your monetary challenges and focus on growth and expansion.

How to re-pay the seed capital inventment

Seed Capital is a form of investment in the company. You do not treat it as a loan, on the contrary, you share ownership of your company with the investors. You can also arrange for a convertible note that converts into equity in the future, in case you are not in a condition to give ownership rights at the time of investment.

You can sum up the requirement of seed capital through the following points-

  • It is a form of investment to help you grow.
  • You share ownership of your company instead of repaying interest or installments
  • You can give future ownership rights through convertible note stake
  • Workout on your product/ service without any monetary hindrance on your way

There is no provision of repayment on a monetary basis like that of a bank loan or any other financial borrowing. The ownership criterion gives you the freedom to work on your product/ services as you have to share profit and loss with the investor.

Read Also: Pre Post Funding Compliance For Startups

What is an Angel Investor

Angel Investors have a higher net worth and bigger entrepreneurial background. Not all investors are angel investors.

An angel investor has -

  • financial soundness
  • a minimum of $ 1 million assets 
  • a minimum net profit of $ 200000.

Angel investors are high-net-worth individuals with good financial backgrounds. The startups get a one-time investment to foster innovation and attain the desired growth in their business domain. They invest with more favorable terms in comparison to the traditional lenders. They help the startups progress in the earlier phase of their development.

Similarities between Seed capitals and angel investors

Seed Capital and Angel investors share several similarities. Both are a form of investors and both support the startups at the initial stage of their development. You can identify the similarities between the two as under-

  • Both provide funds to startups.
  • Both provide funds on the basis of their previous knowledge about the entrepreneur or the future prospect of the business owner.
  • Both use personal funds for investment purposes.
  • Both take ownership in the firm where they invest.

Seed capital and angel investors work on a similar Proforma with shared interests with the entrepreneur. They give the business owners an opportunity to show their potential with their business idea and attain the best growth without worrying about their capital requirements.

Contact Us for Funding Compliance For Startups. in Delhi, Noida, Gurgaon, and all across India: write to us at accounts@especia.co.in. Or Call On :(+91)-9711021268 +91-9310165114

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