How the changing relationship between Angels and VCs can work for your business

In partnership with UKBAA and BVCA

Understanding the working relationships between investors can be key to helping your business secure funding rounds.

That’s particularly the case when it comes to Angels and Venture Capitalists (VCs). Little more than a decade ago, Angels and VCs were seen as very different parts of the finance chain. They had different interests in terms of their investment requirements and would expect businesses to be in very different positions if they were to get involved.

But the lines have since blurred, and Angels and VCs are actively working together and forming strong and productive working relationships.

“The distinction between an Angel Syndicate and a Venture Capital fund has become less sharp,” Tim Hames, Director General of the BVCA explains. “The ultimate difference is that Angels invest with their own money and VCs invest with other peoples’.”

If your business can bring together investment from both Angels and VCs who know how to work together, and if you can successfully nurture those relationships, then there are some very lucrative benefits.

1. Working holistically

Historically, Angels invested early in the process as individuals, whilst VCs invested later in groups. But as Angels begin to form ‘Syndicates’ – larger groups who join forces to offer larger funding rounds and minimise risk – and VCs begin to get involved earlier in a business’ lifecycle, the two have begun to work in harmony.

Rod Beer, Strategic Relations Director at the UKBAA explains, “we are seeing many deals where VCs are identifying the opportunity to get involved earlier, alongside an Angel Syndicate and they work together as a team. They invest on the same terms and both have a place on the board. It can work really well.”

This closer working relationship between Angels and VCs can help businesses receive a more valuable pre-Series A deal. Businesses get the value of working alongside Angels and VCs at the same time, as well as taking home a larger funding pot.

2. Cultivating connection

Even if they don’t work together at the start of a business journey, Angels and VCs often cross-refer companies with potential.

VCs will refer businesses to Angels if they have approached a fund too early in their journey. Similarly, Angels can introduce their businesses to VCs when the time is right to take the next funding step. For both sides, keeping in touch is crucial. And for businesses looking for funding, speaking to investors with strong industry connections can help cross-referral occur naturally.