Angel Investing is a form of “seed” capital, which is money used in the early stages of a business, often before there is any meaningful revenue from paying customers. Usually angel investments are based on more than just an idea – usually a prototype of some kind exists, and there is enough of an organization in place to give the investor confidence that the business can succeed in the difficult challenge of finding “product-market fit”.
While angel investing and venture capital are related, a key difference is that angel investors are investing their own personal funds directly (either by themselves or as part of a syndicate or angel group), and directly decide which companies to fund. When a person (or institution) invests in a Venture Capital fund, they are not choosing the companies directly, rather they delegate that to the fund’s management (its General Partners).
Venture capital also typically comes into a company later on in its development (often after its already demonstrated commercial success and needs financing to fund growth), and in higher dollar amounts. While angel investments are usually around $150-$500K (often through a syndicate of 10-20 investors each contributing $10K-50K), early-stage (aka “Series A”) venture investments are more typically in the $7-$10M range (or higher).
Because angel investors are investing their own money, the amount of due diligence involved can vary quite a bit, with some angels committing based on a single meeting, or others merely following the social proof of a trusted syndicate lead. A venture capital firm, however, owes a formal fiduciary duty to its limited partners (its investors) and so will engage in a more formal due diligence process.