Confused about how to approach funding for your start-up? Keep reading to find out. Following this week’s dinner with investor and former financial journalist, Tim Jackson, this post explains a bit about the differences between the options available.

Firstly, a short overview of each:

Venture capital

Venture capitals work on the premise of return investment. In general, they will take a management fee of 2% and then a profit share of 20% of every new venture they invest in. They will go on to do a further 20 to 30 deals out of the money received from each successful venture. These investments will continue over the next 4 to 5 years.

Venture capitals will set the returns and decide how they want to pay. They will set the valuation, and for this reason, VCs tend to do a lot more due diligence on prospective clients than the other two streams described below.

Angels

Angels, on the other hand, tend to work as individuals. They are mostly high net worth individuals who are often investing as an amusement or on the side. They tend to like opportunities in the sector that they’re in. They are often very well-connected. They go on holiday a lot of the time! They are often tax-driven. They are price-takers, not price-givers.

Crowdfunding

Crowdfunding deals that do well as those that can be easily understood by prospective investors. In contrast to VCs, the due diligence carried out by crowdfunders is going to take 6 minutes, rather than 6 weeks. Campaigns need to be easy to relate to, and easy to explain.

Check out Part II to find our which might be right for you…