Entrepreneurs create businesses using an invention or an innovation for a new product or service or both. They usually have big dreams, but limited financial resources and start their journeys with their own money. At this stage they may also be supported by their families and friends. About 40% of all start ups follow this path.
If and when these startups are successful, and start to grow (which has a probability of only about 15%,) so do their need for capital infusion. At their earlier stages of growth “angel investors”, and in the later stages “venture capitals” may be interested in them and start to provide financial support. Both their angels and venture capitals do this in exchange for the future growth and profits.
Angels usually provide smaller amounts and hope to receive high returns and they do not interfere with the entrepreneur’s business plans or venture’s operation. Venture capitals, on the other hand, are usually seasoned business people (or profit making companies) who study the business plans and provide knowhow both for business and management of the company in addition to much larger sums of capital support, usually in exchange of a percentage of the venture.
In short, while the entrepreneurs’ and the investors’ profiles are different, there is a strong relationship between them. Entrepreneurs are focused mainly on creating a new product or service; and the investors are focused on growing the business and making more money.
In some rare cases entrepreneurs, like Elon Musk, are also the investors with in depth experience in business management. Yet, most of the time, these two groups are completely separate from each other.
