Analyzing the differences from a narrow perspective, the main difference between angel investment (Angel Investment), VC (Venture Capital) and PE (Private Equity) lies in the different stages of investment intervention.

(1) Angel investment mainly invests in early-stage startups; (2) VC invests in mid-term, high-speed development startups; (3) PE intervenes in mature companies that are about to go public or be merged and acquired.

It can be said that VC follows angel investment's offer, PE follows VC's offer, and IPO (listing) follows PE's offer.

Different investment stages determine their following different characteristics: 1. Investment strategy (1) Angel investment mainly depends on people, and the founder determines the quality of the project to a large extent.

Early projects are often just an idea, and the accuracy of the business model cannot be fully tested based on actual operations.

Angel investors can only make judgments based on the founder’s reliability and understanding of the industry.

I often hear that a certain angel investor chats with entrepreneurs for 3 hours, and finally slaps the table and says: "You are a reliable person, I invested in this project!" Although it is a bit exaggerated, "knowing people" is indeed an angel investor.

Very important consideration when making decisions.

The amount of angel investment generally ranges from hundreds of thousands to several million. The specific amount needs to be invested in proportion to the project valuation negotiated by both investors and founders.

(2) VC investment needs to comprehensively consider the project’s founding team and business data. Since VC-stage projects have been operating for a period of time after receiving angel investment, the business model can be partially verified through operational data. At this time, VC investors

The final investment decision will be made based on comprehensive consideration of industry analysis, competitive advantages and barriers, founding team configuration, business data, industry upstream and downstream, etc.

The investment amount ranges from one million to hundreds of millions of yuan.

(3) PE investment is oriented to mature enterprises and mature markets, and requires relatively high industry resources from investors.

In terms of investment strategy, companies that have the potential to go public or are likely to be merged and acquired are often discovered based on industry analysis.

After successful investment, we will use the resource advantages of the PE company to support the invested company to go public or be acquired, achieve exit and obtain high returns.

Investment amounts start in the tens of millions and range up to billions.

2. Funding sources Angel investment was initially made by high-net-worth individuals, such as Xu Xiaoping, Lei Jun, and Cai Wensheng, all angel investors who have been active in the industry for a long time.

Driven by the atmosphere of "mass entrepreneurship and innovation" in recent years, a large number of angel investment funds have emerged, and the market is gradually improving.

Gradually, large VC and PE funds are also involved in the angel investment stage.

VC and PE have been developing for a long time and have relatively rich sources of funds, including high net worth individuals, professional risk funds, leveraged buyout funds, strategic investors, pension funds, and insurance companies.

The operating model of domestic general funds adopts a partnership system, consisting of GP and LP. GP (General Partner) is responsible for fund operations and investment decisions and earns management fees and a small portion of income. LP (Limited Partner), as an investor, does not participate in fund management decisions.

But enjoy most of the fund’s returns.

3. Risk and return Angel investment is undoubtedly the highest “return on a single project”.

The valuation of early-stage projects is low. Once the project becomes a unicorn, returns of hundreds and thousands of times are completely achievable.

If the project does not have a 5-fold or 10-fold return in the first version, it will be embarrassing to mention it to peers.

But the corresponding risks are also very high.

For example, an angel investor invests in 10 projects a year, and 9 of them lose all their money. The one successful project earns hundreds of times the profit to make up for the losses of 9 projects. This situation also happens from time to time.

As company valuations continue to rise in VC and PE investments, the lower the return multiple of a single project, the higher the probability of relative investment success compared to angel investment.

PS: Let’s talk about their similarities again. From a broad perspective, angel investment, VC and PE all belong to the broad sense of private equity investment (the English expression is also Private Equity). The “Private” here has two meanings:

(1) The method of preparing funds must be non-public raising.

Since private equity investment is quite risky and has a long capital recovery period, it has very high requirements on the financial strength and risk tolerance of investors, so it cannot be publicly raised for ordinary people.

(2) The target asset of the investment is non-publicly issued company equity. Through the rapid growth of the target company, high returns on equity appreciation can be earned.

From the perspective of the entire financial market, private equity investment is only a form of "alternative investment" and can also be understood as non-mainstream investment.

According to data from the Securities Investment Fund Industry Association, as of the end of April 2017, there were more than 21,000 private equity & venture capital funds in China, with a total scale of more than 5.5 trillion.