Angel investors are individual investors or groups of investors who are investing their own money. Venture capitalists (VCs) are companies that invest money on behalf of other people. VCs typically raise one or more funds containing money from investors, pension plans and other sources and then use each fund to make a range of different investments.
Both Angels and VCs look to diversify their investments to decrease the risk and increase the change of returns on their investments. However, as a general rule, Angels may be more likely to invest in earlier, higher-risk companies than VCs and Angels typically put in less money than VCs.
VC companies are also more likely to become involved in the management of companies they invest in. VCs often require a seat on the Board of Directors and may wish to recruit a new CEO to run the company. Angel investors may or may not wish to be involved in running any companies they invest in.
The choice between approaching Angel or VC investors will depend on what sort of product you are developing, how far down the product development pipeline you are and how much money you need to get to the next stage of business development.