If you were to raise money from angel investors, which of these two paths would you prefer?

I'd rather take money from no one, but here are a few considerations if you do and have the luxury of the choice:

• if you plan to raise more money in the future, you already gave up the choice to make it a "personal" business and angels will have better intros for your future raise and they can contribute too
• it's usually smart to avoid putting your family and friend's money at risk
• the best money comes from people who are either be the most helpful and/or that will stay the least involved

In much of my research seeking seed money is a pain. Personally, the purpose of starting my own business would be to start something of my own, and having VSc feels like your giving up one boss and replacing it with another. However, the last thing anyone wants would be to fail in creating a business and I think it’s also important to have a contingency or know your current capabilities and how long operations can continue with current finance or determine if your business would be scalable after you’ve reached the Nth number of users and if not would additional capital help get you there.

I've a question:

Taking checks sounds to me so easy, but it is for me always a question of the conditions and circumstances. Real family & friends are perhaps not interested in making money with you, but in supporting you and taking a risk - depending on their financial status - that institutions won't take. So they are simply giving you a loan with normal interests, but not taking any equity for it. That's esp. in the beginning helpful where these checks are often too small to transform in equity without scattering your cap-table and generating tremendous transaction costs for equity-contracting and disproportionally eating up big parts of itself.

Another alternative could be for these FF-people to construct a legal vehicle where you can pool FF-money in an equity-like form but this again is an expense and effort in itself, the construction of the vehicle costs you time and money and also defines or even impedes somehow the later investement structure. But of course this is an option, depending on your resources and environment.

Angels and VC's will perhaps give more convertible notes and instead of loans, right? But bringing in a few different investors with small checks would scatter your cap-table also, what makes your cap-table look less attractive and increases your communication expenses and also the transaction costs, because every new investor always wants to see the captable and the contracts of the earlier investors. Then there is something like a downwards compatibility, so no one wants to have a worse deal than the one before. That means that every bad deal ripples into all follow-up deals and that means that you have be vigilant about the terms in every single case - all in all tends the growing number of different investors to exponentially increase the transaction costs for negotiations. That's why taking some small checks from a few different investors sounds to me a bit too easy, or not?

Angels in comparision to VCs have sometimes another problem due to my experience. They are sometimes binding their investment to the claim to getting involved into the operations as an advisor or a C-level role or even CEO. In that case the Angel turns into a co-founder and I would say that this is one of the most dangerous cases possible with high probability to get toxic, because co-founders have a common culture and buying in later by turning from an potential investor into a cofounder is most probably some kind of powergame. Investor relations should be easy and the decision power of the investor in your company should tend towards zero - they can only have advisory competences and even this should be a role on its own. That's why some people say that Angel-money is the most dangerous money as Angels are often wealthy former operatives and show the inclination to confuse their new role as a silent investor with their former role as active decision maker. Some of them are mixing up things and roles.

But perhaps I'm totally wrong, these are only my personal considerations, and perhaps you have found a way to do deal with easily collecting checks from different types of investors, would you share this? Don't you see these issues? Did you find a shortcut for it?

It depends on the stage of the company, traction, founder and network. Most initial checks come from people you "know" or who know you. If you have a network of Large investors then it is the best option. The reason is for ever 4-5 investors you to talk to, only 1 will end up writing a check. So getting few large checks takes less time that talking to 100 small investors, of whom only 5-10 might invest small amounts of money.