Final answer:
Business angels, also known as angel investors, are individuals who invest their personal capital directly in startups and typically support small new companies in their early stages. Venture capital firms instead pool money from various investors to support companies with high growth potential and offer more than financial backing.
Step-by-step explanation:
​Individuals who invest their personal capital directly in startups are known as business angels or angel investors. These investors typically provide financing to small new companies during their early development stages in exchange for owning some portion of the company. Unlike venture capital firms which collect funds from various sources to make investments, business angels utilise their own wealth.
On the other hand, venture capital firms focus on making financial investments in new companies that have the potential to grow substantially. These firms collect money from individual or institutional investors and engage in more than just financial support. They guide startups on aspects such as potential products, customers, and recruitment of key employees. Investors in a venture capital fund receive returns based on the overall performance of the invested portfolio.