If you are raising money, you may encounter the phrases ‘smart’ and ‘dumb money’, as a way to describe different types of investors. As an entrepreneur, you may wonder: which is better for me. Should I try to get smart or dumb money?

The first thing to keep in mind is that typically capital seems scarce. As an entrepreneur, you may not care who gives it to you, and you may want to take it where you can get it. So who cares. There are, however, a small subset of companies that are doing so well that investors want to throw money at them, in which case you can get picky. There are also a larger group of patient companies who may not need cash immediately (this is the best place to be), and who may feel that waiting to get the right investor is worth it.

So who is right for you?

“Smart money” is a term used by professional investors to describe themselves. These are people who invest for a living. They typically dictate the terms on a deal. They make sure they are looked after, including by getting a good valuation, and even more important good deal terms. They also (claim) to offer you the benefit of their expertise. This may include advice on how to better run your business, sitting on your board and making sure it does its job, opening the door to key customers or partnerships, and making sure any follow-on funding you need gets done smoothly and at good terms. Take the claims of expertise cautiously: the best ones do a great job of helping your business. Others can harm your business, with things degenerating into a fight for control rather than working together to support the business. So ask around for the reputation of the investor before you start, and try to make sure that you at a minimum get one that will do no harm – if not one of the (few) great ones.

You can group classical ‘smart money’ investors into VCs, who invest in around 1,000 new companies each year in the US (the most active venture capital market in the world), and angel groups, whose members invest in around 2,000 new companies each year in the US. In case you were wondering, there are about 6 million new businesses started each year in the US. So, one out of every 2,000 business startups will receive ‘smart money’ investors.