From the July 2007 issue of Entrepreneur

Question: I've talked to several VC firms about my idea for a new social networking website, but they all tell me that it's too "early stage." Is there anywhere else I can go to find investors who are willing to give me the money I need to start my company?

Answer: You might try approaching some angel groups with your idea. These organizations of high-net-worth individuals pool their personal funds to invest in young high-growth businesses that have the potential to generate outsized returns. Some angel groups meet casually for dinner once or twice a year; other groups are more formal and structured, gathering monthly to listen to and weigh in on company pitches and employ paid staff. Unlike investors in VC funds, who invest in all the firm's ventures, members of angel groups typically decide on a deal-by-deal basis whether or not to put money into a particular company.

According to David S. Rose, chair of the New York Angels, an independent consortium of individual angel investors, there are 200 to 300 angel groups in the United States and just as many in other countries. Rose says angel groups often act as talent scouts for VC firms, nurturing promising young companies with seed investments of $250,000 to $500,000, then turning them over to VCs for follow-on funding in the millions. "An organized angel group functions much like a small VC fund," Rose explains. "Many of our companies have gone on to follow-on rounds from VCs, who look to us [for validation]." To find an angel group near you, check out the Angel Capital Association.

Rosalind Resnick is founder and CEO of Axxess Business Consulting, a New York City consulting firm that advises startups and small businesses. You can reach her at rosalind@abcbizhelp.com orabcbizhelp.com.