Bands of Angels

Angel investors have existed mostly as a loose network of wealthy individuals looking for businesses to invest in and sometimes mentor. In recent years, however, angel investing has become more sophisticated, with angels forming groups to pool financial resources and investment expertise-and occupying a niche once filled by venture capitalists.

Even federal lawmakers are joining the action: A recently introduced bill in Congress would offer a 25 percent tax credit to angel investors. Another bill would establish an angel-investment office at the SBA.

"[These proposals] show the growing recognition of the importance of angels to the growth of entrepreneurs," says Marianne Hudson, who manages angel investing initiatives for the Ewing Marion Kauffman Foundation, an entrepreneur advocacy group in Kansas City, Missouri. "[With] more [VCs investing] at later and later stages, there's a need for that institutionalized capital represented by these highly sophisticated angel groups."

Lisa Kable, who has raised more than $2 million from angels for her home spa and beauty products company, Artemis Woman LLC, hopes the trend toward institutionalized angel investing continues. "When one angel can write a million-dollar check, that's what everybody wants," says Kable, 37, who co-founded the Wilton, Connecticut, firm with Ann Buivid, 52. "But you're often getting a lot of $50,000 and $20,000 checks." As the growth of angel groups continues, however, entrepreneurs like Kable may find seven-figure checks a more frequent surprise.