But don't discount them.
Marianne Hudson, executive director of the Angel Capital Association, said angel investors, who pool their money, are looking for growth companies that can be taken to a larger market. Angel investors generally invest in early-stage companies, Hudson said.
One example is Build-A-Bear Workshop Inc., which began as an angel-backed enterprise but now operates its namesake stores at malls across the country, Hudson said.
"You need a company that you could really scale," she said.
In 2006, angel groups - about 250 in the United States - invested $25.6 billion in mostly early-stage businesses. The association's education arm, www.angelcapitaleducation.org, lists angel groups throughout the country.
Unlike angel investors, venture capitalists invest with other people's money, so they work with a larger pool ranging in the multimillions.
And they typically invest in high-tech and later-stage companies, said Emily Mendell, vice president of strategic affairs at the National Venture Capital Association. Last year, VCs made $29 billion in investments, she said.
"Ultimately, the VC's goal is for a company to go public or to be acquired by a larger player," Mendell said. "If you're looking for VC money, you have to be thinking big."
A new wave of fundraising Web sites have cropped up in recent years to connect entrepreneurs with potential investors.
They are like classified advertisement sites, where entrepreneurs post funding requests with brief summaries of their businesses. Investors can cull through pitches and decide whether they are interested. Some sites charge fees, while others do not.
Because so much of raising money involves tapping your existing connections, these new Web sites build on the popularity of social networking online, which can especially appeal to young entrepreneurs, some experts say.
"It's a big decision to write a check to somebody else," said Fishback of the Kauffman Foundation. "It'll be an interesting space to watch."
hanah.cho@baltsun.com
Finding money
Approach your local bank.
Contact your state, county and local development offices.
Look for unique opportunities, including business-plan competitions sponsored by local universities and economic development arms. Rockville Economic Development, for example, hosts a competition for women entrepreneurs with prizes of $2,500 to $10,000.
