Terms of investment from an angel typically vary in terms of stock sold, length of investment and control of the company between entrepreneur and investor.
"Instantly we started getting e-mails from investors, people that I've read about, people that I've heard about," said Varshavskaya, whose site, Wanelo, now has more than 1.5 million users. She accepted offers from 15 investors who were willing to give her the control she wanted of her company. "It was crazy exhilarating."
As technological advances lower both the difficulty and overhead of starting a company, entrepreneurs have become numerous and competition for funding ruthless. Online services such as AngelList allow entrepreneurs to connect with angel investors they would never otherwise meet.
Last year, some 66,230 companies received $22.5 billion through angel investors, up from 36,000 receiving $15.7 billion in 2002, according to the Center for Venture Research at the University of New Hampshire. Since it was founded in 2010, more than 500 companies have found funding through AngelList.
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Just LIke Online Dating Sites
These websites work like online dating sites. Entrepreneurs create profiles about them and their company, and angel investors cruise the site looking for promising startups. Entrepreneurs can also search investor profiles to see who's funded startups similar to theirs.
Just like online dating, though, an online profile is no magic bullet for success. Even AngelList founder Naval Ravikant says most angel investors need to get to know a company's founder or founders in person, and investors want recommendations from a trusted source before they shell out. AngelList is great for an initial introduction, though.
"We're bringing the Silicon Valley ecosystem online and making it available to the rest of the world," says Ravikant, who is an angel investor himself, in addition to being an entrepreneur.
Finding investors didn't used to be this easy, said David Rose, CEO of Gust, an online service that connects entrepreneurs to angel groups, organizations of angel investors who pool their money and share research.
Before services such as AngelList or Gust, entrepreneurs usually had to know angel investors or be introduced by a mutual acquaintance. Finding funding had more to do with who you knew than your company's potential, says Rose.
"How do you find a random rich person who is that teeny-weeny itsy-bitsy percentage of people who's willing to bet on entrepreneurs?" he said. "There was no industry, no structure, not anything. It was a matter of who you bumped into."
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Even though Vic Sarjoo, 36, had been both an angel investor and entrepreneur since he started a hedge fund at age 22, he says Gust reduced the time it would have taken him to find investors for his online music-licensing service, Sir Groovy, by directing him to angels who invested in companies like his.
"Gust allowed us, Sir Groovy, to pinpoint all the top investors in entertainment technology," said Sarjoo. "Those investors are receptive, they understand our business, they understand the problems we're solving."
Investors like being able to find startups online almost as much as entrepreneurs like getting funding.
Jonathon Triest, chief of Detroit-based Ludlow Ventures, says half his portfolio came from AngelList, which lets him connect with startups across the country.
"It's allowed me to operate from Detroit or have access as if I were in the Valley or on the East Coast or wherever the hotbed of start-ups happens to be," said Triest, who regularly surfs AngelList for tech start-up profiles. "While browsing through the companies, when I come upon a company that's so interesting I might want to invest in it, all I have to do is literally press a button that said, 'Get intro'd.' "
Although Wanelo is based in San Francisco, Varshavskaya says she was contacted by investors all over the world from Europe to South Africa. After putting her profile on AngelList in July 2011, she'd finished her first round of funding by the end of the year, timing that might have been impossible without AngelList.
"I probably would have been able to do it on my own, but it probably would have taken a significantly longer time," she said. "I cannot imagine how people did it without AngelList."