'Angels' Give a Lift to Young Companies

Raulee Marcus figured her audience would be skeptical when she talked about her Spongeables, soap-infused sponges that dish out a rich lather and rinse off cleanly for 30 showers.

They were mostly men, after all.

"One of their key questions was, 'Do you really believe women will pay $15 for these things?' " Marcus recalled with a laugh. "They have no idea how much money is in their wives' and girlfriends' showers."

Now they do. The crowd Marcus appeared before that night last year at the Long Beach Marriott was the Tech Coast Angels, a group of entrepreneurial investors willing to bet their cash on start-up enterprises.

Marcus' presentation persuaded members to kick in money -- she won't say how much -- to help SpongeTech Inc. launch its products in 1,500 stores.

Marcus, chief executive of the company based near Los Angeles International Airport, said SpongeTech was on track to book $8 million to $10 million in sales this year, at least a fourfold jump from 2004.That kind of success is helping drive investment by Southern California's "angels," who provide coaching as well as early-stage financing to start-up companies.

Members of Tech Coast Angels invested $6.6 million in 2004, a 53% jump from the year before and the highest level since 2000, the group says in a report being released today.

The 250-member group also is announcing the opening of a Westlake-Santa Barbara network, its fourth chapter.

In January a rival angel group, the Keiretsu Forum, launched chapters in Los Angeles and San Diego -- its ninth and 10th nationwide. The name "Keiretsu" is borrowed from the Japanese term describing a group of affiliated corporations with broad power and reach.

The angel investment pickup is being fueled by a recovering economy and the return to action of venture capitalists, who often invest in companies a year or two after angels get aboard.

Like traditional venture capitalists, angels buy stakes in risky, developing companies, hoping to cash in on an eventual sale or public stock offering. But angels, many of whom are former entrepreneurs, tend to be more hands-on, make smaller bets and gamble on younger businesses.

Tech Coast Angels funded 17 companies last year, including SpongeTech; Diver Entertainment Systems Inc. of San Diego, which makes waterproof casings and headsets for MP3 players; and Altadena's LeisureLink, which runs an online reservation system for vacation home rentals.