“One guy said he used to be able to play angels off of one other,” Geshwiler recalls. “He can’t anymore.” Angels have learned what can happen when they chase investments indiscriminately, allowing panic at the thought of missing the next Yahoo! or Amazon.com to drive up their bids for untested companies. “We’ve had a lot of self-education,” Geshwiler notes, “and [this entrepreneur] said that it was bad for him.”

Angels’ reemphasis on business fundamentals is in sharp contrast to the anything-goes approach that reigned during the dot-com bubble years. Back then, smart entrepreneurs could ignite bidding wars among overeager (and inexperienced) angels for small stakes in embryonic companies. But angels who survived the bubble, its popping and the subsequent lean years are now more assiduous when choosing the better mousetrap to back, when setting the terms of their investments and in deciding when to walk away.