As you save for retirement, you could take the financially prudent path and invest in stocks and bonds. But if you prefer something a little more risky, with a higher potential for return, consider becoming an angel. No, not the kind that saves souls, although you may very well end up doing that as well. As an angel investor, you put your money in early-stage companies. This seed money, along with your knowledge and your networks, can make the difference between success and failure in a young company. And, incidentally, can make you a good bit of money.

"Angel investing is a lot more interesting than passive investing in a listed company," says John Bauer, former executive vice president of Nintendo of America Inc. "You get closer to the founders; you understand the business plan from the ground up."

Bauer, who is in his mid-60s, appreciates his relationship with the companies he has helped fund. He finds that entrepreneurs not only like to talk about their companies, they appreciate hearing what their investors have to say. This swap of information, in addition to such intangibles as entrepreneurial experience and decades of networking contacts, separates angel investing from more conservative strategies. In fact, most angel investors hear about opportunities via word of mouth, one reason why the vast majority of angel capital is invested in local businesses.

Bauer's investment in BigScreen is a paradigm of angel investing. He learned about the company from one of his financial advisers, who was excited about BigScreen's mission to simplify technology use for seniors. Bauer's background in technology - he is an executive consultant with the DigiPen Institute of Technology - as well as his personal interests made for a good fit.

"The industry is one that I find very interesting because of the potential growth due, in large part, to the rapid aging of the American population," he explains. "Investing in BigScreen was one way of supporting this group in a very high-touch, humanistic way."

Bauer knew his adviser was excited about BigScreen, but it wasn't until they unexpectedly appeared together on a financial conference panel that they discussed the potential at any length. Bauer agreed to meet founder Don Ferrel and was quickly impressed.

"Don had put a lot of work in and had already moved his company past concept to prototype," Bauer recalls. "We discussed how he could enhance and refine and expand horizontally, so that BigScreen would provide an even broader range of electronic activity for seniors who want to keep up and stay in touch."

"Angel investing is for someone who can afford to lose their money," jokes Janis Machala, managing partner at Paladin Partners, a strategic business and executive search firm. "More succinctly, angel investors are willing to write a check, and if the money is lost, there is no lifestyle risk."

Machala, a founder of the Alliance of Angels and also the Seraph Capital Forum, a women's investment group, identifies three main groups of angel investors.

"First, the angel investor is someone who prefers stocks to an index fund, who enjoys being more active with their investments. Second, there are plenty of angels in Seattle who invest with a social mission - the environment or senior services, for example. They often have an affinity with this area. Third, these are people who enjoy high-risk investing with the potential of high return. Of course, no one in any of these categories invests exclusively in high-risk start-ups."

It took Bauer almost a year from first hearing about BigScreen from Machala to invest in the company. Such measured decision making comes highly recommended.