With Angel Capital Group, Qualls aims to change startup funding
A repeat entrepreneur, Rachael Qualls has a startup résumé that includes companies like BugleMe, a social media company designed to help celebrities to monetize online content; FastPitch, an event design firm; and Katalyst, an eBay company specializing in the purchase and resale of high-end goods.
Through those varied ventures, Qualls (left) has developed a particular distaste for the process of raising money. She shed light on that on June 19, when she spoke at this month's meeting of the Technology Entrepreneur Speakers Program at the offices of Polsinelli Shughart in Kansas City, Mo.
"I've got to tell you, raising capital was the worst thing I ever did," Qualls said. "It was long, and it was painful. And I said, 'Look, this was so bad I'm actually going to change how this is for entrepreneurs. We're going to move fast. We're going to fund companies quickly' … I was going to change the way that companies were funded."
Qualls is working to do exactly that as the founder and CEO of Angel Capital Group (ACG). Established in 2007, ACG is a network of angel investors throughout the Midwest and Southeast. ACG brings together entrepreneurs and investors, aiming to improve investors' odds of finding good deals by interviewing companies, vetting their ideas, performing due diligence then sharing them with investors.
On June 19, Qualls told a bit of her personal backstory and provided some historical context for the work her company does. But the bulk of her talk was devoted to how ACG is addressing shortcomings in the way angel investors find and fund startups. "I'm an entrepreneur," Qualls said. "So the more inefficient it is, the more I think there's ways for me to make money."
Three big issues
Qualls highlighted three major problems facing angel investors today. For one, investors don't have access to enough high-quality investments. That, she said, is due mainly to the local focus of most angel groups.
Another problem, Qualls said, is that angel investors struggle with the complicated process required to execute transactions. Most groups don't have anyone to facilitate the actual investment process, so each individual investor is usually responsible for his or her own deals.
Qualls also said liquidity — or, more accurately, a lack thereof — is an issue for many angels. Investors oftentimes find themselves stuck in deals for more than five years because the only options for liquidating their share of a company are major acquisitions or IPOs.
But ACG endeavors to address all those problems, and Qualls spent a good portion of her talk describing how.
To solve the problem of access, ACG plans to grow, providing its chapters access to a wider network and more deals. Qualls said the organization will expand using a hub-and-spoke model. "This is the first time that an angel investor, regardless of their location, will get into some of these deals all across the country," she said.
Qualls also mentioned during her talk that ACG plans to relocate its headquarters from Nashville, Tenn. to the Kansas City area. "I can't wait," she said. "I love this city."
To address the issue of difficulty executing transactions, ACG will offer software for tracking portfolios and managing the funding process. Myangelportfolio.com, which is currently in private beta, is designed to streamline the process of tracking, managing and marketing deals.
In response to liquidity issues, ACG plans to facilitate an online marketplace to allow angels and institutions to buy and sell shares of their private equity portfolios. "If we can figure out the liquidity part of private equity," Qualls said, "then we have changed the world."
Qualls recognized that sort of change is no small goal; like any new venture, ACG is figuring some things out as it goes, and the impending implementation of changes to crowdfunding laws could cloud the picture for ACG.
But Qualls has high hopes. "If we make better, more educated decisions about where we invest our money and where we spend our money," she said, "we'll see drastic shifts and changes that we want to see."
Credits: Photo of Qualls from linkedin.com.