Rachael Qualls is the founder and CEO of Angel Capital Group. She founded the organization in 2007, after she realized there was a lack of structure and strategy in conventional, early-stage investment programs. With five locations nationwide, Angel Capital Group is the only angel investment group to date that is not geographically specific in its investment focus. Its unique model not only provides angel investors with a wide range of high-quality deals, but it also offers talented startups and entrepreneurs a reliable capital source.
Rachael attributes much of her success to the fact that she considers herself both an entrepreneur and an investor. As a founder of several startups herself, she has a unique skillset that has allowed her to create an angel investment group unlike any other. Connect with Rachael on Twitter and Google+.
MO: Why is it so important to you to be viewed as an entrepreneur first and an investor second? How did your entrepreneurial spirit lead you down the path you are currently on?
Rachael: I think that, in order to be a good investor, one needs to understand what it’s like to be an entrepreneur.
I have raised both angel and venture capital, and it was because of the inefficiencies I experienced with both that I set out to build a service firm assisting entrepreneurs in raising capital in a way I wish I had been able to.
MO: Throughout your career, you have started many different companies. What led you to do that, and what accomplishments are you most proud of and why?
Rachael: Regardless of the type of company, there is always the same reason for starting it: I saw an opportunity. As an entrepreneur, I’m in it for the sport — money is just how we keep score.
MO: For people who don’t know what an angel investment is, how would you explain it to them?
Rachael: Angel investments encompass everything that made me fall in love with business in the first place — the opportunity to participate in measurable change through funding the innovations you want to see brought to market, to watch that investment grow in proportion to the company’s performance (this is not the case in public markets), and, finally, to sell that investment once it has matured (this is the place where most people are buying, not selling). In my opinion, there is no better way to invest your money.
More specifically, angel investments are direct investments in young companies with unique products or services in large opportunity markets. These startups are typically seeking about $500,000 in investment capital in order to ramp up sales and marketing for their new products. Angel investments are potentially lucrative because the money is going to drive sales, which equals revenue. If the company is successful at producing meaningful revenue, this proves market validity, which is a major risk factor that later-stage venture capital and private equity companies like to reduce or eliminate. Therefore, the company will be able to drive the next round of investment at a much higher valuation — typically two to five times that amount in one to three years.
MO: How is Angel Capital Group different from other angel investment groups? How did you contribute to making your company stand out from the rest?
Rachael: We provide a service platform that enables angel investors to access great investment opportunities, regardless of their physical locations. They can then invest in as many companies as they want, at whatever amount they want, for fees that are minimal. In other words, individuals can now create a portfolio of angel investments in a way that was historically only available to large institutions.
I’ve been involved in every strategic design and implementation of the company from its inception. We have evolved into the firm we are today because of our commitment to two main principles:
In other words, the one thing that is historically synonymous with angel investing, which is the idea that it’s a local activity, is the one thing that isn’t part of our culture.
MO: How did your finance background help you launch Angel Capital Group, and how does it help you on a daily basis?
Rachael: I approach angel investing like any other asset class — with investment fundamentals that include diversification. Diversification needs to come in the number and kinds of deals an investor does. In my opinion, a well-diversified angel portfolio has 100-plus companies from all different industries, is made up of equity deals that pay out years into the future, and has revenue-participating deals that pay out more near-term.
MO: What is the biggest piece of advice you have for entrepreneurs who are considering working with angel investors?
Rachael: The moment you decide to take money from an investor, you work for him. If that doesn’t sit well with you, you shouldn’t be taking the person’s money.
MO: When Angel Capital Group begins to look for a new company to invest in, what criteria must be met by this business? What kind of businesses do you look for?
Rachael: We look for businesses that have the greatest potential to return the most amount of money in the shortest amount of time. We typically invest in markets such as technology, medical devices, financial services, software as a service (SAAS) companies, and digital media.
MO: Where do you see the future taking you? Are there any goals you’d love to accomplish?
Rachael: I would love to someday see angel investments as part of everyone’s portfolio — similar to a mutual fund or a bond.
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