In 2014, I got a call from a venture capital fund — one I’d been in negotiations with for more than six months — to tell me it was pulling out of a £3 million investment in my young skincare company Childs Farm. It was just four days before we had been due to sign.
Not only had the fund spent half a year courting me, but we had both incurred tens of thousands of pounds in legal fees, held numerous shareholder meetings and secured internal investment approvals.
Yet at final sign-off, it transpired that the venture capitalists’ investment mandate did not allow the firm to invest in a business of our size. The deal simply wasn’t approved — and should never have been considered.
Shaking with anger, I took the first train to London to confront the principal. With the confidence of a man untroubled by conscience or consequence, he said he would help to reassure Boots, with which we were about to launch. Instead, on a call with both the high street chemist and me, he announced that I now had no money and suggested it should probably cancel our pending listing.
Quite why he threw me under the bus like this, I will never know, but 72 hours later I was at Boots HQ being offered whatever financial, moral and emotional support I needed to keep going as planned. Boots played a blinder. Meanwhile, my manufacturer personally guaranteed stock production, an old contact came up trumps with alternative investment and the rest, as they say, is history.
But it was a horribly close shave, with absolutely the wrong type of investor for me and my business.
Sadly, this story is not uncommon. Finding access to capital from an investor that is intelligent, genuine and committed can be painfully hard. A new survey of 2,225 female founders conducted for The Rise Report of Female Entrepreneurship, due out later this month, found there was negative sentiment about the process of raising public funding (78 per cent) and private investment, particularly equity finance (73 per cent). This correlates closely with my own experience.
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Chemistry with investors is vital — you may well, on occasion, spend more time with them than with your spouse — but so is taking references. Had I properly referenced the principal of that venture capital fund, I would have learnt everything I later discovered about him.
And not all capital is equal; some comes with experience, empathy and expertise. I discovered this when angel investors Paul Cartmell and Andrew Leek led an investment in Childs Farm just two weeks after “VC gate”. Both were experts in their respective fields, rolled up their sleeves to help and tolerated my farting dogs at monthly board meetings with good grace.
So where should founders look for investment capital that makes sense for their business?
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The British Business Bank (BBB) has invested in more than 64,000 UK small and medium-sized enterprises (SMEs) through start-up loans, debt finance and equity finance, either directly or via more than 200 delivery partners. To date, it has committed £23 billion to support founder and sector diversity across the UK.
Its regional funds are deployed by specialist fund managers who take a lead role but often require co-investors. I myself co-invested in Clothes Doctor, a premium laundry detergent brand, alongside backing from the BBB’s Cornwall & Isles of Scilly Investment Fund and the South West Investment Fund, via fund manager The FSE Group. The experience was painless and efficient, helped enormously by the excellent general partner at FSE, Meg Salt.
The British Business Bank invests taxpayers’ money not only to grow SMEs, but also, following a change to their investment mandate last year, strategically important scale-ups such as the Octopus Energy spin-off Kraken, which recently raised £1 billion and received £25 million from the bank.
The BBB website can feel daunting due to the sheer volume of options, but perseverance pays off. Attend events where the bank is speaking and sign up to its newsletter to learn more.
The Enterprise Investment Scheme (EIS) opens investment doors, too. Individual angel investors, EIS funds and venture capital trusts can all benefit from this government scheme, which offers tax incentives in return for taking risk on early-stage and scaling businesses.
The not-for-profit EIS Association also runs 12 to 15 events a year nationwide under its “Ready, Steady, Grow!” banner — in effect, financial dating events for investors, advisers and entrepreneurs. At £100 a year, membership for founders is an inexpensive way to meet investors in your region.
The UK Business Angels Association has the most comprehensive directory of UK angel investors — currently about 18,000, both individual and syndicated groups.
There are also specialist EIS funds, often focused on sectors or regions. The London-based early-stage fund Parkwalk, for example, invests in university technology spin-outs and has injected more than £500 million since 2009.
Meanwhile, founder communities such as Buy Women Built, Female Founders Rise, Boardwave, Foundervine and Bae HQ offer invaluable sources of recommendations and introductions, giving founders access to experts, mentors and the knowledge of experienced entrepreneurs.
Venture capital funds typically back a broad portfolio of early-stage businesses, accepting that some will fail. Private equity, by contrast, invests in proven businesses seeking capital for growth and scale, and will usually appoint representatives to take a more active role.
Capital is never just about money; it is about trust, alignment and shared ambition. The right investor can accelerate growth, steady your nerves and open doors. The wrong one can derail years of work overnight.
My advice to founders is simple: get references, understand mandates, explore public-backed and tax-efficient routes, and remember that walking away from bad capital is often the smartest decision you will ever make. Access to funding in the UK does exist — but it pays to choose it as carefully as it chooses you.
Joanna Jensen founded skincare firm Childs Farm. She is an angel investor and chair of the EIS Association; her book, Making Business Child’s Play: How to Build a Winning Brand, is published by Kogan Page
Hannah Prevett is away