Richard Reed on struggling to find investment [Video]
The Innocent co-founder talks about rejection from banks, VCs and angels, and being described as a "dreadful investment opportunity"
Now a multi-million pound empire, in the early days Innocent Drink’s Richard Reed and business partners Jon Wright and Adam Balon struggled to raise investment for their healthy smoothie idea, to the point that they considered “throwing in the towel”. However, one investor made Innocent possible.
Having made smoothies “in a blender in their kitchen”, Reed, Wright and Balon wanted to turn their “kitchen idea into something that was commercially viable”. The trio saw raising finance as the only way to scale the business “to sell the [smoothies] into shops and hopefully, one day, to the supermarkets”.
Pointing out that fundraising was “the absolute hardest bit”, Reed says it took 15 months to take their idea to market and said that securing investment had “the longest lead time because everyone said ‘it will not work’.” Discussing each of Innocent’s attempts to raise investment, Reed says that the team first tried to secure a bank loan but “bank after bank said no”.
Reed continues: “we applied 20 times and got turned down 20 times and that’s even with the Small Business Loan Guarantee Scheme which was meant to de-risk banks from lending”.
The Innocent team then “went to the venture capital world” and Reed laughs as he remembers how they “had a big directory of every venture capitalist in London, approached them all and they all said no.”
Why did Innocent struggle to attract investment? Reed recalls a meeting where an investor said; “you score zero out of five in the investor’s handbook; you’re too young, you’re all friends, there isn’t a clear leader between the three of you, you’ve got no experience of the sector, and you’ve got no experience of running a business; it’s a dreadful investment opportunity”.
Determined to prove that they did have a viable business proposition, Reed, Balon and Wright then visited business angels and private investors. Their “final opportunity” was addressing a room of 50 business angels in a 30 minute pitch. Reed says that the Innocent trio “gave the pitch of [their] lives and at the end said ‘if anyone’s interested in finding out more, could you put your hand up’, 50 people did not put their hands up.”
Out of “last minute desperation”, the Innocent founders then sent out an email to every person they had an email address for with the subject line; ‘does anyone know anyone rich?’ They received two replies; one from Reed’s old boss who when Reed emailed back “got no response”, and one from Wright’s friend who had previously worked for “a guy called Maurice Pinto who made investments”. Reed and his partners then sent Pinto their business plan, went to see him and finally, Pinto invested (£250,000 initially).
Reed concludes that they “were at their wit’s end of trying to find an investor” and “if it hadn’t been for [Pinto] then Innocent would never have happened”.
Richard Reed co-founded healthy smoothie brand Innocent Drinks. Since selling a majority of their remaining Innocent shares to Coca-Cola for an estimated £100m in early 2013, entrepreneur Reed and co-founders Jon Wright and Adam Balon have recently launched venture capital fund JamJar Investments.
He also fronted television series Be Your Own Boss on BBC Three to help identify the next generation of UK start-ups and in 2013 founded Art Everywhere, the UK-wide and largest art exhibition of its kind in the world.
You can read an interview with Richard Reed here and find out how your business can emulate Innocent’s start-up success http://startups.co.uk/richard-reed-shares-his-5-golden-rules-for-running-a-business/