What Childs Farm Tells Us About the Real Value of EIS

Childs Farm is a particularly good example

Founded by Joanna Jensen in 2010, the British baby and child personal care brand went from an idea inspired by her daughter's sensitive skin to becoming the leading brand in its segment. In 2022, 92% of the business was sold to PZ Cussons in a deal valuing Childs Farm at £40 million.

Behind that growth story was something many young businesses encounter: a point at which ambition and opportunity begin to move faster than the company's available capital.

For Childs Farm, SEIS and EIS investment helped bridge that gap.

When Growth Creates a Funding Problem

We tend to think of growth as the solution for a young business.

Sometimes, it creates the problem.

Winning a major retailer can mean producing significantly more stock before customers have bought it. A growing brand needs people, marketing, distribution and working capital. All of that can require investment before the resulting revenue arrives.

Childs Farm encountered precisely this challenge.

Jensen has since said that without SEIS and EIS funding, the company would have been unable to raise the capital it needed to grow and would have failed when it entered its first retailer in 2014.

The company raised £200,000 in 2013, £750,000 in 2014 and £1.5 million in 2016, with all three rounds backed by angel investors. Existing investors continued to participate as the company developed.

Those figures illustrate something important about early-stage investment.

Capital isn't always needed because a company is struggling.

Sometimes it is needed because an opportunity has arrived.

More Than Money

One of the more interesting parts of the Childs Farm story is who provided the investment.

The company's angel investors brought experience from private equity, marketing and finance.

Jensen has described that expertise as an important additional benefit of the investment, arguing that the connection between private investors and their professional skill sets shouldn't be overlooked.

That's an aspect of angel investment that can disappear when EIS is discussed purely in terms of percentages and tax allowances.

An experienced investor can bring more than a cheque.

They may understand how to recruit senior people, enter a new market, negotiate with retailers, prepare for another funding round or simply recognise a problem because they have encountered it before.

For a founder building their first company, that experience can be enormously valuable.

From Startup to National Brand

Childs Farm launched in Boots and Waitrose in 2014 and became the leading brand in its segment by 2019.

Then, in 2022, came the kind of outcome early-stage investors ultimately hope ambitious companies can achieve.

PZ Cussons acquired 92% of Childs Farm, with Jensen retaining an 8% interest. The transaction valued the company at £40 million.

Of course, that outcome was never guaranteed when the first investors backed the company.

That's the point.

Early-stage investors are putting capital into businesses at a time when their future is considerably less certain. 

Products can fail, markets can change and companies can run out of money.

EIS exists partly to encourage private investors to accept those risks.

Childs Farm demonstrates what can happen when the combination works.

The Capital Doesn't Necessarily Stop There

Perhaps the most interesting part of the story happened after the sale.

Jensen didn't simply exit Childs Farm and leave the startup ecosystem behind.

She became an angel investor herself.

She has since invested in 11 female or female co-founded SMEs through EIS, while also supporting other founders and becoming Chair of the Enterprise Investment Scheme Association.

That creates an important cycle.

An entrepreneur raises private capital.

The business grows.

Investors and founders achieve a successful outcome.

Experience and capital are then recycled into another generation of young businesses.

One successful company can therefore contribute to the creation of several more.

And that is one of the less visible ways in which a healthy early-stage investment ecosystem develops.

What EIS Success Really Looks Like

Not every EIS-backed business will become Childs Farm.

Some will fail. Others will grow slowly. Some may become profitable businesses without ever producing a headline-making exit.

Tax relief cannot remove those underlying investment risks, and EIS eligibility should never be mistaken for an endorsement of a company's prospects.

But success stories matter because they remind us why the scheme exists in the first place.

The purpose isn't simply to give investors a tax incentive.

It is to make it easier for ambitious young British companies to access capital at the stage when obtaining it can be particularly difficult.

In Childs Farm's case, that capital helped a founder take a young consumer brand into major retailers, build a market-leading business and eventually achieve a significant exit.

And the story didn't finish there.

Some of the experience and capital created by that success is now finding its way back into other early-stage British businesses.

That may be the real value of EIS: not simply helping to fund one successful company, but helping success create the conditions for the next one.