200 Degrees co-founder discusses how he attracted investment

At Invest Midlands, our North-West Editor Shelina Begum spoke to Rob Darby, owner of fast-expanding 200 Degrees Coffee and one of the most dynamic entrepreneurs in the Midlands.

Named after the temperature its roasts its coffee beans at, the firm roasts all of its coffee within its roast house in Nottingham and now has 15 locations across the UK.

Darby discussed how he attracted investment and offered advice to small businesses as to how they can do the same.

Could you briefly describe where you guys are at the moment in terms of the scale of the business?

Rob Darby

“We’ve got 15 trading coffee shops, two in the build phase and have a few more in the pipeline. We have a wholesale business offering which is turning over just under £2m a year. And then we have a subscription online business, which is growing well, especially during the pandemic and then we also have a training arm to our business.”

It was 2017 when you got your first significant investment, why did it take so long? Were you getting yourself to a point where you thought you needed investment to take your business to the next level?

“Yeah, that decision to take investment is clearly a huge one in the lifetime of any business. The real answer is we were not looking for investments. So we’d grown organically. We had another business as well which was very fortunate for us in the sense that we didn’t have to put personal financial pressure on 200 Degrees in order to look after our own living standards.

“We started getting some approaches from venture capital style investors and I had to decide should I take investment and if so, why?

How much investment did you receive and what do you do with the money?

“We received £3m, which was quite a sizable investment for the size of company that we were at the time. That was structured predominantly as an equity investment.

“We parted with 25% of the company for it. There were two things that we really needed to work on. We needed to grow some of our people in order to help us have the right team that was fit for purpose in terms of growth.

As a smaller company, you’re the marketing executive at one minute and then you’re the managing director, and then you’re packing the bags. You have to recognise that a marketing executive who’s actually qualified and experienced in marketing will do it an awful lot better than you will.

“We also started to invest in in new stores and new equipment to grow the business through the shop route.”

What lessons have you learned and what advice would you give to those looking to take the next steps?

“I would say you have to really get to know your investor and become really aligned. Investors don’t want to be there for 20 years. They want to be in and they want to be out in 3, 4, 5, 6, 7, 8 years, whatever the number might be. So you have to really align your journey with their journey.

“You have to get used to allowing someone else to have a voice. For example, I can’t sign up for a new shop without agreement. You have to get used to the fact that someone else does have a say in your business and therefore you have to be really engaging and and willing to share information.

“I think it’s quite tempting to paint the rosiest possible picture you can of your business in order to maximise your investment. And whilst that that might maximise the number and add equity value. There’s also a reality point where I think there’s a lot of value in showing where you need support.

What are the plans for the business now in 2022?

“There is an ecosystem within our business where all aspects of the business help to drive and promote the other aspects. For example, you may well come and look at our online products in our subscription offering, having enjoyed a cup of coffee in one of our stores and you may well look at perhaps having a machine put into your business.

“We are also looking to add roughly five stores a year. We could accelerate it more but we have a saying within 200 that we only do things we can do well, and we don’t feel that we want to open a glut of stores and risk doing it badly.”