The Business Class

Should a start-up ever turn down investment?

Anmar Frangoul | Special to
Betsie Van Der Meer | Taxi | Getty Images

In 2011 Melissa Morris, a 27-year-old entrepreneur, started her business Network Locum. Based on the idea of cutting out medical recruitment agencies and connecting locums with surgeries direct, the business has attracted many plaudits and seen Morris nominated for a Woman of The Future Award.

Not long after starting her business Morris was offered £250,000 of investment. In today's economic climate, many start-ups would grab such an offer. Morris, however, turned it down, feeling she would lose too much control over a business that had barely got off the ground.

"You need to not put all your eggs in one basket," Morris told "In the really, really early stages, try and get a few offers on the table. I know it's really easy to say that – and in London it is difficult to raise money – but don't be lazy. If you just meet one investor and they say they'll give you the money, it's indicative of the fact that you could probably find a lot more," she added.

(Read more: Words of experience: three entrepreneurs share key lessons for start-ups)

Morris' business is growing rapidly, has just relocated to new offices, and is in the middle of a funding round. So far, over 1,500 locums and 800 GP practices have signed up to the site. Network Locum began trading in September 2012, making £30 revenue that month. Today, they are making £15,000 monthly.

What should other start-ups bear in mind when they are offered funding by angel investors?

"Try and get some choices, then at least you can bargain against them and get the best deal for you," Morris said. "If there's only one offer on the table, from one person, then you have to take what they're offering. They know as well that they're in a position of power to dictate what they want."

(Read more: Has the UK become the 'number 1' place to start a business?)

For Tim Sadler, Director & Co-founder of Quiver Software, a new start-up that specializes in providing email security software for investment banks and law firms, securing large investment is not the ultimate goal either.

"We've remained bootstrapped with the company for quite a long time now," he told "We have quite a specific view that investment can be very, very powerful, but when it's at the right time for a company," he added.

There is a lot to be said, Sadler feels, for growing and expanding a business on its own steam. "The ethos we've had as a company is: actually, it's best to stay self-funded for as long as possible," he said. And like Morris, he is wary of ceding control too soon. "As soon as you raise funding you have to then meet the requirements of your investor. Somebody else gets involved in the business, and starts taking the company in a different direction."

There is also an issue of perception when it comes to evaluating offers of investment, Sadler argues. "It's often portrayed that you need to have hundreds of thousands of pounds to grow your business, but you can have businesses that are organically grown," he said.

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"It's not unrealistic to say that you're going to pay yourselves from the sales from your product. A lot of people say 'we're not going to make money for three or four years, and we'll just use investors' money to pay our salaries and hire loads of people'. That's what we've tried to shy away from, perhaps growing at a slower pace, not artificially growing with investor money but growing from sales. There is a market out there for that."

Despite receiving a lot of interest from potential investors, Sadler and his colleagues have so far resisted biting. That's not to say they've gained nothing out of the experience, though. "Even though we haven't accepted investment yet, we keep in touch with all of the people who've expressed interest in investing in us," he said. "They've offered us hugely beneficial viewpoints."

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