Beyond the Capital with Cardiff-based investor Waterspring Ventures

Waterspring Ventures Image credit: Waterspring Ventures

Cardiff-based venture capital firm Waterspring Ventures was born out of founder and managing partner Sam Huxtable’s frustration with finding finance in the Welsh capital.

Huxtable was previously an associate portfolio manager for the investment management firm Schroders before realising he wanted to work with startups, where he felt he could have a greater impact.

Following this, Huxtable worked for a Cardiff-based artificial intelligence business here he became acutely aware of the regional funding challenges facing startups and scaleups.

“Even though the startup has a fairly attractive buzzword with artificial intelligence, which raises a lot of finance, it was still very difficult to raise money from British venture capital firms,” says Huxtable, who believes the AI firm’s funding struggles stemmed from being based in Cardiff.

Waterspring Ventures, founded in 2021, is looking to correct that. The VC firm is focused on Wales, the South West and the Midlands. Huxtable says these areas are overlooked because they’re not in the so-called Northern Powerhouse, nor are they near London.

While the South West and the Midlands don’t have dedicated state investment banks, the British Business Bank is launching a £200m South West and a £130m Wales fund this year.

‘It can go wrong – and it’s helpful to be close’

Waterspring Ventures closed its first tranche of £1.2m in funding earlier this year and so far has £600,000 pledged for its second. The final target for its inaugural fund is around £2m.

Capital for the Waterspring Ventures fund has partially come from exited founders to create a “circular economy”, something Huxtable says is present in London but not as much in Wales and the South West.

“It’s largely down to how far away you are from an investor’s office, especially investing in early-stage companies,” he says. “It can go wrong and in those instances, it’s really helpful to be close.”

Waterspring Ventures looks to issue investments ranging from £100,000 to £500,000 in businesses at seed or Series A and have approximately £1m in turnover.

From its offices in Cardiff and London, the Welsh investor will back startups in the tech, sustainability, consumer, TV production and manufacturing industries.

“I don’t think it’s necessarily discrimination. You can imagine if you have a pot of other people’s money, that you have to invest in other businesses, there’s always an incentive to back what you’re most familiar with and what you’re closest with.”

Whilst the Development Bank of Wales is supplying funding to early-stage startups, Huxtable says there is a demand for “smart capital” too.

Huxtable believes Waterspring Ventures can help plug the “acute shortage” of tech funding in the South West.

Outside of Cardiff,  Waterspring Ventures is also keeping its eye on Swansea and in particular its strengths in agtech. Local Swansea firms include the biotech CanSense, which this month raised £1.5m.

Huxtable adds: “Going through the last year, I’ve been more and more encouraged by how much breadth there is really and how many great businesses there are out there, but which for whatever reason are just struggling to raise the capital.”

Beyond the Capital, an interview series with tech investors and venture capitalists based outside of London, is published monthly. Last month UKTN spoke with Edinburgh-based investor Archangels.