Pembroke VCT likes to fund businesses that are above the level where friends and family could provide the funding, but below the de-risked level: the space that the local bank used to fill with small business loans. We like to invest in strong brands with strong management teams.

Our investment model varies according to what the company needs, but generally we invest with straight equity at the post-revenue, pre-profit stage. We want the founders to be left with enough equity so they continue to be entrepreneurs, not employees – we want to help them grow.

Appealing investments are those concepts that are already familiar to the consumer, which we can then build into big business. We invested in UK boutique studio operator BOOM Cycle in 2013, after seeing how popular the cycling studio model was in the US. We were impressed by the young, passionate, entrepreneurial management and spent time with them fine-tuning the brand, which is all about entertainment on a bike.

We believe that there’s still plenty of growth in this sector, particularly with integrated wellness concepts, as well as health and fitness businesses filling former retail space on secondary high streets. We’re always on the lookout for interesting concepts in this sector and are currently looking at some pay-as-you go opportunities.

Additionally, we’ll be keeping an eye on the wider health and fitness industry – anything that helps to contribute to a healthy lifestyle, such as food and drink offerings that are low in sugar.

We’ve already invested in cold-pressed juice company Plenish. Like BOOM Cycle, this company had a young, active, female entrepreneur at the helm, with a passion for what she was doing and the vision to grow and diversify the brand.

We’ve invested twice in Fitness Hut in Portugal – a total of €12m, or 18 per cent of our fund. This operation is a good fit for our fund: we saw a lot of growth potential, both in terms of Fitness Hut’s expansion plans and the growth potential of the Portuguese fitness market, which currently has low penetration rates.

When we invested, Fitness Hut had seven clubs and was aiming for 45. Offering a premium low-cost model, its strategy is to provide a quality product at an attractive price, and it’s the clear market leader in Portugal. Prior to our investment, Fitness Hut had employed capital well and achieved good returns, so we believed that would continue to be the case going forward.

We have a very flexible investment model and try to customise our investment to whatever the situation requires, so we can provide equity, take control, be minority investors or provide debt. This was a debt investment because that’s what Fitness Hut wanted, although we took the right to buy a percentage of the company.

Fitness Hut management was very confident in the growth prospects and the shareholder value that would arise from that growth. Most importantly, the management team owns a significant share of the business – 50 per cent – which we like, because then they still act like owners.

We like the fitness sector because we see it as a sector that will grow, driven by people receiving more information about what’s good for them. In general, when looking for investment opportunities, we seek growth potential, return on capital, high quality management teams and a transaction structure that shows that insiders really believe in the business.

BGF has two investments in the health and fitness industry, at opposite ends of the spectrum, and both are going very well.

We invested in Xercise4Less in August 2013, because the budget space was very exciting at this time. This disruptive model was demonstrating it could take market share from the mid-market and also increase penetration by enticing more people to join a health club.

Xercise4Less offered a differentiated model, with the lowest membership price (£9.99 a month) and the largest sites, which meant there were no queues for machines. Because it has a membership contract, unlike other budget operators, it was also doing well with retention and attrition rates.

There were also good opportunities for the company to grow, with landlords offering attractive rents in former retail sites. Finally, it had a strong management team who had all spent their careers in the sector and had accumulated a vast amount of knowledge.

Gymbox was a similar story, but at the opposite end of the market. Premium, differentiated, focused around London, quirky and high-end, the financial dynamics were attractive. Again, we were backing someone who had spent many years in the sector and we knew that the quality of the management was very high.

Our model is to take a minority equity stake in the business, backing the management while providing them with the funding to grow. As investors, we’re always looking for other opportunities and differentiated models appeal to us. The boutique market looks interesting – we don’t have any investment in this space at the moment.