FreshBooks, the cloud accounting software favored by freelancers and solopreneurs, has joined the unicorn club. And all it took was 18 years of blood, sweat, and tears.
This milestone comes as the company raised an $80.7 million Series E funding round as well as $50 million in debt. Every round brings a fresh valuation, and this one pegs FreshBooks at north of $1 billion.
Leading this round is a longtime FreshBooks investor, Accomplice, which also includes Klayvio, DraftKings, and Hopper among its investments. Also joining the round were J.P. Morgan, Gaingels, BMO, and Manulife. Barclays, which is a FreshBooks platform partner in the UK, came on as a new investor.
We reached former FreshBooks CFO Mark MacLeod today and asked him if he was surprised that FreshBooks’ has only just reached unicorn status. He wasn’t particularly.
“Just the nature of horizontal SMB,” MacLeod said. “It’s a very large TAM, so you just keep grinding away.”
Sales and Acquisitions
The deal announcement laid out what we might see from FreshBooks in the coming months. FreshBooks lists sales and marketing, research and development, and strategic acquisitions as its priorities. We’ll be very interested in what kinds of acquisitions FreshBooks will pursue. We could easily see it acquire competing platforms, especially those with customers in international markets on FreshBooks’ target list. Or we could see it buying early-stage companies with complementary technology.
The focus on sales and marketing is interesting. FreshBooks has always been a classic product-led growth company. And it had eschewed a traditional sales force. However, it now appears to have an inbound channel to handle sales of its “Select” option, aimed at larger organizations. FreshBooks’ products start at just $7.50 per month.
FreshBooks has always operated in a competitive space. Intuit’s Quickbooks, NetSuite, Xero, Zoho, Sage, and others offer competing solutions. But FreshBooks has carved out a loyal niche among the self-employed. While it appears to remain committed to this segment, we wonder if it plans to target other segments, perhaps via acquisition?
“The funding comes as an injection of confidence in our mission to digitally enable small businesses. We’re going to use this capital to reinforce our competitive differentiators. This includes investing in markets that are becoming more regulated, helping owners manage their finances through simplistic workflows, and prevailing as leaders in best-in-class support,” said FreshBooks CEO Don Epperson.
End of an Era
A significant milestone preceded this latest funding round and valuation. In January, FreshBooks announced that its founder and only CEO Mike McDerment was stepping aside and letting Epperson, who was a FreshBooks board member, take over as CEO. McDerment has stayed on as chair of the company’s board and a member of the executive team.
According to press accounts, McDerment initiated the move. He reportedly felt the company needed a new leader to take it to its next phase, which included international expansion. FreshBooks already operates in 100 countries. And it has offices in Canada, Croatia, Mexico, Netherlands, and the U.S.
McDerment founded FreshBooks in Toronto all the way back in 2003. So the company’s journey from garage band startup to unicorn has been a long one. But FreshBooks has always been a company that does things its own way.
For starters, the company had a longstanding obsession with customers service. In the past, MacLeod has told about how even employees at his level had to spend time on the customer support desk in order to interact with customers. Everyone in the organization was expected to be able to handle a customer situation, regardless of their day-to-day role.
We wonder if this almost quaint focus on the customer will survive in its current form now that FreshBooks is a unicorn on a growth mission.