FreshBooks CEO Mike McDerment has previously raised cash through friends and family, but has always shrugged off institutional venture capital money. Now he's had a change of heart.
The 10-year-old Toronto startup that's amassed more than ten million users is accepting funding for the first time. FreshBooks has raised $30-million (U.S.) in Series A funding led by Oak Investment Partners, with participation from Atlas Venture and Georgian Partners.
"When I look back in 30 years…I want to make sure I left it all on the field," said Mr. McDerment. "It's about ambition: more capital will enable us to building products to serve our customers better and faster."
FreshBooks develops online-invoicing software for small service-based businesses. By all measures, the company is a Canadian success story: its user base has more than doubled over the past two years, appealing to entrepreneurs and freelancers in 120 countries as a simple accounting solution. "I think we're at a stage…that we have not completely disadvantaged ourselves despite not taking capital," quipped Mr. McDerment.
The company now plans to beef up its Toronto headquarters as a global hub. FreshBooks expects to hire more than 200 employees, focusing on developers and product managers, to increase its Toronto work force from 150 to 400 by 2016. Mr. McDerment also hopes to bring Canadian engineers back home from Silicon Valley and Seattle. "We want to give them an opportunity to work for high tech in Toronto."
FreshBooks has found a sweet spot in the small business cloud accounting market: there are about 60 million small businesses and only a few products catered to them, including QuickBooks, its main competitor. "Many are just using Word and Excel," said Mr. McDerment. FreshBooks is designed specifically for service-based owners. According to users, FreshBooks cuts down time spent on invoicing by 60 per cent.
Simon Chong, managing partner at Georgian, said he was attracted by FreshBooks' unique position in the marketplace, adding that the market is "really enormous".
"Mike wanted to add strong value-added partners…to help put more kerosene on the fire that he's built," said Mr. Chong. FreshBooks, along with Hootsuite and Shopify, are leading the new Canadian tech movement, adds Mr. Chong. "It's almost like a Blackberry-backfill in software."
As Bay Street looks towards the next big Canadian tech IPO, FreshBooks' peers are at the top of the list of candidates. Mr. McDerment said he's not currently planning to sell or go public, but that building a great company will leave "all the options" available.