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Toronto accounting startup FreshBooks raises another $54-million

Mike McDerment, CEO and co-founder of FreshBooks, poses in the company's Toronto office in this 2014 file photo.

Darren Calabrese/The Globe and Mail

Toronto accounting and invoicing software startup FreshBooks has raised an additional $54-million in venture capital from Canadian firm Georgian Partners, with participation from U.S. investors Accomplice and Oak Investment Partners.

"It's a big, solid investment to further our mission," says FreshBooks CEO Mike McDerment, who also said the money gives his company an "exciting" opportunity to go shopping for a strategic acquisition, though he expects most of the funding will be needed for internal development. The company continues to invest in new features, such as building collaboration tools into its software for clients and contractors. "We're now very well capitalized. It sets us up not just to run the plan, to be open for opportunities as we see them."

Mr. McDerment, who is also one of Toronto's longest-serving startup leaders, did caution that no one should expect any blockbuster announcements any time soon. "There's nothing imminent on this side," he says, "I have a healthy amount of paranoia around doing it right and making a good investment if we go down that path."

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In 2014, FreshBooks raised $40-million in series A capital, the first major funding the company took since it was founded in 2003. The company invested more than $7-million in an overhaul of its software and platform – beginning in 2015 and launching in late 2016 – intended to make the software more user friendly. FreshBooks claims more than 10 million people have used its software, in 160 countries (though Mr. McDerment admits that figure is a little dated, that's the one he's comfortable releasing).

FreshBooks also expanded to a new office in midtown Toronto for its growing staff of approximately 300.

In addition to leading the funding, Georgian Partners managing partner Simon Chong has joined FreshBooks's board of directors after being a board observer since 2014. Georgian is one of Canada's best connected venture funds, with sizable investments in companies like Shopify, Vision Critical and Influitive. "FreshBooks is a market leader in online billing and accounting for small businesses," Mr. Chong said in the release accompanying the news.

Mr. McDerment somewhat famously founded the company in his parents' basement, "bootstrapping" the company for more than a decade before taking any venture capital. Mr. McDerment won't confirm what the company's valuation is. While he says he also won't discuss how the private company lets employees cash out equity, he acknowledges "we have had the opportunity to do something" to pay back the early support of his parents.

Although he's a long way from the basement, currently spending more of his time travelling and doing strategic planning that plots FreshBooks' three- to five-year outlook, those lean years are never far from his mind.

"The basement guy would be proud," he says.

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