For a decade and a half, FreshBooks has worked to establish itself as one of the most popular accounting software platforms for small businesses and the self-employed around the world. To accelerate growth, the company has raised $43 million in Series B funding led by existing investor Georgian Partners, with participation from previous investors Accomplice and Oak Investment Partners.
Founded in 2003, FreshBooks has bucked most startup conventions in building its business. That includes both its approach to funding the company and also product development.
For the first decade of its existence, for instance, FreshBooks eschewed venture capital entirely. It wasn’t until 2014 that CEO Mike McDerment decided to bring on outside investors and raise $30 million from Oak Investment Partners, Accomplice and Georgian Partners.
“I lived in fear of losing control of the company and that our customers would suffer as a result… I felt really concerned that if i raised capital too early i would do a bad deal,” McDerment told me by phone. But after running the company for about ten years, he realized he needed additional cash to invest in hiring senior management and developing the product.
“By the time I got there it was an easy decision. I had a product and customers loved it,” McDerment said. “All of a sudden the one thing we needed to help us was more capital.”
After raising that round, McDerment realized the company need to improve its product offering. But instead of just making cosmetic changes to its existing suite of tools, McDerment and his team went through the trouble of incorporating a whole new company called BillSpring and launching a product built from the ground up that basically competed with FreshBooks’ own software.
It wasn’t until they were satisfied with the new platform that they redirected BillSpring users to FreshBooks and offered FreshBooks customers the option to migrate over to the new system. And if they didn’t like it, they would be able to migrate back. There was no forced migration.
With the launch of the new platform behind it, FreshBooks is ready to invest in growing its share of the market, particularly in North America. While it’s strongest in its home market of Canada and in the United States, McDerment says the product has paying customers in 120 countries around the world.
And so, the company has raised another round of funding — this time $43 million led by existing investor Georgian Partners. Along with the funding, Georgian Partners managing partner Simon Chong is joining the company’s board of directors.
While some startups look for outside investors to join them in later rounds of funding, McDerment said the company’s existing group was aggressive in pushing to lead the new round. And really, who better to take money from then the people who already know the business best?
With that money FreshBooks will continue to work on improving its product. While it probably won’t be building another whole new version from scratch, the company hopes to innovate on its billing, reporting and accounting systems, as well as adding additional partner integrations.