Today, FreshBooks announced that it raised $30M in its first venture funding round ever. This is the single largest transaction I’ve been a part of and I am super excited to welcome our new investors to the team.
The path to this announcement began many years ago. For years, we have fielded calls from VCs looking to learn more about us. We knew from the beginning we were looking to build an enduring market leader. So we knew that at some point, seeking institutional backing would become part of the story.
In taking the long run perspective we evaluated every investor we met across the same criteria:
- Long-term orientation with fresh new funding vehicles: All venture funds have a 10 year lifecycle. That means they invest in new companies in the first 3 years, hold their investments for a few more years, then look to sell all their investments in order to generate returns in the last 2 – 3 years. So, that meant that funds that were > 2 years old were not a good fit for us.
- Track record of backing founders: If you look across sectors, but especially on the web, the outsized outcomes tend to be founder-led. So, we looked for funds that have a demonstrable long-term track record of helping founders become great CEOs.
- Passion for and success in SMB: When you look at the portfolio of a typical venture fund you see lots of consumer companies and lots of enterprise companies. You rarely see companies targeting SMB. It’s a third market, but a massive one. And it behaves differently from the others. So, we wanted folks with success in our sector.
The syndicate we have chosen hits all of these checkboxes and more. As you know, we were looking first and foremost for a long-term orientation. The round was led by Oak Investment Partners. Oak has been investing in companies like ours for over 35 years. On their 14th fund, they have an unbelievable track record of helping grow hugely valuable companies. Two things we like are that i.) They quietly go about doing this. You don’t hear about them on Twitter. They just deliver the goods; and ii.) In a male dominated venture industry, their firm is much more balanced. In fact Ann Lamont, who’s been investing since the ‘80s will be bringing her considerable experience to the table.
Atlas Venture, a firm we have known for years (and one of the firms we co-invested with most when I was at Real Ventures) is also part of the round. If you know Atlas, you know they typically invest in much younger, early stage companies. We just have grown to love what Jeff and his partners are doing and wanted to work with them.
Finally, Canada’s Georgian Partners completes the group. I actually think that Georgian is one of the best-kept secrets in Canadian VC. The founding partners have deep entrepreneurial backgrounds and the firm as a whole is building a brand and focus around applied analytics. Something that is increasingly relevant to scaling technology companies like ours.
So, what are we doing with $30M? Well, suffice it to say, we’re going after a massive market. There are over 60M small business owners in North America alone and the vast majority of them are poorly served by the cloud accounting solutions available to them today.
It’s funny; in the past with earlier stage companies I saw venture rounds as a massive accomplishment. They validated our vision (since for the most part we hadn’t built much) and they allowed us to survive. Even though this is the largest deal I’ve worked on, I don’t feel that way about this round.
I always knew we would raise. And we raised to accelerate what we’re already doing. So, I’m just excited to get back to business and help FreshBooks become the default cloud accounting solution for service-based small businesses Worldwide.