Invoicing app company Invoice2go is getting a new CEO after closing a $35 million fundraising round – its first – from Accel Partners and Ribbit Capital.
Founder Chris Strode, a former Macquarie banker, has been working on the idea for about 10 years but it’s only in the past four years he’s managed to get traction.
“We didn’t have the perfect product-market fit,” he said. It was only “once we were happy, we started looking at bringing investors on.”
The company has appointed former eHarmony boss Greg Waldorf as chief executive and the Australian startup is looking to build out its global team from a Palo Alto headquarters.
Securing major capital investment has long been a sticking point for Australia’s tech sector. Many say mid-to-late stage funding is almost impossible to access Down Under, and that the market for venture capital is limited to eager, risk-hungry investors who make many small bets but then pull their funding at the first sign of failure.
Just this week Atlassian founder Mike Cannon-Brookes, ranked No.35 on the BRW Rich List at a personal wealth of just over $1 billion on paper, told Business Insider that Australian startups should realise how much harder it is for startups to get investment commitments in the US market.
“People don’t realise,” said Cannon-Brookes, whose company also benefited from a major investment from Accel in its early days.
He said startup founders frequently say to him: “oh, it’s so hard to raise money”, without realising that in Australia, you’re “one in a hundred instead of one in a hundred thousand.”
Strode said he would continue to focus on developing the product from Sydney and growing a local team of developers from 15 people to about 30 over the next 12 months.
“There is a tremendous market opportunity for this business and I’m thrilled to be coming on board at this point in the company’s history,” Waldorf said.
For a first-round investment $35 million is huge. And it’s something Strode said he thought the company needed if it was going to have a chance against some of the “incumbents” in the accounting sector.
“When we looked at what we wanted to do, which was get the product known to over 100 million small businesses globally, it made sense that we would have to do a lot of marketing campaigns but also improve the product in lot of those regions,” he said.
“We thought that was the figure we’d need to take on some of the bigger incumbents who would ultimately chase after this space.
“In Australia they’re the Xeros, the MYOBs, and in the US it’s Quickbooks.
“We had several of those [types of] businesses approach us…We were approached by three of the big ones and that was the path that led to Accel and get us funded.”
Strode confirmed all three approaches were “buyout” offers but because of commercial sensitivity could not say which companies were involved.
He said he didn’t feel the product was where he wanted it, and wasn’t happy about where the big companies would potentially take the product, when the other offers came forward.
“Most small businesses and micro businesses don’t need a fully fledged accounting product,” he said.
Both Accel and Ribbit said they had been closely watching the startup, which helps small and micro businesses get paid swiftly and have more control over their cashflow, for some time now.
The rise of mobile technology and saturation of smartphones across the globe opened up potential which is what Invoice2go is hoping to cash in on.
The investor recruitment started in 2012 and was a long process, Strode said.
“I learned that lawyers cost a lot of money,” Strode told Business Insider.
He explained there were probably up to 15 other venture capitalists who would contact him regularly but they didn’t all see the same potential for the product.
“We wanted to keep the product honed in on what small business needed,” he said.
“Accel saw the same potential,” he said, adding “it made a lot of sense to go with those guys.”
Already the company is generating 80% of its revenue from overseas, including 50% from the US market and about 20% out of the UK.
Everyday about $50 million in work gets invoiced through its system by its 120,000 users. If Invoice2go can build up substantial marketshare it has a big data play potential around small businesses.
“We haven’t yet looked internally at the big data opportunities that we’ve got,” he said, adding it’s in the works.