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FreeAgent flotation targets £8m investment

9th Nov 2016
Practice Editor AccountingWEB
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Cloud accounting developer FreeAgent is floating on the London Stock Exchange to raise £8m with a £31m and £35m market valuation.

FreeAgent founder and chief executive Ed Molyneux said that the admission to AIM will accelerate its growth and assist ongoing investment in its own products.

“We've got to the point in the business where there's enough predictability about the growth and maturity in our processes to be out in the public market,” he told AccountingWEB. “We don't overestimate the overhead and complexity that comes with listing, but we think there are enough reasons to go ahead and do it. Now is the right time.” 

The benefits for FreeAgent will spread across the whole of the company. “Our employees will be able to have share options in a public company, our early investors will have equity, and it will bring more capital into the business,” said Molyneux. 

Despite recent market turbulence, Molyneux said investors were still looking for strong businesses with “good growth prospects, and visibility of forward revenue” to invest in.

The Edinburgh-based company raised £9m through a combination of equity and debt over its nine year life so far. Last summer FreeAgent generated £1m through Seedrs, an equity crowdfunding site, and as a result gained 900 new shareholders wrapped up as one ‘nominee’. Almost all these new Seedrs investors were FreeAgent customers.  

HMRC’s Making Tax Digital plans will no doubt strengthen FreeAgent's listing potential since it will affect the typical FreeAgent customer: sole traders and 'one man band' limited companies.

Extend competitive advantage

Micro businesses make up a large proportion of the market – 95% according to Molyneux. FreeAgent is banking on serving these micro businesses to “extend its competitive advantage” in this pre-MTD world and “maximise growth”.

“What's important about making MTD successful and as painless as possible is the availability of automated and smartphone accessible products,” said Molyneux. “This will allow businesses to comply with the MTD requirements with as little hassle as possible.”

But FreeAgent’s flotation potential is far from predicated on MTD. “All our projections we are able to share based on extrapolating historical growth rates. So we are not assuming anything we happen,” he said.  

Digitalisation of tax will speed up businesses adopting cloud software. But Molyneux has seen the trend already moving towards this transition. 

So far, FreeAgent has helped 50,000 customers transition from the likes of spreadsheet-based recordkeeping to cloud accounting.

Meanwhile, Molyneux is optimistic about the opportunity cloud accounting presents for accounting services. “Technology can't do everything but solving data problems is something it is pretty good at," said Molyneux. "Connecting accountants into this vast market of businesses who are underserved because they don't have the data for accountants to help them is something we see as a big opportunity for the profession."

*This article was amended 9 November to correct a spelling snafu*

Replies (11)

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By Tim Vane
09th Nov 2016 16:10

"Floatation"? That's the spelling we are going with?

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Replying to Tim Vane:
By Tom Herbert
09th Nov 2016 16:36

Thanks for floating that past us Tim, spelling corrected accordingly.

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By free-rider
09th Nov 2016 17:08

Does anyone know when the IPO is to take place?

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By Glenn Martin
09th Nov 2016 23:24

Anyone fancy a dabble, got to be worth a punt with growth potential from MTD.

Next year Rodney.

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Replying to Glennzy:
Man of Kent
By Kent accountant
10th Nov 2016 10:06

Too late methinks - should have got in there last year...

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By RobertD
10th Nov 2016 06:45

Has Ed heard of the damage MTD will do micro businesses? Yes, where's the funnel, let's stuff it down their throats anyway.

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Replying to RobertD:
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By edmolyneux
10th Nov 2016 12:12

No Robert, I haven't heard. But I do know more than 50,000 micro-businesses who don't appear feel damaged by using FreeAgent: our happy customers. For those customers, and the many many of thousands of others using cloud accounting services, MTD will happen nearly automatically and will be a complete non-issue.

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By RobertD
10th Nov 2016 15:42

.

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By RobertD
11th Nov 2016 10:57

"Freelancers and small businesses are the lifeblood of the UK economy, and any measures that get in their way of building great businesses should never be passed. Digitised taxation will have the opposite effect, so have a happy new financial year!"

Ed Molyneux is CEO and co-founder of FreeAgent

Ask CIOT, ACCA, FSB, CLA, NUJ, ATT & OTS

LOL

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Adrian Pearson
By Adrian Pearson
11th Nov 2016 16:52

Ed, will FreeAgent be building quarterly reporting for MTD compliance into the product? Because that could be seen less as "a big opportunity for the profession" and more like bypassing the profession.

You seem to be flip flopping between loving accountants: https://twitter.com/edmolyneux/status/390821463659651073 and

expecting to "drain their moats": https://twitter.com/edmolyneux/status/82455071413116928

Which is it today?

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Replying to Adrian Pearson:
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By edmolyneux
11th Nov 2016 17:06

Hi Adrian,

Yes, we will. Just as we (and all our competitors) have built direct filing for VAT and RTI payroll into our products and we (unlike our competitors) have built initial support for direct filing for Self Assessment. I don't hear too much outrage in the profession about those functions.

I think that part of the profession who may be 'bypassed' is those who have no value to add above collecting bits of paper and filling in boxes on other bits of paper. Any form of digitisation, for them, is to be regretted and obstructed.

For the rest, who are genuinely interested in helping their clients, there is a big opportunity to be far more proactive by helping their clients understand the shared, real-time accounting picture.

Does that help to explain my view?

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