Toronto-based FreshBooks has laid off 10 percent of its employees, BetaKit has learned.
The staff cuts affected approximately 80 members of the accounting software company’s 800-person team, according to a letter obtained by BetaKit that was sent to FreshBooks employees this morning. A source familiar with the company’s operations told BetaKit that these layoffs impact FreshBooks’ marketing, data, and product teams, including CMO Paul Cowan and several directors.
With an IPO no longer on the immediate horizon, FreshBooks shifted its focus to profitability last year.
The letter to employees, written by CEO Don Epperson, attributed the cuts to FreshBooks’ need to adjust its funding strategy amid the market downturn. “Ultimately we decided that the capital markets are, for the foreseeable future, too unpredictable to continue to rely on external funding to fuel our growth,” wrote Epperson.
Rather than raise more outside financing, FreshBooks aims to use its current cash flow and debt facility to reach profitability in 2025, as part of a newly approved three-year strategic plan. As Epperson noted, this plan requires the company to reduce its headcount and programmatic spending.
BetaKit has reached out to FreshBooks for comment.
This headcount reduction marks FreshBooks’ second round of layoffs in recent months. As BetaKit reported, the late-stage FinTech firm shed a previously unknown number of employees in December. Epperson confirmed in the letter that FreshBooks cut six full-time employees and two contractors on its talent acquisition team, as well as “many” contractors on its engineering and data teams. The company also slowed hiring and eliminated backfills at that time.
With its CMO now out, FreshBooks has also seen three senior C-suite executives exit the company over the past year, including its CFO and CTO.
In early 2021, Epperson took over from founding FreshBooks CEO Mike McDerment to spearhead the company’s global expansion efforts. According to the source, Epperson was brought in to help take FreshBooks public. Epperson’s appointment as CEO, coupled with the company’s addition of a CFO with public market experience last fall, hinted at a potential initial public offering (IPO) being in the cards.
But amid frigid public market conditions, a FreshBooks IPO in the near future seems unlikely. With an IPO no longer on the immediate horizon, FreshBooks shifted its focus to profitability last year.
FreshBooks’ latest layoffs come despite the fact that Q1 2023 has been the best quarter in the company’s history.
Founded in 2004, FreshBooks helps small-to-medium-sized businesses manage finances, billing, payroll, payments, and client engagement through its accounting platform. Since then, the company has amassed a customer base of over 30 million people across 160 countries.
To date, FreshBooks has raised hundreds of millions in funding to date from a group of investors that includes Accomplice, Gaingels, Manulife, and Barclays. FreshBooks, which became a unicorn in 2021 after closing $130 million USD as part of its Series E financing, more recently secured a $100 million debt facility last August from BMO and JP Morgan.
In addition to Cowan, FreshBooks’ C-suite turnover includes the departure of long-time FreshBooks CFO Michael Washinushi last September, as previously reported by BetaKit (Washinushi is now CFO of Bird Canada). In Washinushi’s stead, FreshBooks brought in Wayne Jackson.
In a statement at the time, Epperson hailed Jackson’s experience “leading global companies through periods of hyper-growth, including acquisitions and entrance into public markets” as an asset to FreshBooks.
Meanwhile, FreshBooks CTO Oliver Fisher quietly transitioned into an advisory role in January 2023, per LinkedIn, and has since become CTO of Homebase. Fisher appears to have been replaced by Stefano Grossi: according to his LinkedIn page, Grossi has been promoted from SVP of product to chief product and technology officer.
Epperson noted that FreshBooks’ shift in strategy comes as the firm has seen “interest rates rise, economies slow across many of our markets, and capital markets get more and more expensive” over the past six months.
“Practically speaking, our mission and vision have not changed,” wrote Epperson. “What has changed is that we will lower growth and push out the product roadmap in return for reaching profitability much sooner than we had initially planned.”
Like FreshBooks, plenty of other firms have made similar cuts over the past few months amid the economic downturn, in what has already been a heavy 2023 for tech layoffs. Per Layoffs.fyi, over 500 tech companies globally have laid off nearly 140,000 employees since the beginning of January—roughly 86 percent of the amount let go during all of 2022.
FreshBooks is also far from the only Canadian FinTech firm to cut staff recently. According to The Logic, Toronto-based, H&R Block-owned Wave Financial, which provides bookkeeping and payments solutions to small businesses, laid off 50 employees earlier this month.
With files from Douglas Soltys.
Feature image courtesy FreshBooks.