When FreshBooks founder and board chair Mike McDerment decided to cede the CEO position to Don Epperson in early 2021, he set the sights for his financial accounting software company high.
“The next five years will be focused on scaling globally,” McDerment told BetaKit at the time. “In my opinion, Don’s strengths are better suited to leading this next phase in FreshBooks’ development.”
The company, which helps small and medium-sized businesses (SMB) manage their invoicing, payments, and expenses in one unified platform, secured $163 million CAD ($130 million USD) and a unicorn valuation eight months later in a round led by long-time FreshBooks investor Accomplice. Accomplice founder and managing partner Jeff Fagnan told BetaKit after the fundraise that his firm saw FreshBooks becoming a “$10 to $20 billion company.”
Since Sept. 2022, FreshBooks has made six known rounds of layoffs and lost nine senior leaders.
FreshBooks went on to retain a $100 million debt facility from J.P Morgan to aid its global expansion plans and began changing its executive suite. Mara Reiff and Renee Pianka joined as chief data officer and chief people officer, respectively. Wayne Jackson replaced Michael Washinushi as CFO in September 2022, with Epperson indicating Jackson’s IPO experience was an asset.
Since that time, FreshBooks has been on a multi-year rollercoaster ride of executive turnover, staff reductions, and office shutdowns. That rollercoaster continued this month, when chief product and technology officer Stefano Grossi became the ninth executive to depart the company since September 2022, as part of new layoffs impacting 140 employees—the company’s sixth known round of staff reductions in the same period. Those totals include the previously unreported departures of CFO and co-interim CEO Jackson and SVP of Global Sales Greg Rodriguez, in addition to the shuttering of FreshBooks’ San Antonio sales office.
Fresh layoffs
In a blog post announcing the latest cuts that was also sent to employees, FreshBooks noted the layoffs impacted all teams, at all levels, around the world. Reiff, currently the company’s interim CEO, said that FreshBooks has been travelling on the path to profitability and that “it is now time to reach the destination.” She added that the cuts marked a paradigm shift for the way the company operates.
“We’re taking a different approach, one that is less tentative and hopeful, but is rather bold and pragmatic,” Reiff said. “We need to do things differently so we can stand on our own two feet and within our financial means.”
That language is consistent with FreshBooks’ public communications in recent years. In a letter to employees following layoffs in March 2023, which saw the departure of CMO Paul Cowan and a 10 percent reduction in staff (according to her LinkedIn profile, CPO Pianka also departed shortly after this round of cuts). Then-CEO Epperson said the company was aiming to use its cash flow and debt facility as part of a three-year plan to reach profitability in 2025.
When asked about the current state of that plan, a FreshBooks spokesperson told BetaKit that its strategy “remains focused on growing FreshBooks’ profitably in the North American market.”
Prior to the March 2023 layoffs, FreshBooks had 800 employees. FreshBooks declined to disclose its current headcount after multiple requests, but a LinkedIn search puts the company at just over 550 employees. Multiple former employees speaking with BetaKit put the latest cut of 140 workers at somewhere between 20 to 33 percent of the company’s total staff.
According to The Globe and Mail, FreshBooks currently has little cash, high debt, and was looking for capital earlier this year to remain operational.
Expansion, contraction
Following an initial layoff wave in December 2022, and the 10 percent reduction in March 2023, FreshBooks went on to cut another six percent of staff in November 2023. In addition to the closure of its North Carolina operations, the November layoffs also saw the departure of president Mark Girvan and Epperson as CEO—the person tasked by the company’s founder two years prior to expand its global reach. Epperson was replaced by chief data officer Reiff and CFO Jackson as interim co-CEOs.
At the time, sources close to FreshBooks told BetaKit that after years of pursuing international expansion, the company was looking to cut costs and shift its focus back to the North American market. Speaking with BetaKit now under condition of anonymity, two former managers at the company pointed to what they thought were issues in FreshBooks’ go-to-market strategy as reasons for the pullback.
As a modestly-priced SaaS product targeting SMBs, FreshBooks faces stiff competition internationally at both the low and high end of its customer base. Encroachment into new markets was further dampened by the company’s sales team-led strategy, which didn’t fit its core SMB customer profile, and was too early for the companies that would eventually grow to require enterprise-scale solutions.
The two sources BetaKit spoke with differed as to the motivations behind FreshBooks’ global expansion dreams, with one calling it a “vanity exercise” designed to improve optics for a potential IPO or exit, and the other attributing it to the pressure of finding revenue growth following significant venture fundraising. Both agreed that FreshBooks chose a failed strategy for its low-margin, high-churn product.
As the company moved away from its sales team-led strategy, the contraction of its international expansion efforts continued. In addition to the closure of its North Carolina office, FreshBooks quietly closed its San Antonio location this past summer after the departure of Global Sales SVP Rodriguez in December 2023, who had built the office into a sales hub. After his departure,the closure of the office was only a “matter of time,” one of the former managers said.
The FreshBooks spokesperson confirmed that Rodriguez had left the company and that it had closed its San Antonio office over the past year to bring its sales roles together in its Toronto HQ. They added that FreshBooks continues to service customers in more than 160 countries and that changes to the company’s office locations over the years do not impact its abilities to serve customers around the world.
Interim status
Since September 2022, FreshBooks has churned through a number of executives, including the executives brought in to replace other departing executives. The list includes a president, a CEO, a CMO, two CFOs, two CTOs, a CPO, and an SVP. BetaKit has now learned that CFO Jackson, brought in for his public markets experience and eventually acting as co-interim CEO, also quietly left the company this past July.
Jackson’s departure leaves Reiff as the only interim CEO remaining. Following the appointment of Reiff and Jackson as co-CEOs last November, FreshBooks founder and board chair Mike McDerment said the firm was actively recruiting a new CEO. Nearly one year later, a FreshBooks spokesperson confirmed Jackson’s departure to BetaKit, and said that the search for a permanent CEO is still ongoing.
In the blog post announcing the company’s latest cuts, Reiff did not directly mention the summer departure of Jackson or the termination of chief product and technology officer Stefano Grossi. The post does note the company had made changes to its senior leadership, calling the layoffs the “broadest set of organizational changes” in its history.
In a statement to BetaKit, Grossi said he remains dedicated to supporting FreshBooks’ current employees and alumni community in any way he can, and that he has new product ideas and challenges he is now eager to tackle.
“FreshBooks still has a great product, a fantastic customer base and we built an incredible team,” he said. “I have complete faith in their future success and am genuinely excited to watch them thrive.”
Feature image courtesy FreshBooks via Facebook.