FreeAgent have just announced significant funding of "£2.25 million"! Firstly, congratulations to the whole team for obtaining the major component required to move on to the next level.
For anybody not in the know (where have you been?), FreeAgent are having it out with KashFlow as the front-runners in the UK's SaaS accounting vendor scene! The other major player in the top division being the New Zealand based, Xero. Between them all, they lay claim to over 30K paying users in the UK and they leave a decent sized gap between them and the next tier of baying competitors.
Let's be clear, that this is the distinct sector of SaaS, small business accounting whereby anyone even thinking about going into business can access their back-office functions at entry-level (read: next-to-nothing) pricing. As the FreeAgent press announcement trumpets - this is the democratisation of accounting software. What all these guys have proved is that there is real business to be had from this previously neglected customer-base, for a well put-together, targeted offering.
I believe this sector to be most interesting and very important as it signposts the cultural revolution in software for small business. From the typically resource intensive, resented imposition of product by a typically arrogant software industry into an incredibly easy to access and use, supportive, service provision. This alone highlights why the traditional software incumbents are scrambling to find a response to the new wave of dedicated SaaS vendors. They are software companies - the SaaS vendors are service providers!
But let's be equally clear, this is still relatively early days. The FreeAgent investment is not on the scale of a Facebook announcement for example! (I mean FreeAgent sells stuff ;-) However, I do believe it will be, ultimately no less important. Ultimately, every start-up business will get it's accounting software in much the same way as it's other commodities, enabling not just the Facebook's of tomorrow, but also your local plumber et al.
While there is little doubt that most of the accumulated SaaS numbers are coming from Sage's traditional fresh meat market. At this stage in the game their established user base still leaves supposed competitors in their wake. A couple of years ago, I was saying "don't believe the SaaS hype. By far the majority of potential customers are not even aware of an alternative to Sage, let alone a SaaS alternative". Hence the readiness to engage with any productive channel and the need to explore every other - get the word out!
We were at and still are at, the awareness stage: education, education, education. This situation has not changed to any significant degree. I could point to many significant deals from any player to prove my point, but it seems right that I use this fairly recent announcement from FreeAgent about their arrangement with Barclays and then this subsequent post about numbers (which they've acknowledged was strongly influenced by the Barclays deal) to demonstrate my point.
So it's a land-grab scenario. That's why any (in-vain) attempt at competition from the big boys (SageOne anyone?) is warmly received by all as market validation. Likewise significant investment stories like the FreeAgent story. Any SaaS announcement is good PR for all...and they all get it. That's why most of the guys in the space get on, everyone's in it together. Game-changing doesn't have to be a lonely pursuit (of course, like all families, there is the odd black sheep). That's why when announcements like this one surface, the immediate 'competition' are usually first up with the back-slapping. 'Let's go get the big boys'!
Finally, I just want to draw attention to both what sets the front-runners aside from the also-rans and the front-runners aside from the other front-runners. A source of fascination for the commentators/observers/analysts and other geeks (I included) is the different funding models that each of 3 big players have utilised. Another differentiator has been marketing strategies and brand-building. I could go on. Each has gone about this in different ways; they each have distinct and different identities. But all are successful...until now at least. I hope to explore all of these elements in the not too distant future.
I know the FreeAgent guys are good guys doing a great job. They've truly earnt their success up til now and their clear vision and disciplined, sense-of-purpose will likely carry them all the way.
Congratulations and all the very best to Ed and the FreeAgent crew.