Big news in the SaaS accounting space this morning as FreeAgent announces that it has acquired US accounting provider 60mo and will be using the company as its vehicle for a US expansion. 60mo is a small SaaS provider that has quietly been going about building a small following for its financial forecasting tool. They’ve purposely taken a lightweight approach to the problem – seeing that as both the pain point and the opportunity.
In announcing the deal, Ed Molyneux of FreeAgent says that 60mo will be their entre into the US market, and FreeAgent will leverage the knowledge about US accounting and taxation that the 60mo team have. To fund the acquisition, FreAgent tool on a round of funding from Lightbank, a Chicago based VC.
60mo has now shut down new signups and according to Molyneux is building a US-centric version of the FreeAgent application, in doing so they’re squarely going to move into competition with Xero. FreeAgent intends to backwards-integrate some of the cashflow focused functionality of 60mo into its own product.
This is big news for the SaaS accounting space. UK is a busy market with a number of vendors competing for market share – FreeAgent has arguably the biggest slice of the market there, it’s 20000 or so customers making it close to twice the size of Xero with other vendors such as KashFlow also in the mix. Moving to the US now makes sense since no one has yet gained any real market awareness there. While Xero has been building a local US team over the last few years, it’s safe to say that they are very much still in the initial stages and haven’t cornered the market yet. For the record – since the start of 2011, FreeAgent have grown from 4000 to 20000 customer, a growth rate that puts them at the forefront of this nascent sector – that’s an indication of the validity of their approach, regardless of the fact that ny of those customers have been gained through a low-margin partnership with a UK bank.
It will be very interesting to see the approach that FreeAgent takes with regards their go to market. Xero is strongly focused on partnerships with accountants and the like. In the UK FreeAgent has varied approach that sees them partner with a variety of organizations (accounting firms and banks for example) but is also a strong direct sales company.
FreeAgent has a rabidly supportive customer base in the UK – if they manage to have users as satisfied in the US as those across the pond, it’s going to be super-interesting to watch as they go head to head with Xero.