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Dec 20, 2018 · 20m · top-founders

1244 Why Freshbooks CEO was Anti-VC, then Raised $75m

Mike McDerment · 11m spoken Nathan Latka · 7m spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

In this episode of The Top Entrepreneurs Podcast, host Nathan Latka interviews FreshBooks co-founder and CEO Mike McDerment about transitioning from a decade of bootstrapping to raising $75 million in venture capital, scaling to nearly 300 employees, and building a high-touch, customer-first SaaS business.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 39% of the talking time here. How this is scored →

Nathan as informed peer 5.4 Guest teaching 3.0 Guest disagreement 2.0 Nathan pushing back 3.8
05100:0010:0020:000:00–2:13 · Nathan as informed peer 3/10 Episode Preview and FreshBooks Overview Nathan introduces the episode with background research on FreshBooks and its funding, followed by lighthearted banter about Mike's outdoor bio.2:13–5:55 · Nathan as informed peer 5/10 FreshBooks Product Focus and Free Trial Pricing Model Nathan compliments FreshBooks' automated billing features and inquires about pricing structure, prompting Mike to explain the strategic trade-offs between free trial and freemium models.5:55–11:15 · Nathan as informed peer 6/10 Transitioning from Anti-VC Stance to Raising Capital Nathan probes why Mike abandoned his famous anti-VC stance and asks why he didn't opt for venture debt instead of equity. Mike explains his decision around executive hiring and institutional board value.11:17–15:46 · Nathan as informed peer 6/10 Mid-Episode Sponsor Message for Gusto Payroll Following the sponsor break, Nathan presses Mike on the unit economics of providing dedicated live phone support on a low-cost $15 monthly tier. Mike counters that customer proximity and feedback outweigh pure spreadsheet math.15:46–20:01 · Nathan as informed peer 7/10 Company Scale, Headcount, and Forbes Revenue Speculation Nathan confronts Mike with external data points from Wikipedia and Forbes estimating over $50M ARR. Mike politely deflects financial disclosures while Nathan repeatedly seeks confirmation before transitioning into the Famous Five.0:00–2:13 · Guest teaching 1/10 Episode Preview and FreshBooks Overview Nathan introduces the episode with background research on FreshBooks and its funding, followed by lighthearted banter about Mike's outdoor bio.2:13–5:55 · Guest teaching 3/10 FreshBooks Product Focus and Free Trial Pricing Model Nathan compliments FreshBooks' automated billing features and inquires about pricing structure, prompting Mike to explain the strategic trade-offs between free trial and freemium models.5:55–11:15 · Guest teaching 4/10 Transitioning from Anti-VC Stance to Raising Capital Nathan probes why Mike abandoned his famous anti-VC stance and asks why he didn't opt for venture debt instead of equity. Mike explains his decision around executive hiring and institutional board value.11:17–15:46 · Guest teaching 5/10 Mid-Episode Sponsor Message for Gusto Payroll Following the sponsor break, Nathan presses Mike on the unit economics of providing dedicated live phone support on a low-cost $15 monthly tier. Mike counters that customer proximity and feedback outweigh pure spreadsheet math.15:46–20:01 · Guest teaching 2/10 Company Scale, Headcount, and Forbes Revenue Speculation Nathan confronts Mike with external data points from Wikipedia and Forbes estimating over $50M ARR. Mike politely deflects financial disclosures while Nathan repeatedly seeks confirmation before transitioning into the Famous Five.0:00–2:13 · Guest disagreement 0/10 Episode Preview and FreshBooks Overview Nathan introduces the episode with background research on FreshBooks and its funding, followed by lighthearted banter about Mike's outdoor bio.2:13–5:55 · Guest disagreement 1/10 FreshBooks Product Focus and Free Trial Pricing Model Nathan compliments FreshBooks' automated billing features and inquires about pricing structure, prompting Mike to explain the strategic trade-offs between free trial and freemium models.5:55–11:15 · Guest disagreement 2/10 Transitioning from Anti-VC Stance to Raising Capital Nathan probes why Mike abandoned his famous anti-VC stance and asks why he didn't opt for venture debt instead of equity. Mike explains his decision around executive hiring and institutional board value.11:17–15:46 · Guest disagreement 3/10 Mid-Episode Sponsor Message for Gusto Payroll Following the sponsor break, Nathan presses Mike on the unit economics of providing dedicated live phone support on a low-cost $15 monthly tier. Mike counters that customer proximity and feedback outweigh pure spreadsheet math.15:46–20:01 · Guest disagreement 4/10 Company Scale, Headcount, and Forbes Revenue Speculation Nathan confronts Mike with external data points from Wikipedia and Forbes estimating over $50M ARR. Mike politely deflects financial disclosures while Nathan repeatedly seeks confirmation before transitioning into the Famous Five.0:00–2:13 · Nathan pushing back 0/10 Episode Preview and FreshBooks Overview Nathan introduces the episode with background research on FreshBooks and its funding, followed by lighthearted banter about Mike's outdoor bio.2:13–5:55 · Nathan pushing back 2/10 FreshBooks Product Focus and Free Trial Pricing Model Nathan compliments FreshBooks' automated billing features and inquires about pricing structure, prompting Mike to explain the strategic trade-offs between free trial and freemium models.5:55–11:15 · Nathan pushing back 4/10 Transitioning from Anti-VC Stance to Raising Capital Nathan probes why Mike abandoned his famous anti-VC stance and asks why he didn't opt for venture debt instead of equity. Mike explains his decision around executive hiring and institutional board value.11:17–15:46 · Nathan pushing back 6/10 Mid-Episode Sponsor Message for Gusto Payroll Following the sponsor break, Nathan presses Mike on the unit economics of providing dedicated live phone support on a low-cost $15 monthly tier. Mike counters that customer proximity and feedback outweigh pure spreadsheet math.15:46–20:01 · Nathan pushing back 7/10 Company Scale, Headcount, and Forbes Revenue Speculation Nathan confronts Mike with external data points from Wikipedia and Forbes estimating over $50M ARR. Mike politely deflects financial disclosures while Nathan repeatedly seeks confirmation before transitioning into the Famous Five.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 68.5% · guest 31.5%0:00 · Nathan 68.5% · guest 31.5%3:00 · Nathan 30.1% · guest 69.9%3:00 · Nathan 30.1% · guest 69.9%6:00 · Nathan 10.6% · guest 89.4%6:00 · Nathan 10.6% · guest 89.4%9:00 · Nathan 34.5% · guest 65.5%9:00 · Nathan 34.5% · guest 65.5%12:00 · Nathan 53.7% · guest 46.3%12:00 · Nathan 53.7% · guest 46.3%15:00 · Nathan 35% · guest 65%15:00 · Nathan 35% · guest 65%18:00 · Nathan 41.5% · guest 58.5%18:00 · Nathan 41.5% · guest 58.5%
Sharpest disagreement ▶ 16:22 Mike deflects Forbes revenue claim

Mike refuses to disclose financial metrics and playfully corrects Nathan's citation by noting Forbes reported 'north of 50' rather than verifying the figure.

 Hardest push from Nathan ▶ 16:06 Nathan challenges silence on public estimates

Nathan refuses to let the revenue topic drop, pressing Mike on where publications like Forbes and Wikipedia source accurate revenue and account figures if FreshBooks never releases them.

 Biggest teaching moment ▶ 14:47 Customer proximity versus spreadsheet metrics

Mike re-educates Nathan on customer service strategy, explaining that treating live phone support as customer proximity rather than a cost center drives fundamental product insight.

 Nathan holds their own ▶ 16:06 Nathan presents external research data

Nathan demonstrates rigorous prep by presenting specific third-party reporting on user accounts and ARR to corner the guest on valuation metrics.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Episode Preview and FreshBooks Overview 3100 Nathan introduces the episode with background research on FreshBooks and its funding, followed by lighthearted banter about Mike's outdoor bio.
FreshBooks Product Focus and Free Trial Pricing Model 5312 Nathan compliments FreshBooks' automated billing features and inquires about pricing structure, prompting Mike to explain the strategic trade-offs between free trial and freemium models.
Transitioning from Anti-VC Stance to Raising Capital 6424 Nathan probes why Mike abandoned his famous anti-VC stance and asks why he didn't opt for venture debt instead of equity. Mike explains his decision around executive hiring and institutional board value.
Mid-Episode Sponsor Message for Gusto Payroll 6536 Following the sponsor break, Nathan presses Mike on the unit economics of providing dedicated live phone support on a low-cost $15 monthly tier. Mike counters that customer proximity and feedback outweigh pure spreadsheet math.
Company Scale, Headcount, and Forbes Revenue Speculation 7247 Nathan confronts Mike with external data points from Wikipedia and Forbes estimating over $50M ARR. Mike politely deflects financial disclosures while Nathan repeatedly seeks confirmation before transitioning into the Famous Five.

Statements from this episode (7)

Disclosure
McDerment: FreshBooks excludes retail, restaurants, and manufacturing to stay simple
“We're focused on folks who you know, get paid for their time and expertise when serving other people. So we don't serve restaurants. We don't serve retail. We don't serve manufacturing. Really, really around client service based businesses, people who serve ot…”
Mike McDerment Dec 20, 2018 ▶ 3:01
Insight
McDerment: Free trial models provide higher-confidence learning than freemium
“A freemium model, maybe get more people using, but fewer people paying with a free trial model, you have a decision point, so you can actually learn with more confidence, because there's consistent periods in that, so if you're thinking about business model, t…”
Mike McDerment Dec 20, 2018 ▶ 5:32
Assertion Partly supported
FreshBooks has raised over $75M USD in capital
“So I guess at this point we've sort of secured over seventy five million dollars in capital the U S dollars.”
Mike McDerment Dec 20, 2018 ▶ 9:29
Insight
McDerment: Institutional investors provide executive hiring data operators cannot
“One of them runs an 80,000 person company, but couldn't tell me market data, like how much should we pay, you know, executive who does this or like those kinds of things with professional investors. Like, you know, they just give you those answers tickety boo …”
Mike McDerment Dec 20, 2018 ▶ 10:57
Assertion Supported
FreshBooks avoids phone trees and provides live human phone support
“Like, we don't have a phone tree. You get a live person when you phone us.”
Mike McDerment Dec 20, 2018 ▶ 13:56
Disclosure
FreshBooks employs slightly under 300 people
“We're a little shy of 300 people is kind of the, you know, one benchmark that, but you know, I yeah, we basically don't disclose, but that's one thing we do.”
Mike McDerment Dec 20, 2018 ▶ 15:54
Assertion Supported
Latka notes Forbes reported FreshBooks at over $50M ARR
“Forbes reports over fifty million bucks in annual recurring revenue. He did not confirm or deny that”
Nathan Latka Dec 20, 2018 ▶ 20:30
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