IPO for software company
Interview: Ed Molyneux, FreeAgent
High flyer reaching new heights
It has been a hectic few days for Ed Molyneux. Meetings with advisers, brokers, bankers and everyone else connected with raising money on the stock market.
The plan is to take his software company FreeAgent public next month and aside from all the money men and consultants he has to pack in a series of media interviews.
“We’ve been rushing around this past two weeks. I think we’re just about there,” he says.
All being well, FreeAgent will be admitted to the Alternative Investment Market, the London Stock Exchange’s junior market, with a valuation between £31 million and £35m. Molyneux is using the flotation to raise £8m.
It will help accelerate its growth plans. FreeAgent has 52,000 active subscribers to its accountancy product and Molyneux has his eyes focused on Britain’s five million “micro-businesses” – sole traders and very small firms.
“It’s a market that is not very well served and one that we feel we can target,” he says.
The fund-raising comes at a time when investors are showing a little aversion to new issues. Only a week ago Misys, the UK financial software group, abandoned plans for an IPO after it failed to convince enough investors to buy in.
Misys blamed the recent market turbulence that has seen a number of floats either pulled or cut in value.
There have been only 41 IPOs in London this year, the lowest number since 2012, and the value of the companies that went ahead with float plans in the third quarter is down 42% compared with last year, according to Henderson Global Investors.
“We are confident we can do this,” declares Molyneux. “We have a business that has shown predictable revenue growth which investors are looking for. Of course we are alive to the market conditions, but we have a strong business.”
He is no stranger to risk. He piloted RAF Harriers during the Balkans war in 1999 and took a gamble when he chose to launch his company in Edinburgh rather than London.
He left the air force in 2003 after almost 11 years – “I was fortunate to fly Harriers but once you have done what you want to do it is time to try something else – and he first worked as a consultant before a problem with his own accounts gave him the idea for FreeAgent in 2006.
‘I needed something like FreeAgent to sort myself out’
“My accountant gave me a spreadsheet that was just crazy. I was bad at keeping to tax deadlines and putting money aside. I needed something like FreeAgent to sort myself out,” he says.
Working with a small team, and an accountant to advise them on the book-keeping rules, the business grew quickly. They raised £9m through a combination of equity and debt, including £1.2m from 700 investors on the crowdfunding platform Seedrs.
He says they looked at a number of funding options for the latest round of funding, but a flotation offered the best way of raising the company’s profile and, he believes, its status.
“We felt the public markets were the right place for us. It increases our visibility and provides a validation that reassures our customers and investors. By raising money and our profile it kills a lot of birds with one stone.”
Molyneux and other existing shareholders will see their stakes diluted by an undisclosed amount, but he says their overall value will rise as the company grows. His current 11.8% holding will be worth about £4m.
‘It was not easy to hire engineers in Scotland’
He moved to Edinburgh with his Scots-born wife seeking a better quality of life for themselves and their young son, although there were times in the early days when he wondered if he had made the right decision to set up the business north of the border. The explosion in the tech sector has changed his view.
“For the first couple of years we wished we were in London because it was not easy to hire engineers in Scotland. Now things have taken off and we are glad we are here. The quality of life is better. Salaries are lower and so is the churn.
“The growth of the sector means there is a growing pool of talent.”
He admits there was another good reason for being in Scotland. “I wanted to build a house. To do that in London would have meant being a multi-millionaire. And even then you cannot find the land.”
The house in now built. Now he can get on with building FreeAgent to its next stage.
Education: Oxford (engineering)
Career Highlights: Harrier pilot, Royal Air Force; Operational consultant, EDS; Director, Cyanstar Technology; Founder and CEO, FreeAgent
Other business activity: Sits on board of Administrate
What made you leave the RAF?
I enjoyed it, but I did what I wanted and while it is an interesting job there is limited room for creativity.
What can you say about your Balkans war experience?
I did two tours. It had its moments.