Accounting software startup Practice Ignition has raised $5 million in a Series A funding round from a “phenomenal” set of investors as the business sets its sights on an ambitious growth plan.
Practice Ignition provides an automated, cloud-based Software-as-a-Service platform that allows accountants to glean more data about their clients.
Chief executive Guy Pearson co-founded the business with designer Dane Thomas in 2011 after coming up with the idea on the back of a beer mat. Starting the business was the easy part for seasoned former accountant Pearson, but he says growing it was another thing altogether.
“The running of the company didn’t scare me, but growing it and building the product resulted in a lot of lessons learned,” Pearson told StartupSmart.
“I was always tech minded, so I thought building a product would be simple, but it’s a completely different beast.
“It’s like building a car you can’t drive for a year-and-a-half, and then trying to find someone to pay you upfront for that car.”
Despite the learning curve, Practice Ignition has continued to attract investors, after locking in $2.2 million in seed funding in 2014 and 2015.
The Series A funding round was led by Microequities Venture Fund and included contributions from Black Sheep Capital and Right Click Capital, plus existing individual investors, MYOB co-founder Craig Winkler and TechnologyOne founder Adrian Di Marco.
Practice Ignition boasts over 1000 direct customers and more than 40,000 relationships, and the business has “a hell of a lot more potential”, says Pearson. The team is angling for consistent growth of two to three times year-on-year, a cadence Pearson says is “incredibly realistic”.
“Every year we’re pushing for that type of growth. There’s a three-year lag in how accountants pick up new technology, so our goal is to be in the right position at the right time to ride that massive upswing,” he says.
The business has put a focus on smaller accounting firms due to the “bell curve of adoption”, with Pearson saying smaller, more agile firms are more willing and able to switch to cloud-based solutions.
“From a big business point of view, the rollout of cloud technology is just starting to gain traction, where smaller firms have been doing it since 2009,” he says.
“Smaller firms can go through change quickly, where big firms are just starting to get into deployment. Smaller firms are also more scalable and available, accounting for around 95% of the market.”
Raising funds in Australia “not easy”
The investors on board with Practice Ignition are “phenomenal” says Pearson, but he admits raising funds as a startup in Australia is “not easy”.
“Ironically if you want to get funds from overseas, the investors always want you to be in whatever country they’re in,” Pearson says.
Now that the Series A deal is signed off, Pearson is keen to get working. But he acknowledges the strenuous process of bringing the investors together for the deal, warning startup founders to ensure they set themselves enough time to close a round.
“Give yourself at least six months to close a round, as once you get to commercial terms all the lawyers have to get involved,” he says.
“And when you go to meet VCs, you should know them beforehand. Treat the first meeting almost like a coffee catch up.”
The $5 million in funding will be used to double down on what’s already working in the business, with more than half of Practice Ignition’s revenue coming from overseas markets. The business is also poised to push further into the UK market, but Pearson says a decent amount of the new funding will go into marketing the platform.
“We want to deploy a decent marketing function and sales function, as, like many startups, we’ve gotten to where we are with a pretty light spend on those sort of things,” he says.
“We’ll be doubling the team’s headcount to 60 in the next two years. Right now the team I have is awesome, it’s amazing to work with incredibly smart people who are so humble.”
“They leave their ego at the door, and when you have that, everyone’s so down for the company to win and everything matches up. It’s a really great feeling.”