When Ed Molyneux talks about rocket fuel, there’s a strong tendency to believe that he knows what he’s going on about. A former RAF pilot who spent a decade flying military fast-jets, he is by his own admission a “bit of an adrenaline junkie” who’s always got to have a project on the go.
This year’s mission came to fruition last week with the listing of FreeAgent in what has been a difficult market for flotations. Molyneux, who set up the Edinburgh-based company in 2007 with co-founders Olly Headey and Roan Lavery, says the move will propel FreeAgent on a number of levels.
There is the money raised, of course, £10.7 million in total, which will help the specialist provider of cloud-based accountancy services extend its reach among the estimated five million micro-businesses operating throughout the UK. Joining the Alternative Investment Market (AIM) has also allowed some financial backers from the early days to realise a return on their investment, and puts a tangible value on the share options distributed among FreeAgent’s 112 staff.
There is also the element of gravitas that comes with being a publicly traded company. “It demonstrates to the accountancy firms that we partner with that we are a serious player,” says Molyneux. “Accountancy practice is the most rapidly expanding side of our business, with 100 per cent year-on-year growth, and we will be accelerating sales into that area.
“When you look at the whole package, the listing ticks a number of boxes, and when you put it all together it’s like rocket fuel for our business.”
As a sixth-former in the late 1980s at Emanuel School in south-west London, Molyneux was interested in computing but more irresistibly drawn to the allure of flying. He applied to join the RAF’s University Cadetship scheme as a pilot and was accepted, and spent the next four years studying engineering and computing science at Oxford while also learning the basics of flight on the Bulldog training aircraft.
After graduating in 1992, he continued his flight training with the US Air Force in Texas, then at RAF Valley on the fast-jet Hawk trainer. From there it was on to RAF Wittering for training on the Harrier, followed by two tours of duty on that aircraft during the Balkans war.
The challenges were constant, he says, including day and night flights from both land and aircraft carriers, plus extremely high speeds at sometimes very low level.
After reaching the point where he had seen and done it all, he decided to leave the air force in 2003, and hasn’t flown since.
“It’s very expensive,” he says, by way of explanation. “Also, I believe it is something that you have to do professionally, or not at all. I wouldn’t say that it’s not safe, but unless you do it all the time you can get caught up in potentially dangerous situations.
“And to be honest, having done all the things we did on the Harriers, the idea of tootling around the skies in a Cessna doesn’t really have the same appeal.”
He instead set up as a defence technology consultant in the southeast of England, which seemed a sensible option following the birth of his son. But the freelance lifestyle came with its own challenges.
“My management of that little micro-business financially left a lot to be desired,” he says. “When the accountant came at the end of the year and said ‘here is your tax bill’, that came as a bit of a shock.”
Molyneux says he was bad at keeping to tax deadlines and setting money aside, and was frustrated by the lack of bookkeeping software specifically for freelancers.
During this period he met fellow freelancers Headey and Lavery, who similarly found the accounting side of their work to be painful. They decided to develop their own solution, and FreeAgent was born. The business made its home in Edinburgh after Molyneux and his Scots-born wife moved to the capital, and has operated from there since 2007.
Serious work on a market listing began at the start of 2016 when the company was on the cusp of signing one of its biggest partnerships to date with London-based K&B Accountancy, which added 1,200 freelancers and contractors to the FreeAgent platform. That agreement ranks alongside similar deals with the likes of Danbro and JSA, which have taken the number of active subscribers to about 52,000.
But Molyneux sees scope for much more, particularly as the government pushes ahead with its £1.3 billion programme to move the UK tax system over to digital record keeping by 2018.
Like others, Molyneux believes the timeframe is too short, and suggests that 2019 would be a better target for the very smallest of businesses. Either way, it will create big opportunities for FreeAgent’s software, which automates the collection of information such as income and expenses while also keeping track of tax liabilities.
“Our part of the market will be most affected by these changes, and we can really help with that transformation,” he says. “There will be a step-change in the impact that our business can have.”
Molyneux argues that rather than being a threat to accountants, FreeAgent relieves them from chasing up clients for data, allowing professionals to provide more useful and valuable advice. More than half of the firm’s users have been secured through its network of 700 accountancy practice partners, and that ratio is set to rise.
“There are in fact changes going on across all the professions that are being driven by technology in various ways,” he adds. “We are resolute that we should automate absolutely everything that can be automated. By automating the lower-end stuff, we can help accountants do the higher-end stuff which makes them more efficient.”
This will lead to the steady addition of sales and engineering staff at FreeAgent, which employs the majority of its workers at its fourth-floor headquarters in Fountainbridge, where Molyneux enjoys views across to Edinburgh Castle and Arthur’s Seat. Headcount is expected to rise to about 200 within the next couple of years as the firm builds on sales which reached £5.7 million in the year to March.
Prior to flotation, FreeAgent raised £9m through a combination of angel investment, crowdfunding and bank debt. Money from the flotation included £2.7m for selling shareholders, and of the £8m grossed by the company, £2.9m will go towards clearing its debts.
Molyneux says circumstances were never quite right for bringing venture capital or private equity backers into FreeAgent, which is keen to remain focused on its core market of serving the UK’s growing army of micro-businesses. Following that same vein of thinking, the firm will continue concentrating on partnerships with practices serving freelancers and consultants, though there have been some preliminary discussions with one or two major UK accountancy outfits.
“We do have conversations under way with those kinds of practices, but we make it very clear to them that we are focused on smaller firms, which historically have not been part of their clientèle,” Molyneux says. “But what is interesting is that these big practices are looking for ways to grow, and one way to grow is to offer more lower-cost services.”
The move to listed company status has led to a couple of boardroom appointments at FreeAgent, with Nigel Halkes, former managing partner of Ernst & Young UK, joining as non-executive head of the audit committee. Andy Roberts, who led The Innovation Group before its £500m sale to Carlyle Group this year, came on board in September as non-executive chairman.
Molyneux says Roberts was invaluable in guiding FreeAgent through the flotation process, and has a keen understanding of how markets work and the way investors think. But while public listing will inevitably bring some changes in how the company conducts its business, its chief executive is intent on continuing to run things in the “right way” for both its customers and operations.
“We don’t want the ‘tail of the dog’ as such,” he says. “We don’t want to start running the business for the benefit of the market – I am sure everyone probably says that – but we are very keen to make sure that does not happen.”