news Accounting software firm Xero announced last week that it had raised a further AU$15.5 million from current strategic investors to maintain its future growth in Australia and worldwide. The New Zealand-based company also announced the acquisition of Max Solutions, a leading practice management company and developer of WorkflowMax, a job, time and invoice management solution.
Chris Ridd, Managing Director, Xero Australia said that both the new developments supported Xero’s rapid growth here in Australia and the rest of the world. “We continue to transform the accounting industry by helping them embrace the cloud. Many of our customers are WorkflowMax customers so this together with Paycycle gives us a very powerful combination,” Ridd stated. WorkflowMax was introduced in the market in early 2008.
Xero will use the capital raised to expand business in the Australian, USA and UK markets, where the company is gaining market share against the large incumbent providers. The company, founded by serial New Zealand entrepreneur Rod Drury and small business accountant Hamish Edwards, has 170 staff spread across four countries, with the most recent office set up in the US. Xero’s online accounting software spares its clients the hassle of installing anything on their computers.
Among the strategic investors who have given additional funds for Xero’s global growth are independent Xero director and board member of Fairfax Media, Sam Morgan as well as the former co-founder of MYOB, Craig Winkler. Valar Ventures, the New Zealand investment vehicle of US-based Peter Thiel and one of the initial investors in Facebook, is another investor. Thiel incidentally is a former co-founder of PayPal, who had invested NZ$4 million in Xero and joined its advisory board in October 2010.
The Max Solutions acquisition, worth AU$4.6 million, will enable Xero to provide a full complement of online tools to accountants wanting to manage a ‘modern practice’ without using expensive in-house servers.
Max Solutions was founded in 2007 by Gavin George and Chris Spence, who are slated to join the Xero team and bring in all the other staff of Max Solutions. George spoke about the significant opportunities the acquisition would give both the WorkflowMax team and product set. “We always envisaged that WorkflowMax would be a truly global solution, and now with the funding, talent and energy that Xero brings we have a significant opportunity to achieve our goal,” he said.
The Xero Board also revealed the launch of the Shareholder Purchase Plan (SPP). The SPP will allow current New Zealand-based shareholders to acquire new Xero shares under the same terms as strategic investors. The company presently has 60,000 paying customers in over 100 countries, and has also built up strategic marketing partnerships with Telstra and ANZ.
With the newly raised funds and acquisition, Xero seems to be rapidly progressing as a leader in the online accounting market. Revenue in Australia increased to $1.4 million for the half-year up to 30 September, 2011, making it the group’s fastest growing region. Compared to the same period in 2010, this indicates a whopping 260 per cent increase. Consequently, Xero has big expectations for its global operating revenue for the year ending 31 March, 2012 to be twice its 2011 revenue of AU$7.2 million.