Xero became a billion dollar company yesterday, as its share price tipped over the $8.50 mark late in the afternoon.
The Wellington-based cloud accounting company has more than 135,000 customers, helping it bring in around $4 million of revenue per month. Even so, Xero has yet to return a profit to its investors.
Xero has $85 million in the bank, thanks in large to $60 million raised in capital investments last year from a Peter Thiel-backed VC. This isn't money for dividends, says chief executive and co-founder Rod Drury – this is money for growth.
Drury has long dismissed the notion that Xero needs to be profitable at this stage. Growing overseas is the key to success, he says. This means more boots on the ground and products on the table – both costly endeavours.
"If we stopped what we were doing we could drive to profitability by tomorrow, but this isn't what we want to do and our shareholders have voted with the share price," he says.
Drury's focus is tackling the US market, where it only has around 7,000 customers (as of September 2012). This is also where Xero faces its stiffest competition in the form of incumbent players like Intuit's Quickbooks.
"The American market is very conservative at a SME level. Moving away from Quickbooks requires a mindset shift," says Drury.
Xero is tapping into influencers in the American accounting scene, like Quickbook consultant and blogger Michelle Long, to give the company more mindshare.
Americanising existing products is an important step towards acceptance in the US, says Drury. There's still some way to go.
"We need to get our marketing right, and this includes the addition of checks and 1099 forms which are a must in the US. The biggest thing we need to add if we're going there to challenge Quickbooks is adding a stock management system, " he says.
The team at Xero has almost doubled in the last year to 350. This hiring spree is going to continue to support the push into the States, says Drury.
Idealog has been covering the most interesting people, businesses and issues from the fields of innovation, design, technology and urban development for over 12 years. And we're asking for your support so we can keep telling those stories, inspire more entrepreneurs to start their own businesses and keep pushing New Zealand forward. Give over $5 a month and you will not only be supporting New Zealand innovation, but you’ll also receive a print subscription, an Idealog t-shirt and a copy of the new book by David Downs and Dr. Michelle Dickinson, No. 8 Recharged (while stocks last).