Peter Thiel to Invest in Xero

Part of our US strategy is to work with the best people in the Industry.  Over the last few months we’ve had the opportunity to connect with some of our heroes – a group of people that we believe are the global leaders in Internet. We’re really proud that they are enthusiastic about our business, understand what we’re doing and that they want to help us.

Today we have a big announcement …

US Technology Guru Peter Thiel to Invest in Xero

Leading online accounting software provider Xero Limited [NZE:XRO] today announced that Peter Thiel, the San Francisco based investor and Silicon Valley authority, has agreed to invest NZ$4 million to support Xero’s expansion into the US market. He will also join Xero’s US Advisory Board.

Mr Thiel co-founded and led PayPal, the online payments company, which was acquired in 2002 by eBay for US$1.5 billion. He was also the first external investor in Facebook, and serves on its board. He is currently President of Clarium, a San Francisco based global macro fund manager.

The investment in Xero will be made through Valar Ventures LP, Mr Thiel’s New Zealand investment firm. Valar Ventures focuses on helping New Zealand companies in the post-revenue phase move into global markets. The Xero placement is the firm’s inaugural investment.

The capital raising, made via a placement, is expected to close next week and will be priced at NZ$1.4918 – the volume-weighted average share price of Xero over the thirty trading days prior to 20 October 2010.

“Millions of small and medium-sized businesses need an online accounting solution, especially in this time of increasing regulatory and tax complexity,” said Peter Thiel. “Xero’s tight focus, robust product, and strong team should enable it to expand tremendously in the United States.”

“We are delighted to welcome Peter and his team at Valar Ventures as strategic investors in Xero,” said Xero CEO Rod Drury. “Access to their extensive networks will provide a major boost as we take on Quickbooks in the vast US small business market. We have taken a measured approach to our US market entry so far. With the support of Peter and his team, we believe we are now strongly positioned to enter the US and capitalise on the opportunity that this market represents.”

UK Bank Feeds – a new way of working

Henry Ford, the pioneer of what we recognise today as Lean Manufacturing, introduced a revolution centred around the elimination of wasteful processes more than a century ago. In his autobiography he explained the essence of it as:

“I believe that the average farmer puts to a really useful purpose only about 5% of the energy he expends. Not only is everything done by hand, but seldom is a thought given to a logical arrangement…his whole idea, when there is extra work to do, is to hire extra men. He thinks of putting money into improvements as an expense. It is waste motion – waste effort – that makes farm prices high and profits low.”

While I wouldn’t suggest that Ford’s farmer is perhaps the best proxy for accounting, take a moment to look around your desk and office. Aside from the odd PC, I’d bet that paper still rules the roost. But more than that, repetitive paper based processes and workflows still dominate the world of accounting and bookkeeping.

We love a challenge

So, in a few weeks we’ll be rolling a new capability to our UK customers which securely imports daily banking transactions straight into Xero. While we’ve had this running for over twelve months for the hundreds of Xero UK customers who bank with HSBC, the UK bank feeds release will enable this ability for most UK banks, credit cards and financial institutions. Around eighty new UK feeds will be added all told.

So, why is this such a big deal for small businesses?

Cash is king. Providing the capability to check your live bank balance and cash transactions from within Xero not only means there’s one less website to visit every morning, it also means that cash based businesses have a fully automated mechanism for loading, analysing and reconciling their cash. Instead of sitting down once a fortnight – if you’re lucky – with a paper bank statment and then repeatedly manually keying, matching, marking and reconciling payments and invoices for each statement line, Xero will will enable you to do a bank rec in minutes every day. Not only do you save time but, critically, you get the benefit of complete, up-to-date visibility of cash.

So, why is this such a big deal for accountants?

Eliminating the need for accounts staff to manually capture, key and reconcile their clients’ accounts not only benefits the clients, but the internal practice efficiencies are multiplied many times over.

Is bank feed data capture a silver bullet, should all my data now come in from my bank statement?

No. While every business will benefit from automated bank feeds, it stands that the more cash based your business is the more you will benefit. But we believe that loading and coding with automated bank feeds, coupled with the full accrual accounting capabilities already present within Xero, will eliminate huge amounts of wasteful re-keying of cash movements, as well as providing hyper realtime management reporting that is sourced from the real, current cash position – not what it was weeks ago when you last did a full bank rec – could be transformational for many small businesses.

We are really excited about finally bringing this service comprehensively to the UK market, stay tuned for more insight as we get closer to launch.

We knit we bake we rock!

Last Friday we had a bit of a company outing as it turns out 3 of our staff are rather hard core rockers! Dave (interaction designer) had a dream to bring a rock concert to Wellington for ‘Rocktober’ so rustled up a band of old colleagues and new to present the Golden Axes at a DressUp & RockOut party to raise money for the Cancer Society.

Dave cajoled Craig (CTO & drums) and Ross (developer & rhythm guitar) to join other band members from IT companies around Wellington and after 6 weeks practicing they brought the house down and raised over $1000 for the Cancer Society. There were loads of us there from Xero – dressed up in our rocker gear supporting our very own rock legends. Turns out Owen is a champion air guitarist and walked away with a trophy for his efforts!

Golden AxesDave, Ross & Craig

Concert goersFull house & air guitar legend

Ex-Xero Jason was there as official photographer from We Do Photography & Design – check out a gallery of images here.

We’re always hiring!

Speaking at the New Zealand Computer Society 50th Anniversary conference today (twitpic’d below), I mentioned during a panel discussion that our biggest constraint was a pipeline of good talent.

A couple of people mentioned afterwards that …

  1. There were surprised that we were still hiring
  2. There was a perception that Xero was complete and so there might not be any interesting projects to do

At Xero we are always hiring and usually have a number of open jobs:

We’re always looking for great developers, from junior to senior and we can offer a wide variety of work as Xero has so many systems. From the Xero app, to our back office systems, websites, help, mobile community sites etc, etc. With breakeven in sight during 2011 we may have the opportunity to gas up significantly so we are keen to build a pipeline of talent we can tap.  Even if you’re not quite ready to move and want to see what we’re about please make contact.

Our biggest shortage right now is software testers.  There is a real shortage of these valuable people in New Zealand.  There aren’t many places that teach software testing but maybe people with a background in bookkeeping and preparation of financial statements might consider financial software testing as a new career.  Please make contact and we’ll help you set a plan to acquire the skills.  We know we’re going to need many more QA people in the future.

As far as Xero being done. Wrong, wrong wrong.  We’re just getting started.  The last few years have been about building the solid foundations and doing the huge amount of work to build a fully featured, horizontal, accounting application.  That’s just the ticket to the game.  Now that we’re got most of that done we can turn to the game changing stuff.  An example of recent new projects we’ve been working on include Yodlee feeds, Xero Personal, Xero Answers, API 2.0 with oAuth and lots of other stuff behind the scenes.  We’ve got lots of other stimulating projects we want to get into and a huge roadmap to work on. What you’ve seen so far with Xero is just the beginning.

I mentioned at the conference that it upsets me that so many developers in Wellington are working on fee for service type work, rather than using their scarce skills to building intellectual property and create ongoing value.  Building a product that 20,000+ companies work on every day is a blast.  As Xero expands around the world we have a unique opportunity to improve the productivity of the massive small business sector and make business easier and more enjoyable.  It’s pretty cool to be part of this …

So we are all always looking for good people.  Please make contact if you’d like to join our merry band.