Tuesday, April 13, 2010

Rod Drury on Xero and Growing Business

A really interesting interview today on Radio New Zealand given by Rod Drury, the founder of Xero Ltd [XRO.NZ]

Apart from the fact that he is clearly a smart cookie, entrepreneurial and is fully aware of technology and its application in the real world and a very positive person (and don't we just need that in our little negative backwater of New Zealand - such a negative thing to say Darren!) I found what he said about business in general and his own Xero to be quite revealing.

I got the impression from what he said is that Xero could be one of those companies that one builds up with the intention of flogging off to a willing buyer sometime in the future.

Rod cited a number of cases that this has happened, Trademe was one but two that really interested me were 42 Below and the upcoming listed player Ecoya.

42 Below was built up to sell and the intention is that Ecoya will probably go along the same lines.

42 Below is yet to make money but did of course for those that sold the company and Rod hinted that this is a business model that he liked. He also mentioned that Xero could break even in 2011.

I haven't heard it indicated before although I have wondered to myself as to whether Xero is a company along the same lines as the aforementioned and the founders are just waiting for some kind of large sugar-daddy like Reckon Ltd [RKN.AU] or MYOB to snap them up to remove the losses from their balance sheet.

I like businesses that grow and make money but hey that's just me, unconventional and completely off the wall.

*Please see Rod's response to this blog here - seems my impression was wrong.

**Rod is going to do a Share Investor Q & A. Please submit reader questions here.

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  1. Hi Darren, thanks for your kind words.

    I'm not sure how you got some of those impressions though as thats completely different from the message I thought I was giving.

    Sure we could sell Xero now, but what would be the point as we're only just getting going. After selling a couple of businesses before (as it was the right thing to do for those companies and where we were at) our plan with Xero is to build a long term business. This SaaS market is just beginning. We are very well placed.

    As you've seen our customers and revenue are climbing quickly. As I've always said, we learnt a lot with TradeMe which was largely domestic. Doing an international business just has to be bigger than that.

    I can assure you Xero is set up to make money. It's not a trade sale play. SaaS is a huge investment up front to build the product and all the operating systems and build up the brand to cost effectively sell to a large but fragmented market.

    In the words of business legend Rachel Hunter, it won't happen overnight but it will happen. And I think we are demonstrating it is.

    With our capital injection last year we were able to step the team up further. We did this because we saw the growth coming and market developing as we assumed.

    Our focus now is to drive off our growing base of customers to have monthly revenue exceed our spend. We believe we can do that during next year.

    So its working nicely. We are not at all interested in a trade sale in the forseeable future. This is too much fun and it is far too early. We have a lot more to do.

    Feel free to ask any questions directly. rod dot drury etc.



  2. Thanks for commenting Rod. Only good things come out of the Bay - I'm from Hasting myself.

    Clearly I have the wrong impression from your cut yesterday on Nine to Noon.

    It is just my opinion from what you said about those other companies in relation to Xero.

    I don't think you made it clear that you and Xero were a long term thing.

    It is great that we may have a star on the NZX for the long term and I look forward to your baby breaking even soon.

    Perhaps you could write a piece for the blog that indicates where I am wrong and why and where you, Xero shareholders and Xero are going?

    Cheers, Darren


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