Xero founder and chief executive Rod Drury says the company
is only getting started. Photo by The New Zealand Herald.
Rod Drury lives a double life. In one, the serial
entrepreneur is at the technology epicentre of the world among
the cut-throat bustle of Silicon Valley. In the other, the
father-of-three is back enjoying the ''eased, relaxed
lifestyle'' of New Zealand, at home with family in Hawkes Bay
or surfing at nearby Waimarama.
But with Mr Drury's NZX-listed software firm Xero doubling
its market value and the company's overseas customer base up
75% since March, the 46-year-old has probably been spending
more time on long-haul flights than at the beach.
''It's been more intense lately,'' he said. ''We've just so
much going on,'' said Mr Drury, who was named the New Zealand
Herald Business Leader of the Year for 2012.
Looking at Xero's 2012 year in review, this is hard to
The Wellington-based company has hired more than 100 staff in
the past year, listed on the ASX and doubled its half-yearly
revenue to $16.7 million in the six months to September 30.
The software firm's customer numbers have followed a similar
trajectory and Xero now has more than 110,000 clients paying
to use its product.
That product - online accounting tools aimed at the small
business market - may not be the hippest of merchandise, but
Mr Drury is convinced he is on to a winner.
''We're delighted that we've been doubling our revenue, but
we're really only getting started. The market size is
hundreds of millions of small businesses,'' Mr Drury said.
Mr Drury's track record with successful technology start-ups
suggests this is no idle boast.
In 1995, the Napier Boys' High School old boy co-founded the
software firm Glazier Systems, which sold four years later
for $7.5 million.
His next project, AfterMail, was bought in early 2006 by
California-based Quest Software for an amount thought to be
as high as $US65 million ($NZ79 million).
Soon after this sale, a cashed-up Mr Drury formed Xero with
accountant Hamish Edwards and a year later floated the
start-up on the local stock exchange.
Since then, the company's share price - $1 at listing - has
ballooned and in late trade yesterday was at $7.41, giving
the company a market capitalisation of $868 million.
That's seeing it rub shoulders on the exchange with the
Warehouse Group, which recorded revenue of $1.7 billion in
the past financial year.
Mr Drury admits Xero's value looks ''pretty remarkable from a
local perspective'', but when viewed through ''a global
technology company lens'' it did not look expensive, he said.
The software executive pointed to Microsoft's purchase of
corporate social network builder Yammer for $US1.2 billion in
''We've probably got more revenue than them and I think we're
more strategic than them - people understand what we're doing
and the quality of our execution and the size of our
opportunity,'' he said.
''We're still seeing sophisticated investors coming in at
these [share] prices. We're talking to the biggest and best
companies in the world and they're investing in what we're
doing,'' he said.
But the twist in this story - and all good stories have a
twist - is that Xero has yet to turn a profit.
It's a point Xero's critics crow about as they line up to ask
just when exactly the six-year-old company will provide a
return to its shareholders.
Mr Drury's response seems well-rehearsed.
''I love getting that question,'' he said, with a hint of
''Our investors have said `here's the resources, go and build
the biggest business you possibly can'.
''No-one wants to turn a profit quicker than I do but when
you look at it in the cold light of day, and the board does
this every month, the right thing to do is to use the capital
we've been given to grow the business and, yeah, doing that
in the New Zealand sharemarket publicly, people are going to
throw some arrows at you, but you can't worry about that too
much. Clearly the investors like what we're doing, so we've
just got to keep on doing it.''
The type of growth Mr Drury envisions requires Xero to crack
the United States market, where it faces tough competition
from tech giants such as 30-year-old Intuit, which recorded
revenue of $US3.5 billion last year.
While some detractors doubt if the tiny Xero is any match for
such Goliaths of software, Mr Drury is bullish about his
company's prospects in North America.
''We're definitely on the global landscape now - no doubt
With the Australian leg of the business ''practically running
itself'' , the company is focused on its push into the US and
United Kingdom in an effort to increase overseas revenues.
Around half of the next 200 staff Xero may hire are likely to
be in these territories, driving sales and trying to win
market share. Past this, Mr Drury has loftier ambitions.
''Looking to the Olympics being in Rio in 2016, wouldn't it
be great to have a product in Brazil in four years' time? So
in the long term there's lots and lots to do.''
And although Mr Drury took some time off to enjoy a Kiwi
Christmas, he is not ready to give up the hectic life of
running a company.
''I think we're just having too much fun. Our goal is
certainly to drive this business for the next five to 10
years and see what happens. Yes, we could sell it for a big
cheque, but then what do you do [with] it?'' he asked.
''What would you do with [the money] when the best thing to
invest in is Xero?''In a year of highs for Xero, Rod Drury
says his one disappointment was a side project - the stalled
Pacific Fibre cable venture.
Mr Drury was a co-founder and director of Pacific Fibre,
which wanted to build a 12,900km internet cable between
Auckland, Sydney and Los Angeles at an estimated cost of
The company hoped to rival the Southern Cross Cable Network's
system, which is the only link transporting internet traffic
in and out of New Zealand, and help bring down the price of
This, it argued, would allow internet companies to increase
the monthly data allowances they offered customers so users
could take advantage of the Government's billion-dollar
ultrafast broadband network.
Despite backing from high-profile investors Facebook
billionaire Peter Thiel and Trade Me founder Sam Morgan, it
was announced in August that the company had failed to
generate enough funding for the venture.
''Sam and I were gutted we didn't get Pacific Fibre away. It
was looking really good right to the end,'' Mr Drury said.
''If there was one thing that could step-change New Zealand,
it would be a new fibre cable so we could have better pricing
[to do] more live meetings, more conferencing and do more
selling from New Zealand.''
While no plans were set in stone, the software executive said
he was in discussions with the Government about reviving the
project as a public-private partnership.
''We just got to keep educating the Government how important
it is and how we can create more jobs and earn more expert
revenue [with the cable]. It's just a no-brainer,'' he said.