Xero raises NZ$60m from US investors

We’re thrilled to announce that Xero has just raised an additional $60m of capital from two of our existing investors.

Xero raises NZ$60m from US investors

It’s a huge endorsement for what we’re doing and the great work our team continues to do.  We’re just at the beginning of the business SaaS market and we have the resources to keep our foot on the throttle.

It’s been a pleasure dealing with Matrix and Valar. Both of them continue to provide fantastic experience and advice.

The full release is below and more than happy to take any questions.

Xero Limited (XRO) has raised NZ$60 million of new capital from Valar Ventures (backed by Peter Thiel) and Matrix Capital Management. Matrix Capital Management is investing NZ$58 million and Valar Ventures NZ$24 million. Their total investment of NZ$82 million includes a purchase of NZ$22 million of shares from Xero’s three largest shareholders. All the transactions are priced at the 20-day volume-weighted average price at the time the deal was negotiated – NZ$6.00 per share.

The Board’s decision to increase funding follows the announcement on 14 November 2012 that Xero will accelerate its investment in the business to take advantage of market conditions. Xero recently reported Annualised Monthly Committed Revenue of NZ$38.7 million as at 30 September 2012, up from NZ$18 million a year earlier. The company expects to double its operating revenue for the full year to 31 March 2013. Xero reported NZ$30.6 million of cash on hand and a first half loss to 30 September 2012 of NZ$7.0 million. Xero anticipated an increased loss for the second half to 31 March 2013.

“Over the past two years of our involvement with Xero, we have seen the team consistently meet and exceed their ambitious goals,” says Andrew McCormack of Valar Ventures. “The combination of an experienced and focused team, superlative product, good timing and an absolutely huge market give us confidence that Xero has a very long runway.”

David E. Goel, Managing Member of Matrix Capital Management, says “we have witnessed the disruptive power of cloud computing across the technology universe, and believe Xero is the global market leader in cloud-based small business accounting software. Xero differentiates itself, not only as a model for accountancy, but also as a harbinger for where all software companies will have to go if they want to remain relevant. The future is in the cloud, Xero is already there, and we want to be there.”

The investors made the offer to buy shares from the three largest Xero shareholders in order to minimise dilution to existing shareholders. As a result of the new share issue and transactions, Matrix Capital Management’s shareholding will increase from 1.8% to 9.8% and Valar Ventures will increase from 3.9% to 7.0%. Director Craig Winkler’s shareholding will reduce from 19.5% to 15.7%, Chief Executive Rod Drury’s shareholding will reduce from 21.0% to 18.5% and co-founder Hamish Edward’s shareholding will reduce from 5.7% to 4.9%.

Xero Chief Executive Rod Drury says, “We are delighted that sophisticated global investors have been watching our progress and wish to support our continued investment in growth.

We look forward to winning market share from the big incumbents by introducing small businesses around the world to beautiful accounting software.”

9 Comments

L Zawilski
November 30, 2012 at 11:08 am

Congratulations to Rod and the team at Xero going from strength to strength!

Carl Aiau
November 30, 2012 at 11:10 am

Awesome work guys!

I can see that stock price Soaring into the double/triple digits in no time!

Moira Milligan
November 30, 2012 at 11:59 am

Congrats Team Xero!! It’s great to be a new partner.

Robbie Dellow
November 30, 2012 at 1:00 pm

Respect to Valar Ventures and Matrix for having the vision to back the cloud opportunity Xero management have to make a huge ‘global’ impression in the traditional accounting space.
Pedal to the metal.

Joel Hanna
November 30, 2012 at 2:41 pm

Congratulations to the whole team. Another really clear indication that Xero is really the only legitimate player in market place.

The best is yet to come…

Andrew Haynes
November 30, 2012 at 2:45 pm

Will existing shareholders have an opportunity to participate in this capital raising? Specifically Australian ones.

Gayle Buchanan
November 30, 2012 at 2:56 pm

super super high 5, very proud

James Bremner
November 30, 2012 at 4:27 pm

Loading up with buck shot to go a Quickbooks huntin’!!
Fantastic news and a huge endorsement from some seriously savvy investors.
Xero has a huge opportunity over here in the US. Time and time again I have heard people making negative comments about QB. Amazing that the 800lb gorilla of an incumbent in a huge market gets so little love, which makes them very vunerable. I really believe that Xero is going to do very well State side.

Rod Drury
November 30, 2012 at 6:57 pm

@Andrew we didn’t feel we needed to do an SPP this time as we did one earlier in the year, as we have sufficient capital and the vwap pricing which is fair to all parties.

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