
Xero Raises Another $150M to Do Battle With Intuit in Online Accounting Software - kjg
http://techcrunch.com/2013/10/13/xero-zeros-in-on-another-150m-to-do-battle-with-intuit-in-the-world-of-online-smb-accounting-software/
======
ilamont
_Xero’s unique selling point is its slick and simple user interface_

This worked for Mint. I am less confident it will work for Xero, even though
many startups/small businesses (myself included) want an alternative to
Quickbooks.

The article didn't mention this, but one of the most important selling points
is not how it looks to SMBs, but whether or not banks and accountants will
work with it. I remember reading somewhere that 90% of small business
accountants integrate with Quickbook files or Quickbooks Online. Getting
accountants to start using a new system will be a tough sell, especially if
only a small number of early adopter clients are there to begin with.

While it may be possible to encourage SMBs to switch to Xero-based banks or
accountants, that's a large step for some. I use a neighborhood bank for
business banking services (augmented by Dwolla) and a local accountant team
that is pretty sharp. Switching is not only a PITA, there's also the risk that
a new bank and accountant may be lacking in other areas, even if they support
Xero.

~~~
jacques_chester
I use Xero.

I showed it to my accountant and we now regularly use it to cooperate on my
accounting. I don't have to bring a MYOB file in to her, I just send her an
email with a question and she can log in to look at my books.

She's now recommending it to her other clients.

(n=1)

~~~
ipmb
I had a similar experience. My accountant had never heard of Xero. I sent her
a login and she was quickly using the system without a problem. For me,
they've nailed making a system that is easy to use without being an
accountant, but powerful enough for an accountant to do their job.

------
mbell
I was looking at Xero last year and ran into a firm brick wall, from [0]:

"There is a daily limit of 1000 API calls that a provider can make against a
particular Xero organisation in a rolling 24 hour period."

That is an absurdly low limit for anything but the simplest of businesses or
businesses that aren't actually looking for tight integration, but rather just
something to push accounting data to at the end of a day.

[0] [http://developer.xero.com/documentation/getting-
started/xero...](http://developer.xero.com/documentation/getting-started/xero-
api-limits/)

~~~
jacques_chester
Their market is SMBs. The worst case is that you group your updates into (say)
5 minute batch jobs, using only 288 of the available 1000 API calls.

------
icu
Living in London now I've not really kept up with the start up/entrepreneurial
scene in New Zealand (actually it's one of the many reasons why I left New
Zealand in the first place but New Zealand's start up prospects are a whole
other story). While it is amazing that Rod Drury (Xero’s CEO) has built Xero
up to a valuation of about 2 billion, it's not a surprise. Rod had a vision
right from the start to build a global company that would outmanoeuvre
QuickBooks and MYOB with Web 2.0 and from what I know he had the experience
(he's a serial entrepreneur) and access to capital to execute.

I've meet him a few times when I lived in Auckland (New Zealand) and
approached him for advice when I was fresh out of University. If New Zealand
wasn't such a small place getting access would have been impossible but Rod
was really approachable and I was lucky enough to meet him over breakfast and
get some entrepreneurial advice (this was about 7 years ago).

Some of the most memorable things he said to me at that breakfast was that
entrepreneurs are fundamentally unemployable. I inferred from that statement
that being an entrepreneur was going to be the only compatible career path for
me (at the time I was considering going into investment banking). At the time
I didn't heed his advice (well I was an impetuous youth) and I went to work
for a discretionary fund manager but with the benefit of hindsight he was
quite right. I really didn't like working for others.

The other thing he said was that I was probably too young for entrepreneurial
success and that there's a certain element of experience needed for
entrepreneurial success. I'm now a bit older and a touch greyer and with the
luxury of hindsight I can now understand what he means. Now in my early 30s,
my approach to launching my start up is a lot different to what I was doing in
my 20s.

~~~
flog
> Now in my early 30s, my approach to launching my start up is a lot different
> to what I was doing in my 20s.

Rod has said to me previously that no entrepreneur should have money before
they're 30... which has rung true with me. At least from a NZ perspective, we
have to suffer for our art, it takes time to earn your stripes.

~~~
icu
Okay well guess I feel I have to respond to the "from a NZ perspective, we
have to suffer for our art". Yes, we do suffer as entrepreneurs in New Zealand
(NZ). But I disagree, I think the suffering is self inflicted. An entrepreneur
in NZ is up against structural problems and the cultural issues that make it
unduly hard on us. Please permit me to explain.

The structural problems:

IMHO the biggest problem isn't distance to global markets but a lack of
capital gains tax on real estate which soaks up capital that could otherwise
go to new ventures. When I say that, I'm talking about the 3Fs... friends,
fools and family. Please don't get me started on the New Zealand Venture
Investment Fund (NZVIF), the Seed Co-investment Fund and Kiwi Saver because
these are band-aid solutions to the tax problem. And forget about any solution
to it. Any political party/coalition that tries to do away with the no capital
gains tax on real estate will be committing Seppuku.

Also NZ suffers from a vicious venture capital (VC) Catch-22. With hardly any
angel/VC industry there is no quality deal flow (I'm talking about deals where
the VC actually has a chance at x1000 returns) which feedbacks to poor
prospects for VCs to raise money for their funds from pension funds (they live
and die by their returns). So without astronomical VC returns, pension funds
just aren't interested in an allocation of their portfolio to VC because it
just won't make a difference to their overall fund return. End result, there
is no NZ VC.

The cultural issues:

While entrepreneurial tall poppy syndrome was waning when I left NZ thanks to
initiatives like the University of Auckland's Spark competition (I was a
finalist one year and an eventual winner the next) there are much bigger
cultural issues I think kiwi entrepreneurs face that no one seems to talk
about. This would be the shame of failure and low aspiration that pervades
kiwi entrepreneurs. The shame of venture failure is something I have
personally experienced. It took me my 5th time trying to start a venture
(between my teens and my early 20s) before I successfully built a company of
30 people. I then got bought out by a co-founder and I went to University. I'm
sure that those 4 other failures taught me lessons (the 5th venture did too)
but I just couldn't talk about my other failures to people. I always felt that
it just wasn't culturally all right to do so and I've seen it cause problems
when trying to raise seed/early stage money in NZ. I've found that people keep
this silence and project a "I did it on my first go" fantasy. This becomes a
feedback loop and the bottom line is that kiwi investors just don't want to
invest in entrepreneurs that have 'failed' before. This isn't the case in
other places where your venture failure, and ability to keep picking yourself
up, is seen as important and needed experience. The low aspiration/horizon
thing is also a big problem... I found that on average most entrepreneurs only
aspire for the 3Bs... the beamer (BMW), the batch (holiday home) and the boat.
Anything beyond the 3Bs and there's this perception that you're just being
greedy. And you know what they say... birds of a feather. I remember pitching
something (in NZ) to some some high net worths from Silicon Valley a venture
idea and then being asked point blank why I want to do it. I was floored,
thinking to myself, "isn't it obvious?" I replied, "I want to get rich." To
which they replied, "that's the right answer." "We've been travelling across
NZ looking for ventures to invest in and not one entrepreneur said that. They
all see their business as a lifestyle vehicle whereas I'm interested in a good
return on my risky investment." And while they weren't so interested in the
opportunity I pitched them, they have become great mentors to me.

My advice to aspiring kiwi entrepreneurs, don't become an entrepreneur unless
you are tough enough to handle it... but if you are, then shed a tear for
Aotearoa (the Maori name for NZ) and just leave.

I know saying that will ruffle feathers and won't be right for everyone's
situation. However after fighting these structural and cultural issues I let
go and embraced that NZ has a location disadvantage for new tech ventures.
This decision was hard, and the price I've paid has been high. Leaving my
friends and family and starting from nothing in London... no friends, no money
just my entrepreneurial dreams, has much harder than I ever imagined.

I am a much stronger person because of it. Also I know right down to my bones
that moving here has been the best move for my future entrepreneurial
prospects. If it doesn't work out then I'll do it all again and somehow, some
way, move to Silicon Valley. It's been hard... and I expect it will get harder
since I have a baby on the way, but IMHO you have got to stack as many things
in your favour when you're trying to launch a new venture and location is part
of the equation.

If the scales are tipped against you then you've got to do what it takes to
even out the odds.

Best of luck to all kiwi entrepreneurs, you all have my heart felt
condolences.

~~~
jacques_chester
A lot of this rhymes with the Australian situation.

~~~
pm
We have tall poppy syndrome, but there's also a great deal of Valley envy.
There are as many naysayers telling us to keep our day jobs as there are
sociopaths telling us to "fail fast and break things", the consequences be
damned.

I think there's an appropriate middle ground, and we'll find our footing over
the next 5 years or so.

------
chiaro
As a public investor, I was wondering why my ticker wasn't ticking last
Friday. I'd encourage anyone in AU/NZ to take a look at Xero - we don't have
many public tech stocks here, so it'll be interesting to see what happens to
this one and its effect on the scene here.

[https://www.google.com/finance?client=ob&q=ASX:XRO](https://www.google.com/finance?client=ob&q=ASX:XRO)

~~~
voltagex_
As always, I wish I'd bought when it first floated (same with Pipe Networks).
Any hints? I'm currently looking at CBA's MyWealth platform to start
investing.

~~~
chiaro
That's perfectly fine. It's really quite intuitive once you start the process.

------
djt
Xero was started by someone involved with MYOB. MYOB's software is a nightmare
for SMB's, so they probably started there as small businesses are happy to put
their finances in the cloud. Once they grow their businesses out I can imagine
Xero will grow with those businesses (ie payroll). Xero seem to be embracing
API hooks into other systems too, very smart play as they can potentially
include things like payroll etc etc later down the track.

~~~
rileyjamesx
We realise we can't build it all. So the API enables Xero to stay flexible, if
you really need additional features there will be suitable add-ons. We have
Payroll in Australia.

------
edawerd
Xero is one of a number of companies that are helping to modernize the
backoffice for SMBs. While the article focuses on Xero's UI as a selling
point, another key value proposition is their integration with other modern
back-office software such as ZenPayroll for payroll and bill.com for billing.
These sorts of things are providing a more integrated and seamless back office
for businesses and accountants.

------
MarkMc
Their website doesn't seem to mention prices for accountants. If I was a
bookkeeper wanting to manage the accounts of say 10 clients, how much would
Xero charge me?

~~~
rileyjamesx
Accountants & Bookkeepers aren't charged, the model is to charge the end
customer (business owner). The accountant or bookkeeper can choose to purchase
Xero and then charge their client for it, or just absorb it into their
existing pricing.

Through the Xero partner program there are some perks, including software to
manage their practice.
[http://www.xero.com/au/partners/](http://www.xero.com/au/partners/)

~~~
MarkMc
Hmm... so Xero will charge me the full end-user price for each business even
if my clients have no interest in using Xero?

~~~
rileyjamesx
No, only clients that want it. Accountants and bookkeepers can have clients on
Xero as well as other platforms. There are incentives to have them all on
Xero, but there are no requirements to be 100% Xero.

~~~
MarkMc
Sorry, I wasn't clear: Let's say that I want to manage my clients' accounts
using Xero, but my clients have no interest in using Xero themselves. Does
that mean I have to pay around £19 per month per client?

------
buro9
We chose Xero for our UK startup as:

1) It syncs with HSBC bank (we chose HSBC as it syncs with Xero)

2) It syncs with PayPal (we chose PayPal as it syncs with Xero)

3) Our accountants ( [http://ihorizon.co.uk/](http://ihorizon.co.uk/) ) use it
heavily

4) It has an API

My goal in choosing an accounting tool is to have visibility and
centralisation to ensure that the key people in the company have information
instantly about cash flow, assets, the books, etc. And it does all of this
really well.

The areas in which Xero is a PITA for anyone considering using it:

A) Expenses.

B) API limits.

C) Payroll

On expenses, the cycle is a long one and unfortunately expenses in Xero are
such a mess that our accountants urge us to use an Excel based spreadsheet
that we print and complete by hand, and then post to the accountant for
processing. Then the accountant summarises the expenses and enters it into
Xero. This sucks big time. One of our goals in choosing Xero is to ensure that
we can see all of our costs clearly. We want to be able to answer questions
like "How much are we spending on air travel?" and if expenses are summarised
we lose that insight. Expenses in Xero are non-editable, which makes them very
hard to fix when an employee enters in something wrong. We're not talking
about fixing the payment amounts as payments would have been made already, but
fixing categorisation, VAT (sales tax), etc.

On API limits one of the driving reasons to select Xero was to have the
capability for a company dashboard in which revenue, recurring revenue,
runway, etc is displayable on the single dashboard along with customer
metrics, operations information, etc. We even want to eventually have monetary
events in the company books charted "there was this spike of customers due to
this Slashdotting, that led to this operations load which in turn did this to
the revenue" (or not as is likely the case). The API limits are way too low to
be useful, to the point that right now we've not actually built it into the
dashboard. The limits are such that developing against the API isn't as
trivial as calling it and fetching the numbers, now we'd have to build our own
storage and design that schema, etc. It's gone from a quick extension to the
dashboard to a more significant piece of work.

On payroll, Xero does not implement any real capability other than recording
that payroll has happened. That our accountant still uses Sage (
[http://www.sage.co.uk/sage-50-payroll](http://www.sage.co.uk/sage-50-payroll)
) to calculate payroll and generate payslips and payment instructions shows
how useless Xero payroll is. It's not even fit for purpose, they built the
first 80% (recording it and issuing payslips, etc) but not the ability to
calculate it.

I don't know how the main UK competitor stacks up against Xero, but I've
looked at Kashflow ( [http://www.kashflow.com/](http://www.kashflow.com/) ) a
few times and would probably try it out in parallel to Xero for a while if
they'd complete the picture above and weren't using SOAP for the API.

Xero is a love/hate relationship, it's good but the limitations are awkward
and inelegant. It feels half-baked in many ways, parts of Xero are nearly
perfect, but other parts look like a first-stab that after 3 years of using it
it has become clear that no-one is going to finish.

~~~
pm
In Australia, there was a company called Paycycle which filled in the payroll
gap, which Xero subsequently bought out and incorporated into their Payroll
offering for Australian companies.

My theory is that Xero purposely crippled parts of their software so as not to
offend or discourage the developer ecosystem. However, they missed the target
with things like payroll, which is such a gigantic PITA for everyone and
EVERYONE WANTS IT, that they instead responded by creating a solution that
tried to appease third-party developers and their users. As you said, that
solution ended up half-baked and pointless.

However, I have great faith in Xero. If they buckle down on things features we
want, their developer ecosystem be damned, then we might get a truly killer
product.

~~~
rileyjamesx
The developer eco-system is very important. The lack of payroll didn't
eventuate out of a fear of offending the developer community tho. Xero started
in NZ without payroll. It was only after expanding to Australia that there was
enough demand for payroll. At some stage payroll will be available in all
regions.

I'm glad you have faith. Lots of features in the pipeline.

~~~
pm
Indeed, I signed onto Xero when payroll didn't exist. Payroll is as hard, if
not harder than doing payment gateways in different countries - everything's
different for each country. But the first incarnation of (Australian) payroll
left much to be desired - and I assume that's the payroll that everyone's
currently stuck with - so I was elated to hear that you'd bought out Paycycle
and were integrating it directly into Xero.

We're going to be integrating internally with Xero in the next couple of
months, so hopefully the API call limit doesn't become a pain.

Otherwise, keep up the good work.

------
logn
I was trying to find a breakdown of Freshbooks, Xero, and Quickbooks. Found
this: [http://accounting-
software.findthebest.com/compare/64-157/Xe...](http://accounting-
software.findthebest.com/compare/64-157/Xero-vs-Freshbooks)

Anyone have any thoughts on features/prices of these?

~~~
stephen
I don't think Freshbooks really counts...

They do great marketing, and the name being a play on Quickbooks is simply
brilliant, but it's not at all an accounting system. No double entry, no
general ledger...it's just invoices.

Granted, they are incredibly successful, so are doing something right, but I
find it fairly annoying that their marketing positions themselves as a
Quickbooks alternative ("cloud accounting") when they are not, IMO.

Perhaps I'm being pedantic.

So, Freshbooks aside, Xero is not Quickbooks, so I think that means it wins.
:-)

