It’s a solid product though. Much better than QuickBooks or anything else I’ve used.
Don’t forget the vendor lock-in. Once an org start using accounting software - they are very unlikely to switch.
There's a _ton_ of funding going from the states to various agencies for various pro-software, next-silicon-valley initiatives. Most of this money is handled by career bureaucrats with little personal experience in running a business.
It's easy to waste someone else's money by giving CPR to a large domestic IT firm, when the alternative is being held responsible for the lost jobs when the company goes under.
That seems more likely especially in a case like this, where the employees are skilled, and where the company isn't doing anything unique (novel, charitable, beneficial to society in a nonprofit way, etc) that would merit rating it by some other metric than profit.
It just seems tremendously wasteful to be losing tons of money in a market where there's already a lot of competition and you're not doing anything new. This isn't an electric car, and AI, a space company, where the outlay might be a lot and the time to develop the tech is great, this is a long-established market full of already-solved-profitably problems.
I would guess most of Xero's employees are outside of NZ, but since NZ's primary export is dairy, the government might be foolish enough to try propping it up with some nebulous hope that "keeping the tech industry afloat" will somehow be beneficial, rather than letting the few technologists in their employ go to work for another, more useful company, or to go and start a startup of their own (perhaps with government funding, in lieu of it going to Xero, in that hypothetical situation.)
Maybe without Xero, they'd be out looking for and learning new things, starting new companies, etc. That's what I would do if I worked for Xero (which was conceivable, at one point) and they closed down.
The US doesn’t really have a similar culture of perpetual cash injection, often in the form of low-interest loans.
What an incredibly strange statement. It's so far away from the reality of the situation that it comes across as just looking for an excuse to lash out.
Their revenue climbed 38% to NZ$407 million, with a positive EBITDA, and grew their subscriber base by 1/3. That business isn't even remotely in danger of going bankrupt. If running a NZ$28 million loss results in that kind of tremendous business expansion, they should do it perpetually.
They're not profitable, they expanded, the expansion incurs more loss, what they're doing is digging a deeper hole. If you lose money per customer overall, and you get more customers, now you're losing even more money.
"Positive EBITDA", if you can't pay your taxes/etc and break even... guess what, you're going bankrupt eventually.
All this and they think they can compete with Intuit. This won't be the first time a New Zealand company succeeded in the "ignored by competition because its too small and has its own system of laws and isn't part of a cooperative economic zone (vs, you know, just expanding to another large city in US/EU)" and then thought it could compete overseas, only to have its ass handed to it.
It's still a bet, it's impossible to say if the lifetime value holds up in the face of competition, screw ups or changes in the business environment - but that's why it's an investment.
Now this isn't quite as simple as that but growth without profit and without the prospect of profit isn't something any investor should be keen on.
Without profit the company will have to either take out loans (which require repayment with interest) or issue more capital (which dilutes current investors).
This can be fine in the initial growth stages of a business (you have a plan to start making a profit in the future), however for a 10+ year old business who's already floated their stock, it's not great to indefinitely prioritise turnover over profit.
Kind of like the early days of the XBox. Sometimes you just have to burn money and years to get your foot in the door.
It makes at least some bizarre level of sense that a social company like Twitter, with no clear customer other than "maybe advertisers" to not turn a profit for some time, but for an accounting software company, whose product is paid, to burn cash for over a decade, it just doesn't seem right. It seems like a scam to bilk investors.
Let's raise a glass to the inevitable bankruptcy, in which the founders and VCs don't suffer because the IPO already happened. Here's to you, Rod Drury, Peter Thiel, and Chris Liddell (now working for the Trump administration). Great job, guys. If you end up in jail, I'll send postcards.