New Zealand-based cloud accounting software developer Xero has raised $150 million in a new round of funding aimed at unseating Intuit as the small business accounting software leader.
Contributors included Valar Ventures (backed by PayPal co-founder Peter Thiel), which contributed financing for the fourth time to Xero, along with Matrix Capital Management, which contributed for the second time to the company, and other unidentified U.S. and New Zealand investors. U.S. investors together contributed $123 million of Xero’s new capital to help the company advance its cloud-based accounting system in the U.S. market.
The new funding is expected to help the company take on QuickBooks provider Intuit and accelerate its growth and market adoption. The transactions were priced at $15.10 USD per share for 9.92 million shares representing 8 percent of the shares on issue after the raise.
Intuit, for its part, has been readying a host of new products, which it showed off at its annual Intuit Gallery Walk event in New York last week, including new mobile apps for QuickBooks Online and its Lacerte tax prep software.
According to Xero US president Jamie Sutherland, who runs the U.S. division from San Francisco, the stock price jumped from around $18 NZD on the New Zealand stock market to over $20 after the announcement was made Monday.
“It’s always a good sign when investors are upping their stake,” said Sutherland.
The money will be used to accelerate Xero’s growth plan. “We know we’ve got a great strategy,” said Sutherland. “Our business model is replicable in all our markets with some local efforts. It’s just more cash in the bank to accelerate those plans, build out our teams and also develop products faster for both accounting professionals and small businesses.”
The company is investing in creating software to improve the lives of accounting professionals, he noted, arming them with tools to manage their practices. In addition to its core online accounting software for small businesses, the company recently introduced Xero Practice Manager, a practice management system for accounting firms to manage their staff, track and allocate time, and do job costing. On top of that, Xero also has a Workpapers tool, which integrates with the other cloud-based software it has developed.
“We provide software for free to accountants and when they bring a client onto the platform, then we charge them for that subscription,” said Sutherland. “It’s a usage model, and the beauty of that is we’re vested in their success and they’re vested in our success.”