Xero was named No. 1 on Forbes’ list of the World’s 100 Most Innovative Growth Companies, followed by NetSuite at No. 2.

Selected based on investors’ ability to identify firms they expect to be innovative now and in the future, Xero and NetSuite ranked ahead of other companies with under $10 billion in market capitalization, including AthenaHeath, MercadoLibre, Gartner, Kate Spade and Daewoo.

"It's an honor to be listed No. 1 by Forbes," stated Xero CEO Rod Drury. "We're thrilled that investors see how we're transforming the lives of hundreds of thousands of small businesses and accounting professionals so they can more easily manage their books and run their businesses."

The list’s methodology is based on the framework detailed in “The Innovator’s DNA,” ranking companies by their innovation premium—the difference between their market capitalization and a net present value of cash flows from existing businesses. Xero’s 91.7 innovation premium put the online accounting software provider ahead of NetSuite at 89.0 and third-ranked Monitise at 85.6.

"Xero ranked at the top of our World's Most Innovative Growth Companies based on its astonishing rise and that investors believe it will continue to grow, profit and innovate," stated Hal Gregersen, executive director of the MIT Leadership Center. "On a personal level, I am deeply inspired by Rod Drury's innovative leadership and his ability to ask the kinds of questions that have led him to disrupt the accounting software market. I suspect we'll be hearing a lot more about Xero in the future."

Other software companies joining Xero and NetSuite in the top 20 are Ultimate Software Group (No. 8), Concur Technologies (10), Aspen Technology (11), Kakaku.com (15) and MercadoLibre (18).

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