I just finished the not too easy task of reading the Xero share issue documents.

The first interesting thing is that Xero chose the IPO versus the VC route for funding. The Chairman’s report makes some mention of the limited VC funds in New Zealand but I’m not sure if this explains it sufficiently. They’re only after $15mill after all. Maybe Xero realises that they have to speed the process up and a single share issue instead of multiple VC rounds will help this along – I’m not sure.

The second  issue is to try and assess the IPO on its own merits and not get caught up in some web bubble 2.0. It’s easy to be sidetracked by the calibre of those involved in Xero – Rod Drury, Sam Morgan, Guy Haddleton, Hamish Edwards et al. However it is important to view the offering on it’s own merits and not by some defacto measure just because of those co-investing in it. At the end of the day, while Sam Morgan surely understands web 2.0 he also surely has spare cash that he can risk – much more so than ma and pa investors in New Zealand (yes that even includes his Ma and Pa).

A further question is whether MYOB, Intuit or one of the other big players can rapidly introduce a SaaS model based on their own, existing apps. The cost of MYOB out of the box is around the same as a 12 month Xero subscription so it would seem from that perspective the only compelling reason to go the Xero route is if the online app model is a feature that a particular business needs. If this is the case then migrating client/server MYOB to a web app MYOB would seem like a better route to take.

Xero  is selling their app on the ability of a business’ accountant to easily access data to do some analysis. To be honest I wouldn’t be surprised if accountants push clients away from Xero – seeing it as a threat to their revenue streams.

Watch and see I guess……

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

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