Rod Drury on speed, capital raising, marketing complexity

Notes left over after interviewing Xero CEO Rod Drury for a magazine article.

On marketing Xero:
“Xero is a product for small businesses. They need all the complexity found in enterprise software. Yet because of its nature we have to sell it like a consumer product. You can’t go one-on-one with every customer. It’s intensive. There are a lot of up front costs.”

Drury went on to say the Xero business model is partly about spending a lot up front to get small annuity revenues.

On being profitable now:
“You can’t fake this stuff. We have more than a quarter of a billion cash in the bank, that’s a big moat to protect us.

“There are plenty of opportunities swim to the side”. 

This is a great metaphor, in essence he’s saying Xero could stop spending on growth tomorrow and those monthly subscription fees would deliver a respectable profit. However, Drury and Xero have big ambitions and a war chest full of cash to help pursue them

“We’re executing well and growing faster than our competitors. We can’t keep hiring new people at the rate we currently are. Eventually our numbers will cross over”. 

Xero burns through cash as it builds a organsiation large enough to deal with its long-term ambition. That means putting feet on the ground; developers and sales people. They all have to be hired now before the revenue stream is big enough to pay their wages. He’s saying here that the point where the revenue is greater than the wage bill is in sight