4 ms·

All this to "close the gap to profitability", which, after the migration, they still will not have done, they'll still be in the red, after more than a decade.

All this to "close the gap to profitability", which, after the migration, they still will not have done, they'll still be in the red, after more than a decade. 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.

nikanj 8y ago
Not sure how New Zealand does things, but in the EU, it's relatively common to have zombie companies stagger on for decades on government life support. 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.
- PostOnce 8y ago
  I wonder if this is in fact even worse, keeping people "occupied" in money-losing companies, where if the company went under they might (especially in tech) find something productive (in the literal sense of producing something of value) to do. 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.)
  - pc86 8y ago
    I use Xero and the interface and functionality is great, but what makes you think someone writing JavaScript for Xero has the skill to work on AI or spacecraft?
    - PostOnce 8y ago
      I worked on js and php once, and now I work on AI. The tech market in NZ is very limited so I imagine anyone working for Xero in NZ has better-than-average odds of being there just because its a job, rather than because thats all they know how to do (or all they want to know how to do). 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.
- mr_toad 8y ago
  A history of bailouts in New Zealand is a pretty short list: http://www.stuff.co.nz/business/4859373/A-history-of-bailouts http://www.stuff.co.nz/business/4859373/A-history-of-bailout...
  - nikanj 8y ago
    Bailouts are different from operating mainly on grants. The US doesn’t really have a similar culture of perpetual cash injection, often in the form of low-interest loans.
adventured 8y ago
> 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. 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.
- PostOnce 8y ago
  "Business expansion" rather than "business growth". I agree. They're expanding. 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.
  - mseebach 8y ago
    I don't know what their numbers are exactly, but the math often comes down to something like cost of customer acquisition being $10, and customer lifetime value being $80 over 10 years. As long as there are customers to be acquired, and money to spend acquiring them, you should get as many as you can as fast as possible. This is clearly long term profitable, but the first many years you do this, you will be in the red. The flip side is that you could stop doing this and become profitable overnight (at the cost of foregoing potential future profits). 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.
moltar 8y ago
They are probably just growing and reinvesting. 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.
xupybd 8y ago
They have a solid business plan. They're expanding to gain more of the market and spending loads to do it. But at the end of the day they have a good product and can make money out it once they get the adoption rates they're going for. 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.

nikanj 8y ago

Not sure how New Zealand does things, but in the EU, it's relatively common to have zombie companies stagger on for decades on government life support. 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.

PostOnce 8y ago
I wonder if this is in fact even worse, keeping people "occupied" in money-losing companies, where if the company went under they might (especially in tech) find something productive (in the literal sense of producing something of value) to do. 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.)
- pc86 8y ago
  I use Xero and the interface and functionality is great, but what makes you think someone writing JavaScript for Xero has the skill to work on AI or spacecraft?
  - PostOnce 8y ago
    I worked on js and php once, and now I work on AI. The tech market in NZ is very limited so I imagine anyone working for Xero in NZ has better-than-average odds of being there just because its a job, rather than because thats all they know how to do (or all they want to know how to do). 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.
mr_toad 8y ago
A history of bailouts in New Zealand is a pretty short list: http://www.stuff.co.nz/business/4859373/A-history-of-bailouts http://www.stuff.co.nz/business/4859373/A-history-of-bailout...
- nikanj 8y ago
  Bailouts are different from operating mainly on grants. The US doesn’t really have a similar culture of perpetual cash injection, often in the form of low-interest loans.

adventured 8y ago

> 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. 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.

PostOnce 8y ago
"Business expansion" rather than "business growth". I agree. They're expanding. 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.
- mseebach 8y ago
  I don't know what their numbers are exactly, but the math often comes down to something like cost of customer acquisition being $10, and customer lifetime value being $80 over 10 years. As long as there are customers to be acquired, and money to spend acquiring them, you should get as many as you can as fast as possible. This is clearly long term profitable, but the first many years you do this, you will be in the red. The flip side is that you could stop doing this and become profitable overnight (at the cost of foregoing potential future profits). 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.

moltar 8y ago

They are probably just growing and reinvesting. 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.

xupybd 8y ago

They have a solid business plan. They're expanding to gain more of the market and spending loads to do it. But at the end of the day they have a good product and can make money out it once they get the adoption rates they're going for. 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.