FinTalk: Xero UK chief talks building financial services for small businesses
Small businesses may make the world go round, but struggles with book balancing and accounts can be distracting and end up throttling growth especially in the crucial early days. Xero is a cloud based accounting software firm that aims to take that work off their hands and enable them to focus on building their companies.
Today the firm is one of the most recognisable brands in business technology with posters adorning London underground carriages, more than 700,000 customers, 1,400+ staff and annualised committed monthly revenue NZ$257.9 million (around £144m) from its subscriber base.
The less familiar part is, perhaps, that the startup was founded in New Zealand and went public there back in 2007 when it had just 100 customers and no revenues. In the latest episode of the FinTalk interview podcast series Gary Turner, the firm’s UK MD, talks about the early days of building up the business, why location is no longer important and why we’re on the cusp of another significant technology shift.
The story starts back in New Zealand about 10 years ago. Our CEO and founder Rod Drury had one of those Hollywood-style moments sitting with his accountant Hamish Edwards and looking at the books for his business thinking: ‘there has to be a better way of doing this’.
They had the idea to try and so something differerent with accounting software, which is one of the least innovative categories of software. There’s rocket guidance and moon landings and then way at the end of that spectrum is accounting.
Had there been much innovation in accounting at that time?
There hadn’t been a lot. Accounting was seen by businesses as a big chore.
Our co-founders wanted to build something with cloud, which was just coming to the fore at that time. Around 2004/5 – web browsers became more capable of doing complicated things like handling accounting and transaction analysis. So that and the availability of early cloud platforms is where the idea came from.
Rather than just building a software business that served the New Zealand community, though the vision for Xero was to build a global business. The fact it’s from New Zealand is telling – it is kind of irrelevant now where you start. The web enables you to scale globally and not be restricted to your local market. Until Xero I don’t think I used or knowingly used software from New Zealand.
Ten years later we have more than 700,000 customers, we’re turning over NZ$1bn in revenues globally and we’re market leaders in New Zealand, Australia and the UK with great strides being made in the US. It’s been an incredible 10 years.
In those 10 years you must have seen the types of businesses evolving with the growth of the internet?
Definitely. Starting a business and being and entrepreneur is now a career choice. 20 years ago you had to be pretty hardcore to take that route – jumping through hoops of fire and hurdles to raise money.
Setting up a business 20 years ago was very physical thing, you needed an office, a telephonist – all the accoutrements of a business – today it can be a side project.
We see so many examples of people who are fully employed but might be writing an e-book or building websites in their spare time that ends up turning into a fully-fledged business. There are something like 50% more businesses in the UK economy than there were 15 years ago. In 2000 there were half as many and I think there is a really strong correlation with the internet and how much easier it is to set up a business.
How has the UK tech ecosystem changed in that time, are you plugged into the startup scene here?
The fact that we have places like the Barclays Accelerator and Techstars project in – where I mentored a great startup called Agent Cash – and the fact there is such a high quantity of discussion and debate around fintech is great. London is the fintech capital of the world and it is a real opportunity to challenge conventional thinking that cool stuff only comes out of Silicon Valley.
We now have pretty unique an ideal conditions with finance concentration in terms of markets and expertise plus investment in things like Tech City and in creating a community of investment around not just fintech but all tech. And it’s the UK as a whole because there are hubs everywhere from Bristol to the North.
If we make it work out, London fintech can make as much of an impact as Silicon Valley has in the last 40 years. That sounds a little grand and I’m sure a lot of Silicon Valley people will hear this and spit out their lattes, but geography is no longer a determinate on whether your business will succeed.