Xero – to invest or not – again

There has been some good discussion around the traps about Xero’s IPO. As I whizz to my plane I’d like to pop some more things into the mix:

1: The emphasis on SAAS to me is missing the point. The USP of Xero is its promise to reinvent the usability and the approach to processing your accounts. That could be done via SAAS or via a downloadable program with updates. If they succeed then this could be huge.

2: What guarantee do I have that once I’ve subscribed that the price won’t steadily rise? If I own a piece of software then I can choose or not to keep upgrading, but this seems to lock you in to a solution. It would ease my mind to know that importing and exporting to a range of other accounting software was seamless.

3: Small busineses are (or should be) tight with their money. If this is such a paradigm shifting product, then why are the prices so high? Can’t you charge me by the year ($99), or give me a lifetime price ($299), or charge by the amount of revenue I make? (<$100,000 – $99; $100-500,000 – $199; >$500,000 – $499 etc.)

4: I understand that the NZX only requires one year of projections, but this is an early stage company, and as there is no revenue history, why can’t we see a fuller model? I’d love to see 3-5 years worth of numbers, backed up by clearly stated assumptions. There should be a robust discussion of the method used to come up with those assumptions and the management team’s take on the certainty and variability of them.

5: Mark Clare’s sudden visit to Xero after his first Valuecruncher post stuck me as unusual. Not untoward, just unusual. His post about it is worth reading.

6: Why no plan to enter the USA? That’s the real market – the US economy dwarfs everybody else’s, and if you want internet savvy customers that are ready for this sort of thing that is where they are. (many will be using Intuit’s online tax products)