Rod Drury: rewriting the IPO rulebook

 

As I look back on my journey with Xero, I guess I always knew that I would list a company on the share market. I used to read all the United States tech books, which teach you that success is taking a business public, so I guess that was bored into me.

I’d been involved in four launches but I’d never tried listing a company.

But for Xero, things were very different. We had hired 50 people for half a million dollars a month. We knew it would take three years to build a profit, and we needed NZ$15 million. 

At that time, the average business-capital raise in New Zealand was NZ$2-3 million, and I couldn’t fund the business with that. Simply put, a big part of business is just having the money to grow the company.

It required a change in thinking. Most New Zealanders are used to investing in profitable growth companies. But the idea with Xero was to grow people’s capital for risk. 

Xero went public on the New Zealand Exchange on 5 June 2007, with a NZ$15 million initial public offering (IPO), which gave us the capital to be successful. 

Our listing was different to many, because we paid for investment bankers’ advice. We had Cameron Partners and First NZ Capital on our side. 

The Xero story was really about how you fundamentally change the markets. But with early-stage companies, the downside is that effectively you do a start-up in the public eye.

That means that you’re accountable from day one, so you end up growing a very good business, because it has to be well managed and have good boards.

People ask me, how did it feel to hand over my baby? It felt fantastic! I got a big cheque. 

Since then, we invested over NZ$1 billion in developing Xero into a global platform, and along the way we’ve bought three or four companies. Listing certainly gave us bigger chess pieces to play with.

Capital markets give you the ability to reach many more investors: hedge funds, US venture capital companies, sovereign wealth funds.

I’m delighted Xero has emerged as one of the largest and fastest growing listed technology companies in Australasia. 

As Xero continues to grow, having enhanced access to deeper capital markets, increased trading liquidity and a broader base of potential investors are all critical to fulfilling our aspirations.

I’m grateful for the support of the NZX since we listed.

I feel strongly New Zealand tech companies should list locally to build those vital long-term relationships and track record. Xero’s growth and success globally shows that the NZX is a strong proposition for tech companies.

At Xero, we were thinking long term, and the listing enabled us to execute our strategy. What
I’m most proud of is that we’ve continued to explain our strategy and deliver on our strategy. We’re delivering on those results and we’re able to keep attracting fantastic talent. We’re truly a global business. 

I don’t invest elsewhere. I love to drive our own business and, for me, that’s the most exciting place to put my money. 

Some people call Xero one of the iconic Kiwi companies, like Air New Zealand and Kiwibank. Certainly we’re all proud of each other, but at Xero we don’t push our New Zealand identity because now half our staff are offshore – we’re a global company. 

Xero is a proud and ambitious New Zealand business, but we’ve stopped being ‘based in New Zealand’, and we distribute through the world. We remain headquartered in Wellington with
1,000 of our people working out of our three New Zealand offices.

Delisting is part of our strategy to drive further growth in markets like the UK, North America and South East Asia.

At the same time, it makes me feel really proud that Xero shares have made a profit and helped change lives.

Rod Drury’s tips for Kiwi companies listing:

1. Get a really good banker.

2. Don’t be worried about the amount of value that you hold yourself. It’s better to own a small part of a bigger pie. 

3. Projects always require more capital than you think. We’ve always raised money well before we needed it. 

4. One of the really good things about the share market is liquidity. Staff have done well out of Xero shares by selling them and that’s rewarding to see.

5. Don’t obsess about the share price.

By Rod Drury, Xero

First published 20 November 2017

The editorial below reflects the views of the editorial contributor only and content may be out of date. This article is sourced from a previous JUNO issue. JUNO’s content comes from sources that it considers accurate, but we do not guarantee that the content is accurate. Charts are visually indicative only. JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions.


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