Xero’s New Investor
Accountancy software developer Xero made the news this week as they received an investment from a large, U.S based venture capital firm; TCV.
TCV (Technology Crossover Ventures) reportedly invested $26.4 million into Xero by purchasing 1.4 million shares. When asked about the investment, TCV declined to comment, however Xero CFO Sankar Narayan has said the following about the investment:
“We’re thrilled to receive strong support from new investors who are ready to join Xero in it’s next phase of growth”. – Sankar Narayan Xero CFO
What is Xero’s next phase of growth?
To become a global platform that services millions of small businesses.
Who Are TCV?
TCV (Technology Crossover Ventures) are based in Palo Alto California, and have invested more than $9 billion dollars across 200+ companies. In the past they have heavily backed global platforms such as Air BnB, Facebook, Expedia, Netflix and Spotify.
Their portfolio of investments seem to strongly suggest that Xero are moving in a similar direction!
TCV reportedly made their $26.4 million investment from a fund they have set aside to invest in mature firms that have proved themselves in the marketplace. This will be music to Xero’s ears as they continue their push to overtake the competition in America, TCV’s home country.
This investment will have gained TCV about 1% share in Xero, and has costed them an estimated $20 a share.
Scepticism Surrounding The Investment?
This story has been met with a mixed response from the media, with some arguing that a contrary move made by Matrix Capital Management should be the focus of this investment.
Matrix Capital Management are the US Hedge Fund who sold their stake in Xero to TCV, and some reports suggest that their move should cause Xero worry and that this isn’t the time to be celebrating a win.
But when you look closely at their motives, it seems more likely that Matrix have decided to simply cash in on Xero’s incredible growth. When they first invested in the company, it was at $6 a share.
The sale of 1.4 million shares to TCV was at $20 a share, which means that Matrix will have have made $14 dollars on every share since their initial investment: a profit of over $14 million dollars. And their investment hasn’t ended there…
Matrix have also retained 11.8 million shares in Xero – meaning they’re still getting the best of both worlds: backing a company that is growing at a rapid rate, whilst also reaping the rewards of having a great eye for an industry changing business.
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