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Xero raises $180M selling shares at premium to Matrix, Thiel, others

Monday 14th October 2013

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Xero, the cloud-based accounting company whose shares have more than doubled this year, raised $180 million selling shares to Matrix Capital Management, Peter Thiel-backed Valar Ventures and other US investors to ensure it can keep bankrolling its expansion.

The Wellington-based company sold 9.92 million shares at $18.15 apiece, a 1.1 percent premium to their price last week before being halted for the capital raising. The new funds more than quadruple the cash buffer Xero has to fund sales growth as it chases 1 million customers, almost five times its current customer base of 211,000.

"Xero is emerging as the definitive software platform for small business worldwide," David Goel, managing member of Matrix, said in the statement. "Having empowered hundreds of thousands of small and medium-sized businesses in New Zealand, Australia, and the United Kingdom, Xero is poised to do the same for its 29 million potential customers in the US. We are adding to our investment to help facilitate and accelerate this goal."

Cash on hand rises to $230 million from the $55 million it disclosed as at Sept. 30. The sale represents 8 percent of the enlarged capital of the company.

Valar and Matrix last injected funds into Xero in November, with $60 million of new capital, while buying $22 million of shares from director Craig Winkler, chief executive Rod Drury, and co-founder Hamish Edwards at the same time.

Xero has been burning through funds as it posts short-term losses as part of a strategy to build global scale.

The company didn't disclose how many shares were allocated to which investors. US investors accounted for $147 million of the funds raised and "represent some of the most enduring and well-capitalised asset management firms in the world, all of whom will assist the company with its strategy and execution in the US market." it said.

The shares last traded at $17.95.

BusinessDesk.co.nz

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