Intuit’s Nightmare Approaches As Xero Raises NZ$180m / the king of small business accounting now has a fight on its hands back in the USA.

Sholto MacPhearson for BoxFreeIT writes: Intuit saw this coming. Despite rushing out a localised version of QuickBooks Online, its cloud based accounting program, to Xero’s Australasian home turf as a diversionary tactic, the king of small business accounting now has a fight on its hands back in the USA.

The Kiwi David has landed in Goliath’s homeland with a pocket full of rocks and a good amount of sling practice. What are Xero’s chances against Intuit with a $19 billion market cap? As Australians know all too well, if 4.4 million New Zealanders can produce the world’s best rugby team, there’s no reason why they can’t win at accounting software.

The ASX and NZSX-listed Xero went into a trading halt on Friday before announcing it had secured NZ$180 million ($158 million) to fuel its global expansion. Plenty of successful Australian and New Zealand companies have landed on American shores with dreams of conquest. But few have done so with the same amount of capital to spend.

But Intuit may be more concerned about who is sticking up the money than the size of the warchest itself. Most of the $180 million came from two funds; one, Matrix Capital Management, which makes long-term investments in companies it believes can disrupt markets, and Valar Ventures, backed by one of the US’s most successful entrepreneurs, PayPal co-founder Peter Thiel.

Together the funds have deep experience in cloud software and infrastructure, payments and e-commerce which are key aspects of the wider picture. While the frontline is accounting software, the stakes are much higher. Xero and Intuit see their accounting platforms as foundations for a broad range of services stretching from payments to e-commerce and beyond.

“By next year we will have mostly finished building the core accounting platform – and then we can build the fun stuff,” said Xero CEO Rod Drury in his keynote at the recent Xerocon conference in Australia.

“Xero is emerging as the definitive software platform for small business worldwide,” said David Goel from Matrix Capital Management in a press release yesterday. Note that he didn’t call it an “accounting software platform”.

Money doesn’t equal market share, of course. Replicating success in Australia and New Zealand isn’t as easy as copy pasting their marketing strategy from one country to another. Can Xero sign up 200-300 businesses a day in the US as it has done in Australia?

Xero had the element of surprise in Australia. MYOB and Reckon took far too long to get out their own versions of cloud software. Reckon’s is yet to launch, and MYOB still hasn’t launched a cloud-syncing version of AccountRight Premier.

But Intuit now knows the game plan. It already has a good cloud accounting program in the market which is quickly getting better. And it will fight hard to keep all its accounting partners in the US loyal to the brand, for four out of six of Xero’s sales are made by accountants and bookkeepers.

Can Xero grow to a global scale while still moving fast enough to outstep Intuit? Clearly Peter Thiel thinks so, and that’s got Intuit worried.