Sally Rose for Australian Financial Review writes: Rod Drury, co-founder of the cloud accounting software company, is willing to forgo profits in pursuit of success in the United States.
Three office blocks in Wellington are badged with the blue and white logo of homegrown accounting software company Xero.
The brand is a dominant feature of the city's skyline. It's a beautiful sight indeed for Drury, who co-founded the company with entrepreneur Hamish Edwards in 2006.
An eternal optimist, friends and colleagues describe Drury as a man who knows where he wants to go and makes a point of getting there quickly.
"Never, ever, accept a lift from Rod. He is the biggest leadfoot you will ever meet, and driving with him is absolutely terrifying," jokes former business partner Andy Lark, when asked to dish the dirt.
Drury sold his web-archiving business Aftermail to the Nasdaq-listed tech giant Quest Software for US$45 million in 2006.
That deal was struck in a movie-like scene in a swanky restaurant in Orange County, California, when a napkin with a big number written on it was passed across the table.
It was the second time Drury had brokered a trade sale exit for one of his babies. Glazier, the software development and consulting company he co-founded in 1995, sold to Advantage Group in 1999. Today that business trades as Intergen.
After selling out for the second time, Drury realised he was no longer satisfied with establishing companies only to move on before they could reach their full potential.
ROLE REVERSAL
"About a year after Quest acquired Aftermail, I saw the CEO deliver a presentation at the same conference where he had listened to me talk about Aftermail the year before. Up on the big screen was a slide with dozens of logos of competitors Quest had swallowed. It struck me then that the next time around I wanted the roles reversed," Drury says.
So it was that his next venture, Xero, came to the public market before it had even started generating revenue.
"Listing from day one, we had to start by telling a big story and that is what we are still doing today."
From its beginnings eight years ago with four people in one room, the business has grown quickly. Today Xero has nearly 1000 people in four countries, serving more than 334,000 paying customers worldwide - 147,000 of them in Australia. Marketed under the tagline "beautiful accounting software", Xero is a cloud-based solution for small to medium-sized businesses. It's category leader in New Zealand with a market share of 23 per cent.
Xero's biggest market is Australia, where it is in a fierce rivalry with MYOB. The plucky start-up is also taking on incumbent Sage in the United Kingdom and preparing to assault Intuit, owner of QuickBooks, in the US.
Dual listed in New Zealand and Australia, the stock has had a stellar run fuelled by ambitious growth forecasts. But in the past six months, Xero's share price has tumbled 50 per cent. Investors, it seems, are becoming uneasy about whether Xero can succeed in its expensive expansion campaign in the US.
"The market is assuming Xero can become a relevant player in the US. But there is a high degree of uncertainty hanging over the timing and scale of success achievable there," says US-based Morningstar analyst Andrew Lange.
LONG-TERM INFLUENCE
"Xero has created a good product. It also has some savvy tech investors behind it and is attracting some high-profile senior personnel with influence in Silicon Valley. But winning any significant market share against Intuit is a long-term goal," Lange says.
He follows Intuit closely and, being a New Zealander himself, has kept half an eye on Xero over the years.
In the meantime, the risk remains that chasing growth in the US will just burn cash. Xero had revenue of $70m in the year ended June 30, while recording a net loss of $35.5m.
Macquarie analyst Daniel Frost has forecast net losses to blow out to $66m in the financial year ended June 2016.
If Drury had chosen to keep the focus on Xero's trans-Tasman base, the company could be recording profits and paying dividends back to shareholders by now. But the CEO is adamant shooting for the stars in the US is the right idea.
Plans are formally afoot for a third listing in the US in 2015. Drury insists this move is motivated more by the need for publicity than capital.
Long before he dreamt of making it big on Wall Street, Drury wanted to be the most famous businessman in New Zealand. Specifically, he wanted to be more successful than his friend Sam Morgan.
Another of the windy city's sons, Morgan is best known as the founder of Trade Me, New Zealand's most popular online auction and classifieds business. Drury was a Trade Me director before founding Xero, and Morgan is now a Xero director.
TECH COMPANY HUB EMERGES
Trade Me and Xero are at the vanguard in shaping Wellington's reputation as an emerging hub for technology companies. Although it is film director Peter Jackson's Weta Workshop, which produced the Lord of the Rings and Hobbit series, that has done the most to raise the city's global profile.
He may never be an international household name like Jackson, but Drury has cultivated his image as an unofficial spokesperson for the small business community, and government relations is a key pillar of the Xero growth strategy.
Along with Morgan and retail entrepreneur Stephen Tindall, Drury made waves on the policy scene a few years ago with their now shelved Pacific Fibre project. The group unsuccessfully pursued an ambitious plan to raise close to a $1 billion to lay a 13,000km internet cable connecting New Zealand, Australia and the US.
Incumbent National Party Prime Minister John Key is a good guy doing a pretty good job, Drury said.
Drury has also been lobbying New Zealand's Inland Revenue Service to reconsider its plans to spend about $1.5b rebuilding its core technology.
"We could get a national space programme for that! Why spend so much taxpayer money when the private sector is ready, willing and able to fork out for the front-end," Drury says.
It's a clever move. Plug-ins to government services make software such as Xero more appealing.
Another campaign is under way to lean on the Key government to follow in the footsteps of the Obama administration in the US and appoint a national chief technology officer (CTO).
"A government CTO is the only way forward. The role would act as a conduit between industry and government, charged with filtering out vested interests," he says.
It is an idea that has won public support from technology entrepreneurs in Australia, including Andrew Bassat, the co-founder and chief executive of online jobs market Seek. The two men appeared, this July, on a panel hosted by Google Australia boss Maile Carnegie in front of business and government leaders at the B20 Summit in Sydney.
Drury delivered a rousing riff on the need for business to step into the void left by inadequate government budgets and solve pressing social problems such as youth unemployment.
Bassat replied dryly that he wasn't sure about Xero shareholders, but he didn't think Seek's would consider that the most appropriate use of investor capital.
It is clear that Drury takes great pleasure from being part of the clique of high-profile Antipodean technology entrepreneurs, which notably includes Bassat and his brother Paul.
PERSUASION MISSION
"There are a group of us who have been part of the battle to convince people that world-class software can come out of this corner of the globe," Drury says.
Not everyone can be friends though. Earlier this year, a slanging match between Drury and imported tech entrepreneur turned wannabe pop star and political powerbroker Kim Dotcom went viral.
At face value, calls for cheaper, better broadband "to create a stronger more connected New Zealand" sound consistent with Drury's agenda. But the Xero boss made it clear on television he is no supporter.
Dotcom hit back at Drury where it hurts, tweeting taunts about how Xero's share price is over-valued, considering its user base. That accusation lies at the very heart of the serious concerns some well-regarded analysts and fund managers have about the loss-making Xero as an investment.
Despite recent losses, Xero's shares are ahead more than 350 per cent, since listing. As at September 17, Xero's shares were $21, giving the company a market capitalisation of $2.75b. By way of comparison, the broad ASX All Ordinaries index lifted about 25 per cent over the same period.
"What the critics are saying about Xero's US strategy is exactly the same as the criticisms we heard about launching in Australia and the UK - that we couldn't catch MYOB and Sage," Drury says.
The detail he ignores is that the critics are still saying that, and with good reason. Australia may be Xero's largest market these days but MYOB, which is headed for the ASX itself, is still a long way ahead. Xero is even further off catching Sage in the UK.
"As a challenger, having incumbents to push against is a fantastic thing," he says.
He may have started out as a programming nerd but admits the transformation to salesman is complete. It was an awkward transition but a necessary one to realise big ambitions for Xero.
"More than anyone else I've ever met, Rod is a guy who had a clear vision of what he wanted his life to be like and planned to make that happen," his good mate Lark says.
Not only was Drury determined to build a big listed company, he wanted to do it while living away from the city up the coast where the kids could go to school and he could go mountain biking and paddle boarding.
HOME-BASED WIFE ADVANTAGE
Running a global business means a lot of travel. Drury aims to work out of his home in Hawke's Bay from Friday night through to Monday. He doesn't always manage it.
"It has been a huge advantage to have a wife who was not as passionate about her career and wanted to take a few years out to care for the kids fulltime," he says.
Drury and his wife, a dentist, have three children aged six, eight and 10. With the demands of a US IPO on the agenda for the year ahead, it seems unlikely their father's schedule is about to ease up any time soon. Drury has an optimistic outlook.
"Xero just hit an important milestone with $100m in annualised monthly sales in June. Getting from here to $1b is going to be infinitely easier than it was to get from nought to $100m."
His shareholders will certainly be hoping that is true.