A Front-Row Seat to the Shift from Desktop to Cloud
I made my first investment in Xero in 2015, but my interest began well before that—back in 2010, when I first came across the company as a challenger to MYOB.
At the time, MYOB still dominated the Australian and New Zealand accounting software market. But it was clear to me—even then—that desktop-based financial systems were a dead end. Businesses were going digital. Banking, taxation, and payroll were all heading online. What I needed to see was who was building for that inevitability.
Xero’s early product was clean, simple, cloud-native—and more importantly, designed with the user in mind. It was accounting software built not just for accountants, but for business owners. It had elegance. It had momentum. But it was early.
So I waited. Watched. Studied.
And by 2015, I had seen enough traction—enough product iteration, customer loyalty, and smart capital allocation—to know that Xero had the potential to become a category leader. I initiated a position.
A Textbook Example of Category Disruption
The thesis was simple:
- MYOB had the market share, but Xero had the product velocity
- The cloud-native architecture gave Xero long-term advantages in speed, cost, and innovation
- As small and medium-sized businesses grew, they would want real-time visibility, remote access, and seamless integrations
- And as compliance and tax reporting became more complex, the demand for automation would grow in lockstep
What Xero was building wasn’t just accounting software—it was a small business financial operating system.
And they delivered. The company grew rapidly, especially in Australia, New Zealand, and the UK. Retention stayed strong. Ecosystem partners grew. And Xero earned the right to be on the shortlist of every small business owner going digital.
A New Chapter of Leadership
In recent years, I’ve been particularly impressed by Xero’s ability to maintain its culture of innovation even as it scales. Under new CEO leadership, we’ve seen the company:
- Tighten its capital discipline
- Expand international opportunities more methodically
- Continue to evolve its ecosystem integrations (with banks, payroll providers, CRM platforms, and government portals)
- Invest in AI-enabled features for predictive insights, cash flow visibility, and auto-reconciliation
This tells me the company is not just maturing, but maturing intelligently. It hasn’t lost its start-up DNA—it’s just learned how to channel it with discipline.
Why I’m Still Long Xero
Xero remains a core compounder in my portfolio—a Horizon 1 holding with enduring relevance.
It’s:
- Embedded into the workflows of tens of thousands of SMEs
- A sticky, high-retention SaaS product with pricing power
- Operating in a category where the cost of switching is high and the value of data is growing
In short: I still believe Xero’s best years are ahead of it.
As digital compliance requirements, payroll complexity, and AI tools all become standard expectations for businesses, I expect Xero to remain not only a software provider but an infrastructure layer for the global small business economy.
