Archive for May, 2007

Homegrown competition for Xero????

Published by Ben Kepes on May 12, 2007 in Business, IT and New business. 4 Comments

Just saw this - could be interesting - seems it is akin to Xero but without the high profile backers and founders. Also this as posted on this forum.

The plot thickens?????

The only thing of substance I could see in the offer doc is the that founders suddenly become very rich. My main take home points from prospectus are:

1. Prospective 2008 revenue from customers of $550k does not look compelling. This eqautes to straight line growth over year from zero to 1833 customers each paying $50 per month. This seems a little light for software that is set to take over the world.

2. Operating expenses forecast to be $5.4m.

3. Total shares outstanding will be 55m so this company is valued by the offerers at time of IPO of $55m.

4. $300k of the cash raised will be used to lend to the directors at 4%, so they can buy shares.

5. No forecasts or projections to support valuation.

My take on the service as an SME owner [ie I am their target market]

1. Accounting software is a highly competitive busines dominated by large incumbents, switching costs are high in terms of time. You would need to see a large benefit to switch, its worse than switching banks.

2. SME’s who don’t already use accounting software usually have good reasons for this. Being available on the internet is not a good reason.

3. Simple to use means only useful for simple things.

4. No fixed asset register

5. No payroll

6. No inventory

7. Each county has its own standards and requirements so its not quite as easy as alluded to in the prospectus, to transfer accounting software from country to country.

Unanswered questions

1. Is Hamish getting paid good appearance money.

2. Did Chris know his comments would be headlined in the prospectus?

3. Who was the ad agency who wrote the prospectus?
My overall take on the IPO

1. I find it difficult to see where their customer base will come from

2. $600 per year seems expensive for what most of us SME’s can do on a simple spreadsheet… and with internet banking

3. Most of the writing is in the special language of advertising and marketing people that sounds like it is saying something but it isn’t really.

4. I think you will get a better risk adjusted return betting on the Africans to take out the RWC with the TAB at $6.00.

5. Makes my BIO shares look attractive.

6. If you have a compelling offer you dont need ad people to write your prospectus or to refer to other successful companies/people to try and get a pseudo halo effect.

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Xero IPO

Published by Ben Kepes on May 12, 2007 in Business, Economic Development, Governance, IT, New business and Strategy. 0 Comments

I just finished the not too easy task of reading the Xero share issue documents.

The first interesting thing is that Xero chose the IPO versus the VC route for funding. The Chairman’s report makes some mention of the limited VC funds in New Zealand but I’m not sure if this explains it sufficiently. They’re only after $15mill after all. Maybe Xero realises that they have to speed the process up and a single share issue instead of multiple VC rounds will help this along - I’m not sure.

The second  issue is to try and assess the IPO on its own merits and not get caught up in some web bubble 2.0. It’s easy to be sidetracked by the calibre of those involved in Xero - Rod Drury, Sam Morgan, Guy Haddleton, Hamish Edwards et al. However it is important to view the offering on it’s own merits and not by some defacto measure just because of those co-investing in it. At the end of the day, while Sam Morgan surely understands web 2.0 he also surely has spare cash that he can risk - much more so than ma and pa investors in New Zealand (yes that even includes his Ma and Pa).

A further question is whether MYOB, Intuit or one of the other big players can rapidly introduce a SaaS model based on their own, existing apps. The cost of MYOB out of the box is around the same as a 12 month Xero subscription so it would seem from that perspective the only compelling reason to go the Xero route is if the online app model is a feature that a particular business needs. If this is the case then migrating client/server MYOB to a web app MYOB would seem like a better route to take.

Xero  is selling their app on the ability of a business’ accountant to easily access data to do some analysis. To be honest I wouldn’t be surprised if accountants push clients away from Xero - seeing it as a threat to their revenue streams.

Watch and see I guess……

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Telstra clear sucks…….

Published by Ben Kepes on May 10, 2007 in Business, Economic Development and IT. 1 Comment

In response to Andy Lark’s recent post about Verizon and Mauricio Freitas‘ post about TC - I thought I’d serve up an article I wrote recently after a long and annoying TC experience. Read on…..

A recent blood pressure elevating experience I had has made me think about customer service in general and more specifically the disparity between intended service levels and actual service levels that we as consumers face.

I recently shifted my telephone and broadband (although where I live it would be more correct to call it “only slightly broader than narrow-band”) from one provider to the other we have to choose from in our current duopoly. My reasons for changing were simple – a better fit for my particular situation in terms of product offerings.

After some time I finally managed to get the relevant information from the new provider. Admittedly this process took half a dozen phone calls with me having to explain the situation at length and on multiple occasions. This surprised me as I had always thought that I as a simple customer would have less of an understanding of a suppliers products than the supplier themselves – seemingly this is not the case which begs some questions about employee training that are for discussion another time.

Having finally switched providers I was most pleased to receive my first invoice and see that the change had saved a substantial amount of my former telecommunications spend. I did however have a couple of small questions that I wished to ask of the provider and in order to get some answers I decided to call them one weekday morning.

I firstly had to spend several minutes talking to a machine to describe the minutiae of my enquiry so that I could be ported to the correct department. Having thus ensured that my pronunciation and intonation was correct I arrived at the department relevant to my enquiry. I was then informed by an automated attendant that the wait time for my type of enquiry was 28 minutes! Bear in mind that this was a weekday and was a stock standard question which could have been easily and quickly answered. Continue reading ‘Telstra clear sucks…….’

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Domestic vs offshore manufacturing

Published by Ben Kepes on May 10, 2007 in Business, Economic Development, Governance, Manufacturing, Society and Strategy. 0 Comments

An interesting article here that came out of the Better By Design conference last week. The gist of the argument was that, in order to remain globally competitive, NZ manufacturers have no option but to move production offshore.

Now we need to qualify this argument - if we want to remain price competitive then, yes we have no option but to move to locations with a labour cost that is less than ours. But in stating this aren’t we missing the main point about our ability to compete? we should not be trying to compete on price but creating world class products that are sufficiently differentiated that they command a premium.

An example I like to use is the Danish design houses - Danish Design is, of itself, such a well known concept that the individual brands are buoyed by the brand as a whole.

This is where a specific NZ brand that is bigger than all the little boys and girls trying to do their own stuff comes in.

It was tried a while ago by The NZ Way but maybe the time is ripe for another go - no catchy gimmicks just Authenticity!

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