Don’t believe the hype, people – or should we? Rebecca Stevenson reports from a slightly cultish Xerocon in Melbourne, and finds accountants (and bookkeepers) just wanna have fun.
It starts before we’ve left New Zealand. I’m guessing, but I reckon most of the people who boarded this plane for Melbourne with me are heading to worship at the Kiwi altar of cloud accounting. They could have been accountants. Or maybe they were bookkeepers. Whichever, they were fizzing to get to Xerocon, the New Zealand cloud accounting firm’s annual get together that has now grown to three locations; Melbourne, London and Las Vegas, baby.
“Don’t drink too early at Xerocon,” one advises as we wait at the gate. “Last time I went too hard on the first night.”
“Is everyone ready to have fun?” another asks, before quickly correcting themselves, “I mean to learn and be educated.”
Everyone laughs.
When Xero launched in 2006, founder Rod Drury says, the company had about 100 subscribers and “most people had the surname Drury”. In March of this year it announced it had signed up 1 million subscribers. Xero now dominates the Australasian online accounting space, and it has aggressively moved into the UK and US.
There, however, it faces vigorous competition from Intuit and its QuickBooks accounting software. QuickBooks has felt the pressure from the Kiwi upstart and revamped its interface; Drury claims to love the competition and that Xero has provoked a reaction from the big boys. Xero is David and Intuit is Goliath, he says. Being David is way more fun.
While it has made strides in the US and UK, it’s not all smooth sailing. The US states’ complex regulatory regimes make it like dealing with more than 50 different countries, Drury says. And it has yet to take its payroll product to all states, a common gripe from US users about Xero. This has to happen to get the “ticket to the game”, Drury acknowledges. But he says Xero’s stats are much better than Intuit’s, across any measure. Intuit’s customers are “low value” compared to Xero’s, he says, and they’ve had to discount deeply to get them — he cites a 10 for $10 deal being offered.
“Low value customers don’t move the needle.”
Outside the US, Xero is twice QuickBook’s size, and has 4-5 times the revenue, Drury says. For the year ended March 2017 the company booked more than $295 million in operating revenue; Intuit’s revenue is in the billions. It also has more than 2.2 million subscribers worldwide, but Drury remains bullish.
“We are not just slightly ahead. We are killing it.”
In the UK Xero has been signing up users quickly, but there is some discontent. Some new users are not impressed with Xero’s email-based customer service, but Drury is adamant it’s not changing that, and says it wins awards for its service. Xero has been “really courageous” in its decision to stick with email, and Drury dismisses the criticism as “a lot of noise”. Who wants to be stuck on the phone for hours, he asks? He claims the company’s automated responses mostly get it right the first time, and if needed Xero will call you for more complex problems; but these excuses don’t wash with some Xero customers.
“Please tell me Customer Support is planning on adding a more robust, perhaps even live tech support for this platform in the near future. This twelve plus hours for each reply to a simple conversation is really untenable. I want to love Xero. Please help,” one posted on Xero’s community board.
Others are less hopeful.
“I know how you feel I have been waiting for going on a week for just for feedback… You may get a million subscribers, but this is not how you keep them.”
The Melbourne Convention and Exhibition Centre has been overrun this year by about 3000 auditors, and developers, who ply their trade inside Xero’s ecosystem. They are primed to drink in new announcements from Xero’s CEO, Drury, and just drink. It’s a huge venue. And Xerocon Asia-Pacific has swallowed most of it.
The walk from my hotel to the Yarra River venue in downtown Melbourne seems shorter than the walk inside to reach Xero’s cavernous main stage, where the keynote presentations will be held. There’s a large exhibition space with numerous stages for “breakout sessions” including on artificial intelligence, against a trendy graffiti backdrop. Also in here are the more traditional conference stands for Xero’s product partners like New Zealand’s Timely appointment booking app. There are hangout zones, play areas and a lot of coffee spots where baristas will whip you up a flat white.
So what’s the big deal about Xero? It’s basically accounting, but in the ether. No more paper spreadsheets, all the data lives inside Xero, and this data is being harnessed by the company to predict trends and tell us more about small business. Xero claims users are more productive and make more money. It’s taking the drudgery out of the numbers game, but also changing the game, the company says. Move from being someone who presents the past digits and become a futurist – add more value, it urges its users. Spend less time on spreadsheets and more time with the family. It’s a compelling message.
The effervescent Drury is the keynote speaker in the morning on Xerocon’s first day. But first there’s a hype man to get us in the mood to make noise in the vein of the best evangelists or rappers, and it is all very Jobsian and in the style of Apple’s vaunted launches. We are instructed to practise applause: give us a golf clap, now ramp it up to beauty pageant applause, and now let rip! None of this polite clapping at Xerocon, thanks.
The atmosphere is one of fun, but underpinning the party atmosphere is serious business. The numbers flash up on the screen. One million subscribers across the globe, 180 countries, trillions of dollars in transactions going through Xero, hundreds of Xero-friendly apps, $108 million in cash on hand, hundreds of banking partners.
Xero has completed moving its back end to servers owned by Amazon Web Services (AWS) so it can quickly ramp up new products and offerings. It’s moving from the back office – boring – to the front office, Xero says.
On day one there are a dizzying number of new products launched. Xero Projects will allow real time tracking of time spent on projects, Xero Discuss will let users communicate inside Xero, and Xero Expenses will let users take a photo of a receipt on their phone and automatically create an expense claim. In his typical rough and ready style, Drury says that as a Xero user, expenses were driving him “bat-shit crazy”.
Xero has also added a learning platform, so it can capture future users early. This enthuses the crowd, so many graduates are learning accounting and bookkeeping on old platforms and then hit the workforce and need training immediately. The market reacted well; Xero shares hit a three-year high, and analysts seem upbeat about the company.
“In my opinion, Xero is one of the most impressive companies in Australia and New Zealand,” investor website Motley Fool said earlier this year. More recently, it said Xero retains a robust growth outlook thanks to its global horizons, widening network effect, and market-leading product.
“Not to mention that the shift of small business accounting from traditional Excel formats to the cloud is only just beginning around most of the world.”
AWS is here as a sponsor, alongside Paypal. And there are a coterie of companies present at Xerocon who are codependent on Xero; integration with Xero is trumpeted. How many Kiwi companies have spawned adjunct businesses who rely on them to survive? Not many, if any.
But back to the Coachella for clerks. Thumping remixes of popular music including our Lorde are played by a long-haired female DJ in the plenary, and there is an obligatory blue-toned light display to ensure Drury’s arrival on stage is a moment. Drury walks on in his Xero uniform: black Xero tee, black jeans.
“Holy shit!” he exclaims.
He explains his excitement. When he first started talking about Xerocon he envisioned exactly this, Drury says. It will be international. It will be multi-day. He stands before us, claiming to be humbled by our presence, but the bookkeeper sitting next to me from Brissie says this is what she loves about Xero. There’s nothing dull or boring about it, and Drury has legions of followers, including a woman who makes a pilgrimage to Xerocon every year. Last year she made a Xero-themed dress with Xero dollars as the skirt and Xero logos over her nipples. This year she is sporting a t-shirt with Drury’s face on it. Drury gives her a shout out; she smiles and waves happily.
The bookkeeper agrees Xero is not perfect, and she’s really happy to see the expenses project and real-time project tracking introduced. But you have to understand where the industry has come from. It’s a massive improvement on using multiple Excel spreadsheets, she says.
The Consolid8 crew from Brisbane are 18-strong and wearing matching green hoodies with their ‘titles’ printed on the back. Only two of their team are male. “Chief People Person” Rebecca White says their founder, the “Chief Chaos Creator”, “jumped on the Xero bandwagon” in 2013. The next year the whole team came to Xerocon together. They now come every year and it’s a big effing deal. They get a Hummer to take them around, they stay in a nice hotel, they come to talk business and learn about Xero, but they are clearly having a hell of a fun time.
Assembled around the swing set in Xero’s exhibition space, they’re drinking champagne and being silly at the end of day one – and they’ve even brought a baby. Blake is here at Xerocon too, along with a few older kids as well. This is part of what Consolid8 stands for – back in Brisbane, the company has on-site childcare. There’s a lot of diversity around the rooms too. It really is all-comers: young, old, male, female, babies.
A man sitting next to me during another Xero presentation says it was only a three years ago that he was manually filling out spreadsheets. Xero has changed the way he works for the better.
“And they’re not trying to take my job,” he says, “they’re making my life easier.”
Xero is a software company for those who know about numbers and sensible spending. And yet at Xerocon one of the most popular stands is the Xero Store, where those software users are spending their hard-earned cash buying merch with Xero all over it. A woman pulls on a Xero puffer jacket. Her companion thinks it’s a good fit; sale done. At the end of the first day the previously groaning silver racks of Xero gear are sparse. People actually paid to buy this stuff. One of Xero’s public relations staffers points out the company always has an online store running. This is not abnormal behaviour for Xero users. The mission is to excite, and bring emotion to accounting software.
What is it about this company that engenders this level of loyalty and excitement? Imagine working in an industry that is a byword for boredom, and then out of the Xero-blue a company decides you are not all Poindexter types with pens in pockets; they see the assembled acolytes for who they really are. Sure, a lot of the men seem to be wearing blue shirts – striped, spotted or checked. But there are a lot of women here too.
Xero’s data would indicate they are more likely to be accountants. Former rugby sevens player and now Xero New Zealand boss Craig Hudson says 13% of Xero’s clients are bookkeepers — but they are a vocal bunch. Bookkeepers have traditionally tracked the numbers, while accountants interpret the data and provide advice too.
Our hype man asks all the accountants in the auditorium to give a shout out; it’s a bit muted. Not Xero-worthy whatsoever. The bookkeepers on the other hand are loud. They seem to love being part of Xero. It’s a bit bizarre but then you realise this is a home away from home. They can meet up, hang out, have fun and are not pigeonholed as dullards.
They are treated as individuals bound together by Xero’s self-proclaimed beautiful software. And they want to party too!
In the morning of day two people are swapping war stories from the night before; some in the hotel restaurant look a little rough around the edges. The big one is yet to come — a street party is set to be held on the last night. The only downer is the weather; it’s cold and wet. But that won’t dampen their spirits. Xerocon only happens once a year. Go hard or stay home.
There’s another conference going on at the same time as Xerocon and the contrast is striking. Xerocon has ambience, it’s colourful, everyone is well catered for, the food looks and tastes good, there’s a croquet set, play area and the typical bean bags and it all screams “we are not boring!” and you can’t help but smile at strangers and enjoy it.
The other conference seems tame – and a massive snoozefest, in fact – in comparison.
Is this truly an accounting revolution or just a good time that will only last a short time? Xero has been criticised plenty over its more than 10-year life, with people pointing out how much cash it’s spent, how much capital it has raised, and how it hasn’t made money.
But this is Drury’s point. You can’t do what Xero is doing, trying to be global, by giving money back to shareholders. It has to invest in its products. It is uber-ambitious, as is Drury. What we are doing is cool, he says, but exhausting — that’s why so few can do it.
No-one is being talked down to here. Its supportive, collaborative, and there’s nothing high-brow at the centre of this thing Drury has created.
So where to next for Xero? Well London Xerocon is around the corner. And the two other conferences are even bigger than this one. Next year the company is planning for about 5000 at the southern hemisphere event. Maybe they should charter a Xero plane from New Zealand, Hudson suggests.
It’s going to keep getting bigger, keep getting better, Drury says. And it’s a shitload of fun.
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BusinessSeptember 16, 2017
Social enterprise: trendy movement or real change?
Social enterprise – entrepreneurship that combines business nous with ethical aims – is on the rise. But is it anything more than a placebo effect that makes consumers momentarily feel good? Victoria Crockford finds if you want to remain relevant in 2017, you need to show your social credentials.
“Be Here Now” encourages the worthy wooden sign as you drive into The Sherwood, Queenstown’s most popular destination for discerning global nomads, and a well-known spot for local freelance nomads like myself. A self-described “community hotel”, The Sherwood offers a garden-to-table menu, large-scale waste reduction initiatives, free yoga classes, and a solar-powered electric vehicle charger. While the whiff of hipster hangs quite heavily in the air, it’s most definitely an enterprise with the local community at its heart.
As I grab a corner table and contemplate the lake view, it occurs to me that this, according to those waving the flag of social enterprise, could be the future of business in New Zealand: a world where every single part of a community has a responsibility to it; where every enterprise is a social enterprise.
The rise of #SocEnt
The Ākina Foundation – an incubator and consultation entity that has been in New Zealand’s social enterprise vanguard – defines a social enterprise as an organisation that trades to deliver a social or environmental purpose.
Such enterprises are proliferating both here and internationally, with Scotland leading the charge. A recent census conducted by Social Value Lab for the Scottish Government documented 5,600 social enterprises, employing 81,357 people, with 64% of founders women, and generating an estimated £2bn for the Scottish economy. New Zealand is no slouch either. In the 2016/17 financial year, Ākina alone provided business development support to more than 700 organisations engaged in social enterprise activity at various stages of development.
Also on the rise are investment funds that exist to provide capital to social enterprises. Internationally, there are huge players like Bezos Expeditions, the sprawling venture capital vehicle for Amazon founder Jeff Bezos. Here, Aera VC – the investment arm of social entrepreneur and B Team co-founder Derek Handley’s Aera Foundation – has a well-established presence, and the recently-launched Impact Enterprise Fund and Soul Capital both have an explicitly domestic focus.
Surely this marked acceleration of businesses driven by purpose as well as profit is excellent news?
For many critics of the rise of social enterprise, the answer is no. They are concerned we are getting a trend confused with a movement for change, particularly when it comes to retail solutions. They point out that at the customer end, the feel good factor only lasts as long as your recent purchase, and that these one-off acts of consumerism obscure the need for collaborative efforts to solve problems. This critique has become more pronounced with the entry of ‘big money’ into social enterprise. Some have gone so far as to call impact investment funds a “neoliberal takeover” of the sector.
There is also an argument to be made that social enterprises are plugging gaps that the government should, or at least has traditionally, filled. This leads to what some see as the perverse outcome of people profiting from poverty, particularly with the ‘buy-one-give-one’ model, which is a very clear have and have not scenario. With this sort of power differential at play, the question must be begged: is social enterprise solving problems, or is it reinforcing the dynamics that cause issues in the first place?
‘Every business will become a social enterprise’
Rob Wise, the Melbourne-based founder of Be Collective, is an open and friendly interviewee, and with 12 businesses and a charitable foundation under his belt, he is also incisive in his observations of social enterprise. He is quick to point out that social enterprise is part of his commercial DNA: his father, Graeme, brought The Body Shop – a business at the forefront of the concept – to Australasia in the early 1980s. Ergo, Rob sees the idea that business should think about community as “a no brainer”.
With Be Collective, Wise wants to mobilise a generation to identify their passionate values and make a positive social impact. To that end, the company uses software to create the social infrastructure for community interaction, with a focus on facilitating volunteering opportunities. The outcome? A verified social record for each customer. As Wise notes, a curated social CV has a lot of power in an era where the “soft skills” are the ones that will keep us one step ahead of the robots in terms of employability.
He is enthusiastic about the social enterprise landscape here in New Zealand, where he has recently appointed a country manager. He reminisces fondly about Be Collective’s recent roll out in Otorohanga, and is sincere when he says that he felt “a real alignment of spirit” in New Zealand. He thinks that we have a strength that is missing, or perhaps obscured, in Australia: the way in which our national philosophy of values is influenced by tikanga Māori. He believes that a sense of community therefore comes more naturally to us than Australians, and – if the enthusiasm in Otorohanga is anything to go by – there is a tangible hunger for innovative solutions in small town New Zealand that bypass the stifling obligations of government grants.
He understands the critiques of the sector, particularly the entrance of the investment funds, and observes that there is an element of tokenism, or ‘social washing’, by people keen for a legacy project. However, he is clear that this doesn’t diminish the power of social entrepreneurship as a concept, or a practice. He believes that it’s all part of the inevitable teething problems with a fundamental transformation of how we understand business.
The end point of that transformation? “Every business will become a social enterprise.”
‘People should just be building good businesses’
Sean Barnes cuts a spritely figure. He has barely contained energy during his presentation to what he describes as “a coalition of the willing” in Queenstown. As an Ākina Foundation Venture Manager for the South Island, his contact book is full and growing. His slide deck showcases successful social enterprises across sectors – body care, resource management, the trades – and he makes a strong case for the use of social enterprise as a tool in the tangle of Queenstown’s growth issues.
Success notwithstanding, Barnes has firsthand experience of the model’s current problems in New Zealand. From an operational perspective, the issues with getting social enterprise embedded in our economy are still lurking, and significantly restrict the ability of new enterprises, and the sector more generally, to scale.
A key factor in this is the lack of a legal form for social enterprise. As it currently stands, a social enterprise is often an uncomfortable mash up of a charitable trust and a company, with most enterprises in New Zealand starting out as charities. Having the regulatory onus of a charity acts like a brake on the ability of many enterprises to pivot or accelerate growth. On that point, he agrees with Wise: the government grant set-up can be a hindrance.
Underdeveloped capital markets have also been an issue. The placement of social enterprises in the ‘charity’ box has meant that venture capital has been disinterested or ignorant, depending on who you are talking to, and pools of funding have been largely limited to crowdfunding and philanthropy. As Barnes notes: “There needs to be a greater general understanding of how social enterprise works to avoid misconceptions.”
This misconception is something that Aera VC founder Derek Handley has spent a lot of time trying to change. He believes that the “waters have been muddied” when it comes to social enterprise here, with the mentality of local entrepreneurs playing a role.
“People should just be building good businesses,” Handley says. However, more often than not he thinks that in New Zealand the term “instantly conjures up ideas of very small businesses that… have little hope of disrupting an entire industry or problem.” This has led to a near non-existent angel network and disinterest from venture funds.
Despite these frustrations, he highlights some shifting ground — he has recently been joined as an investor in food-for-schools start-up Eat My Lunch by Foodstuffs, which has bought a 26% stake and will assist the enterprise with supply chains and logistics. Such a partnership by a such high profile traditional company is unprecedented in New Zealand, and is a clear strategic move by Foodstuffs: if you want to remain relevant in 2017, you better be able to show your social credentials.
‘We want to create a wider impact’
A solid value proposition is something that also underpins Roy Thompson’s approach to the social enterprise sector. Thompson heads up New Ground Capital, an investment fund that has recently partnered with Ākina to set up the Impact Enterprise Fund.
A former head of Private Wealth Management at Westpac who divides his time between Auckland and Queenstown, Thompson is in the midst of working on one of the most pressing issues in Queenstown, and one that is ripe for disruption: housing. He has teamed up with another local developer to get large-scale affordable, healthy accommodation for the town’s numerous hospitality and tourism workers off the ground. So, with one foot already in the camp of social enterprise, perhaps the Ākina venture was a natural fit?
“The Ākina relationship is critical,” Thompson says. He believes that Ākina brings a sector knowledge that lends credibility and will help the fund select the best opportunities and says New Ground Capital and Ākina have a set of shared values in terms of the impact that they want to create.
“There’s currently no real driver to establish yourself as a social enterprise in New Zealand”, he says, citing a lack of tax incentives as an example. He hopes that the Impact Enterprise Fund will assist with changing this. The same refrain as Wise then, just more qualified — every enterprise could be a social enterprise.
While the Impact Enterprise Fund is ambitious in its ultimate goals, Thompson’s natural restraint plays out in plans to start with a ‘softly, softly’ approach. “We will be keeping it small. Otherwise the whole sector could die before it’s even born.”
What about the perception that he is ‘big bad money’? Thompson’s responds with a wry smile and a clear statement: “We aren’t forcing money on anyone.” As he sees it, the entrance of big investors is a win-win: “They [the social enterprises] desperately need capital…and we want to create a wider impact.”
Scale is once again the magic word in the formula. Enterprises will be selected based on an assessment process that vets both their purpose and their ability to scale their impact. Like Handley, Thompson is ultimately in the business of disruptive – and profitable – problem solving.
‘It’s just looking after each other at the end of the day’
“Have you seen the stats on Scotland?!”, enthuses Scottish native Richard Docherty of Queenstown social enterprise start-up Munchly nearly the moment I sit down to chat with him at his thriving health food eatery Rehab.
As fellow Queenstowners, our conversation inevitably veers to housing prices, traffic congestion, tourism infrastructure and the local council’s record on all of the above. It’s clear that Docherty is a social enterprise believer: “A start-up business can do in six months what a council can do in ten years”. Docherty is also positive about the entrance of venture funds into the sector: “I want to have a strong impact and I need to have money to do that”. Of the critique that government should be stepping into the social gaps that exist, not business, Docherty is emphatic: “A solution is a solution”.
With Munchly, Docherty is proposing an ambitious one: “We’re trying to feed and educate families and kids.” After talking with local teachers, he was shocked to learn that “even in Queenstown” kids are going to school hungry, whether through the sheer hectic pace of family life or because of poverty. He was also concerned by the difficulties that many of the schools face when fundraising. Under the decile system, most of Queenstown’s schools are 9 or 10, earning them relatively little in the way of government funding, and current fundraising initiatives just don’t raise enough to bridge the gap sustainably.
Munchly aims to address the two pressure points — food and fundraising — by selling fairly-priced and healthy school lunches to parents, with a portion of the profits going to the schools as a fundraising tool. The healthy part is integral to Docherty’s vision. At Rehab he aims for as much local and fresh as possible, and he is preoccupied with waste management. He wants both Rehab and Munchly to be interactive food experiences, where kids can participate in the ‘garden-to-table’ philosophy.
His impact metric? A globally disruptive model for food education and school fundraising. Here is one social entrepreneur who has heeded the call for scale, then.
Watching the steady stream of customers coming in and out of Rehab, I wonder: what is his motivation for entering into the world of social problems when he has a perfectly successful business already? “It’s just looking after each other at the end of the day,” Docherty replies.
And that right there is the heart of the thing. Social enterprise and impact investment, with all of their difficulties of definition and vulnerabilities to ‘tokenism’, are fundamentally about just giving a damn. The mash up of profit and purpose still has some sharp edges in practice. How is it measured? Where does the balance between profit and social good lie? What role does government have to play, if any?
But, “just looking after each other” seems like a good place to start.
This content is part of an ongoing social enterprise series in collaboration with Kiwibank and the Social Enterprise World Forum.
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