In a candid conversation about building and scaling a global SaaS company, Xero founder Rod Drury shared invaluable insights about his journey from a small New Zealand startup to a global accounting software leader with over 4.2 million users. His story offers a masterclass in building a sustainable, global software business while maintaining strong values and culture.
At its core, Xero's success stems from deep technical understanding and market insight. Rod's experience implementing financial software at Ernst & Young revealed significant gaps in the market that would later shape Xero's development.
Through his consulting work, Rod identified several critical issues with existing financial software:
Lack of proper relational databases
Missing or inadequate journal entry systems
No capability for real-time collaboration
Limited multi-currency support
Armed with this knowledge, Rod and his team developed something revolutionary: a multi-perspective general ledger that could handle both cash and accrual accounting simultaneously. This innovation required stopping core development for two months to integrate real-time currency updates, but the investment paid off enormously in the long run.
Rod's approach to growing Xero defied conventional startup wisdom in several ways. His experience offers valuable lessons for entrepreneurs about timing and strategic development.
Unlike many founders who launch their big idea straight out of college, Rod started Xero at 40. His career progression philosophy breaks down into distinct phases:
The twenties are for building fundamental skills and understanding business operations. During this time, Rod focused on learning the intricacies of accounting software and building technical expertise.
In your thirties, Rod advocates focusing on moving through organizations and building professional networks. This period proved crucial for developing the relationships that would later support Xero's growth.
By forty, armed with experience and industry knowledge, Rod was ready to launch and lead Xero while balancing family commitments.
One of Xero's most unconventional decisions came in its funding strategy. The approach they took challenged traditional startup wisdom but proved instrumental to their long-term success.
With just 100 customers and $15 million in initial capital, Xero made the bold move to go public. This decision, while unusual, provided several key advantages:
Consistent access to capital for long-term growth
Forced discipline in business operations
Enhanced transparency and accountability
Ability to attract and retain top talent through equity
Building on their public company status, Rod developed a systematic approach to investor communications that emphasized transparency and regular engagement. This helped maintain investor confidence even during challenging periods.
Understanding company performance required focusing on the right metrics. Rod's approach to measurement emphasized quality over quantity.
Two metrics stood out as particularly crucial for Xero's growth:
This metric served as a key indicator of business efficiency and automation effectiveness. Rather than just tracking total revenue, this measure helped ensure that growth came from building capability, not just adding headcount.
In a subscription-based model, churn provides immediate feedback on product-market fit and customer satisfaction. Xero's focus on this metric helped drive continuous improvement in their product and service delivery.
As Xero expanded internationally, they needed an organizational structure that could support global operations while maintaining local effectiveness.
Rod implemented an innovative matrix organization that broke from traditional hierarchical models. This structure had several key components:
Direct reporting lines between country leaders and CEO
Clear service relationships between functional and country managers
Explicit accountability and reporting cycles
Regular cross-functional communication channels
Within this structure, maintaining consistent culture proved crucial. Xero developed several innovative approaches to ensuring cultural alignment across their global operations.
Managing customer support for a low-cost, high-volume service required innovative thinking and careful balance of resources.
Rather than following traditional support models, Xero developed a scalable approach that emphasized:
In-app contextual assistance
Comprehensive self-service resources
Targeted video support when needed
AI-driven issue triage
Today's SaaS landscape offers new opportunities and challenges for entrepreneurs. Rod's advice for current founders reflects both timeless principles and contemporary realities.
For new SaaS companies, Rod strongly recommends considering the enterprise space, where you can build substantial business with fewer, higher-value customers rather than needing to immediately build mass-market sales capabilities.
Rod's journey with Xero demonstrates that building a global SaaS company requires more than just a great product – it demands strategic thinking, strong values, and the ability to evolve as the company grows. His experience shows that with the right foundation and approach, it's possible to build a world-class technology company from anywhere in the world.
The key to success lies not just in having a great idea, but in consistent execution, maintaining strong values, and building lasting relationships with customers, employees, and investors. As Xero continues to evolve under new leadership, it stands as a testament to the enduring power of building companies with strong foundations and clear values.