Ignition Lane’s Weekly Wrap: Xero turns 15, local space race takes off, Hotmail turns 25

- July 12, 2021 6 MIN READ
Xero, Rod Drury
Xero founder Rod Drury

Welcome to Ignition Lane’s Weekly Wrap, where they cut through the noise to bring you their favourite insights from the technology and startup world. Ignition Lane works with ambitious business leaders to apply the Startup Mindset to their technology, product and commercialisation problems. 

This wrap goes out free to subscribers every Saturday. Don’t forget you can catch Gavin Appel discussing the week on the Startup Daily show on Ausbiz every Monday at 2pm. If you miss it, you can catch up on the week’s shows here.

Here’s their review of the week. 

Happy birthday to an NZ tech hero, Xero

This week in 2006 Xero was registered as a company. Fifteen years later, Xero is one of NZ’s biggest success stories, valued at over NZ$21bn.

To celebrate its birthday, we look at some of the No. 8 wire mentality (to all you non-kiwis that means ingenuity & resourcefulness) that helped get Xero to get…

The domain name: In a previous life Xero.com was a fan site for band Linkin Park (formerly known as Xero). Instead of just throwing cash at the domain owner, Xero founder Rod Drury flew him to NZ for a break. Here, Drury wooed the owner with some good old fashioned kiwi hospitality, while sweet talking him into selling the domain for the reasonable sum of US$20k.

Capital: There was little-to-no VC money in NZ around 2006. So Drury and the founding team decided to go public, raising NZ$15m in an IPO in 2007. With only 100 paying customers (“Xero, named after their revenue” analysts would troll), the listing valued the business at $55m.

Usa Network Reaction GIF by Suits

It took many years for the broader market to understand Xero’s SaaS business model and potential. In FY21 (ended 31 March) Xero brought in revenue of NZ$848.8m, profit of $19.8m and revenue per FTE of $233k. Solid. Who’s laughing now?

Customers: SMB is a VERY hard customer segment to crack. Xero gradually infiltrated the market with a crafty distribution channel strategy – focussing on unloved accountants and bookkeepers. Coupled with an exceptional customer experience and a gold-standard partner program, Xero has been able to amass over 2.74 million subscribers.

On Xero’s secret sauce, former Xero Australia MD Chris Ridd (now an investor and adviser) told us:

Xero understood from the outset that UX, good design and brand went well beyond just a cool logo.

Creating a great customer experience was certainly in the product, but it was also in our passionate people, the can-do approach, the playful language, witty written comms, speed of response, great videos, awesome events, and even accountants playing rock n roll.

We tried hard to make every touch point with customers a great experience, which was completely unexpected and different from what they were accustomed to with the other accounting software providers.


Heart Love GIF by Xero

Births, deaths and marriages

Births: Harrison.ai and and I–MED Radiology Network launched Annalise CXR, a chest X-ray AI solution that identifies 124 clinical findings and is a decision support tool for radiologists and clinicians. The Annalise CXR AI model was trained on 821,681 chest X-ray images from 520,014 studies across 284,649 patients. Findings of the study relating to Annalise CXR were published in The Lancet Digital Health.

Deaths: Founded by Mick Spencer in 2010, Onthego enabled customers such as schools, businesses and sports teams to design and order apparel and accessories online or via in-store kiosks. It collapsed on May 31 and now the administrators are considering pursuing shareholder Wesfarmers for more than $500k for expected or lost revenues relating to its JV agreement.

louis litt deal GIF by Suits

Always think about what could go wrong when negotiating contracts, people.

Marriages: VendorPanel acquired Nimblex. VendorPanel provides procurement software in the US, Canada, Australia and NZ. Nimblex develops a suite of low-code procurement solutions. In a buy (rather than build) move, the acquisition enables VendorPanel to provide an end-to-end Guide-to-Pay solution.

Local fundraising news (AUD)

The big one this week: Skedulo raised $100m. Brisbane-founded Skedulo is a workforce management and scheduling platform for mobile workforces. With customers including DHL, Johnson & Johnson Revenue, Red Cross and Splunk, the company’s revenue has reportedly increased 400% in three years. Skedulo has been used to coordinate coronavirus testing and around 10% of US vaccinations. It wanted to apply this experience in ANZ:

“To knock on our government’s door and say, ‘We can help, we know how to do this, and just be told, thanks but no thanks.’ This series of bad decisions after bad decisions is incredibly frustrating.”

The round was led by SoftBank Vision Fund 2. Fun fact: Microsoft led Skedulo’s series B in 2019. At the time Priya Saiprasad (now joining Skedulo’s board) and Nagraj Kashyap were leading Microsoft’s VC arm, M12. They’ve since jumped ship to SoftBank and taken their Skedulo relationship with them. Robyn Denholm, Blackbird Operating Partner and Tesla Chair, has also joined the board taking over from Niki Scevak.

Butn debuted on the ASX after closing a $20m IPO. The fintech offers advances on payments for small businesses, including on commissions and invoice payments, through a platform integrated into their existing CRMs. It closed its first day of trading right on the issue price of 50 cents ($80m market cap).

SourseAI raised $1.5m led by Aligned Equity. SourseAI is a forecasting, prediction and scenario planning platform. Southern Cross Austereo (SCA) also participated in the round and wants to use SourseAI to create more personalisation for users of its audio app, LiSTNR (Australian radio, podcasts, music, and news).

EVOS raised $1.7m from Autostrada and an undisclosed ASX-listed company. EVOS is designing energy management and AC charging solutions for electric vehicles and homes.

Kāhu raised NZ$3m from Pioneer Capital and Precision Driven Health. Kāhu spun out of MoleMap to better use technology to analyse images of a patient’s skin and detect signs of melanoma.

Spalk raised US$3m from sports personalities – including Steven Adams and Greg Norman. Kiwi-founded Spalk syncs alternative sports commentary offered by bloggers and podcasters with live broadcasters and enables broadcast commentators to work from home.

FL0 raised $5.1m led by Blackbird (investment notes). FL0 wants to speed up coding with a low-code format – “dev acceleration.” FL0 supercharges back-end engineers with the power of coding in a low-code format.

Lyka Pet Food raised $6.5m. It has delivered more than 1.5 million fresh meals for dogs since launching in 2018.

Gamurs raised $7.35m – $2.6m via convertible notes from investors reportedly including Elysian Park (theLA Dodgers’ ownership group VC) and $4.75m in venture debt from Marshall Investments and Aura. Gamurs is an esports media agency with more than 32 million monthly active users and $6.7m in revenue in the year to June 30. Following on from the acquisition of US company Pro Game Guides last year, it acquired We Got This Covered last week for up to US$4.5m (including milestone payments).

Amaroq Therapeutics raised NZ$14m. The biotech startup spun out of the University of Otago is exploring the use of long non-coding RNA (the “dark matter” of the genome) molecules as therapeutic targets and diagnostic markers in the treatment of cancers such as breast, colorectal and liver cancer.

Alt. funding

Space race. Four leading Australian spacetech startups have been awarded $14m in federal government grants as part of the the Modern Manufacturing Initiative:

  • $1.2m for EffusionTech: low cost, durable and high performance liquid fuelled rocket engines.
  • $5.8 m for Romar Engineering: space fluid and motion control products for space missions.
  • $2.3m for Titomic: space vehicle and satellite parts using green titanium.
  • $4.5m for Q-CTRL: quantum remote sensing payloads for space deployment.

Make it rain, brain. 17 of Australia’s top researchers were awarded around $3m each ($53.7m total) in this year’s Australian Laureate Fellowships scheme. Some of the projects:

  • Prof Andrew White: creating energy-efficient AI using quantum technologies
  • Prof Dena Lyras: how bacteria adapts and functions in the gut ecosystem and providing insights into gut diseases and antibiotic resistance.
  • Prof Michael Milford: “Nature’s Best Positioning System”, a GPS alternative for automation and robotics.
  • Prof Zaiping Guo: the next generation of batteries for use in portable devices, electric vehicles, and smart grids.

The debt bet. OneVentures has deployed half of its venture credit fund. To date it has provided loans to Shippit, Edrolo, Hometime, Indebted, Coassemble, OneVue, Zoomo, Phocas, Eucalyptus (new) and Hivery (new).

Pandemic prescription: subscription. Elenium Automation is a software company helping airports automate with touchless check-in terminals, fever screening (Elenium is the only company in Australia and the EU with regulatory approval to perform automated fever screening), baggage handling systems and biometric access to lounges. Of course, airlines and airports are struggling hard right now. To prevent customers being scared away by a big upfront capital investment, Elenium is offering a $200m pay-as-you-go infrastructure as a service.

Around the world (USD)

Sue sue sue. The US defense department (DoD) has cancelled a $10bn JEDI cloud computing contract that it awarded to Microsoft in 2019, as it “no longer meets [the DoD’s] needs.” The contract has been on hold since 2019 because Amazon filed lawsuits challenging the decision, arguing that the Pentagon decision was full of “egregious errors” – a result of “improper pressure from Trump”. Now Amazon is getting a second chance to bid for JEDI 2.0, sans Trump.

Usa Network Reaction GIF by Suits

The companies are also at law-war over a multi-year cloud deal with Boeing worth at least $1 billion.

Think listing a company is stressful? Try being Chinese. It has been a tough first week as a listed company for Didi, which raised $4.4b in its IPO on 30 June. Two days later, China’s internet regulator launched a “cybersecurity review” into the ride-hailing giant. Then on Tuesday, China’s government ordered the Didi app be removed from app stores, while issuing a warning to China’s biggest companies that it will tighten oversight of data security and overseas listings. Didi’s share price is now below its $14 IPO price – sitting at $12 at market close on Friday.

VC’s latest competition: hedge funds? The hedge fund-venture trend is on the rise. Outbrain is the latest to raise $200m in a pre-IPO round from a Boston-based hedge fund, The Baupost Group. Outbrain is an Israeli adtech company that provides clickbait ads below news articles. In September 2020 Outbrain called off its merger with fellow Israeli adtech company, Taboola. Coincidentally, Taboola listed via a SPAC with a valuation of around $2.6bn last week.

Ballmer’s balmy billions. Ex-Microsoft CEO Steve Ballmer is now worth over $100bn! Interesting thread on how he negotiated an 8% share of Microsoft. Good at negotiating, average at being the Microsoft CEO.


This week in history

In 1994 Amazon was founded. Andy Jassy became CEO this week.


In 1996, Hotmail launched:

Not tech but continuing the Xero band theme… 25 years ago in 1997, Spice Girls released their debut single, “Wannabe”.

In 2012 an inadvertent signal caused 18 minutes of fireworks to be let off in 15 seconds.

That’s a wrap! We hope you enjoyed it.

Bex, Gavin and the team at Ignition Lane