The hockey stick
Today we announced 6000 customers. Doubling our customer base in the last 3 months.
Xero operating update – 31 March 2009 (pdf)
Many have asked us to share our customer growth chart, which we’re happy to do because we believe as an industry we’re still coming to terms with how to build and fund a SaaS business.
I think the key learning to date is that no one thing will accelerate the curve. It’s a bunch of factors which include
- People have heard about your solution from enough people they will now trust you. Especially so in the accounting space as it is a referral sell and very sticky.
- The feature set steadily becomes more compelling, as you rapidly build out the product.
- The ecosystem starts to kick in, initially as a validator but eventually your natural channel will begin to work.
- Your true scale model starts function. Over half our customers in March came through accountants, an obvious early scale channel for our particular business
I personally believe that SaaS is about having the capital to give you the time to do things properly ahead of the curve. SaaS business are complete businesses and require you to form a multi-disciplined team that can execute on all facets of the business. Software development, platform development, testing, customer care, marketing, business development, sales, finance and operations.
29 comments
Great news. Thanks for the transparency – from a very happy customer and shareholder.
Great work guys – congratulations 
[...] Drury, Xero’s CEO pinged me on this post that shows how the company has hockey sticked on take up this last year. The illustration says it all. What is staggering is the number of [...]
[...] have just announced their customer numbers as of 31 March 2009. They now have 6000 paying customers. They had 4000 [...]
Given the big lift March seemed to bring last year and this, this is probably due to customers (especially CA clients) joining for the start of a new financial year, which means you have a key promotional window some time before to make sure that happens. But of course you know that.
(Window is different in some other countries).
Any doubters left? Didn’t think so. Well done to all involved.
Great stuff guys – you continue to worry me!
Great stuff – a real tiger by the tail!
I like your SaaS belief on capital – which is the same as any infrastructure play. There are a lot of people out there claiming ‘SaaS’ status who really don’t get the fact that you can’t bootstrap your way into this stuff.
[...] [Update: Xero have blown out my 4,000 figure announcing over 6,000 paying customers at 31 March 2009] [...]
[...] any startup would kill for a sales graph like this during the recession. Oh look, here’s a SaaS (Software-As-A-Service) providers sales revenues with major growth in the current [...]
It will be interesting to see if the trend is replicated from 2008 with a significant drop off after March and then new monthly records being set in Jan 2010; or whether things continue to motor
Mark
Looks great. How sticky are your customers i.e how many customers subscribe initially but then fall off after a few months?
[...] weeks after publishing the hockey stick that shows online accounting software Xero hitting the 6000 customer mark to close out the [...]
Well done guys – a very impressive result!
Rod
A couple of questions if I may:
1. How are your competitors responding to your success? Are they launching competing SaaS products?
2. If I recall correctly, the Prospectus indicated breakeven at 8000 customers paying $79pm. How does your lower pricing model impact on this?
Many thx
@Mark – your question was directed at Rod (who I’m sure will answer) but I thought I’d give you my (independent) take on this.
I spend an inordinate amount of time talking about SaaS accounting (see cloudave.com/tag/accy for lots of reviews and analysis) – the fact is there are literally dozens of SaaS accounting products out there. Many existed before Xero came on track and many more have launched since Xero’s release – Rod would be the last person to suggest that Xero “invented” SaaS accounting – and to be honest this isn’t a zero-sum game – there’s room out there for many players.
To specifically answer your question – the traditional accouting software players are vaguely trying to go SaaS but a number of technical and business issues mean that they’re unlikely to do so successfully. A number of new businesses are also doing SaaS accounting to greater or lesser success. Bottom line is that if the Xero feature set and pricing fits within your use case – it’s the pick of the bunch – as always it’s important to assess your requirements to ensure that any solution will fulfil your requirements.
And now over to Rod for question two (although I’d have to say that yes, a lower average revenue per user does mean that the number of users needed to break even is higher – that said lower ARPU should result in higher customer levels anyway)
Hi guys. Any chance of seeing an updated hockey stick?
nathan
i think xero may do very well in the coming years…
they have the potential to kill off quite a few small accounting houses around town which i see no reason for them to exist…[only to over charge customer]
hey rod ,i think borrowing some of peter jones business builder’s approach may help.
This kind of system is relatively simply to create and manage as well as a promotional tool for helping people to get into business…or hook up with xero.
everything peter does is almost win-win.
I wonder why NZer’s don’t seems to like TV appearances…largely due to the culture
I’m planning to start similar site in asia, there may be where it could take off.
Plenty of small online businesses there…
Very impressive.
[...] UX and abundance of conveniences, Xero might just get away with their premium pricing. Well, they haven’t gone backwards, that’s for sure. QB & MYOB will rob you of at least $250 / year for a version “that [...]
[...] It’s that a consulting model is very difficult to get exponential growth. You know that hockey stick growth curve, well it’s actually an S-curve but early it looks like a hockey stick, that is [...]
[...] It’s that a consulting model is very difficult to get exponential growth. You know that hockey stick growth curve, well it’s actually an S-curve but early it looks like a hockey stick, that is [...]
[...] model. It’s that a consulting model is very difficult to get exponential growth. You know that hockey stick growth curve, well it’s actually an S-curve but early it looks like a hockey stick, that is so [...]
Congratulations on your impressive achievement!!!