Within minutes of the ASX's open this morning, shares of New Zealand-based cloud accounting software provider, XERO FPO NZ (ASX: XRO) were up a whopping 25% following the release of an important announcement.
Despite not yet being profitable, Xero said it had secured an investment from leading Silicon Valley-based venture capital firm, Accel Partners, worth US$100 million, or NZ$20 per share, which it can use to fund its global operations.
Matrix Capital Management, Xero's largest institutional investor, has also agreed to invest an additional US$10.8 million.
With the completion of the transactions (expected in mid-March 2015), Xero would have a cash balance of approximately NZ$285 million. The company will use this to continue growing in key markets, such as the United Kingdom and USA.
Xero's CEO, Rod Drury said, "We welcome the Accel Funds as strategic investors in Xero, and are delighted with Matrix's continued support." Following the share issuance, Accel will likely hold around 4.9% of shares on issue.
In the same statement to the market, Xero also announced the appointment of former Dell Executive, Russell Fujioka, as President of US operations. He will be based at the group's US headquarters in San Francisco. Mr Fujioka brings a wealth of experience of sales, digital marketing and operational management from previous roles in high-growth technology businesses.
Xero also announced that Graham Smith, former Salesforce Chief Financial Officer and board member of Splunk, will join Xero's board as an independent director.
Mr Drury said, "Our ability to attract capital and leadership of this calibre is testament to our success and our potential to become the small business SaaS platform of choice for entrepreneurs around the globe."
Should you buy Xero shares?
Xero could have a very exciting future ahead of it, given its superior low-cost service offering. Now that the company has the right people in place, the money to push more aggressively into larger markets and a firm base in Australia and New Zealand, the odds of it living up to those expectations are perhaps better than ever.