Xero (ASX:XRO) shares are up over 20% this morning on some great news — U.S. venture capital juggernaut Accel Partners just made a whopping US$100 million investment in Xero. Not only that, but Xero's largest current institutional investor Matrix Capital Management, agreed to invest a further US$10.8m.
We at Motley Fool Pro are very impressed that Xero was able to attract an investor of Accel's caliber, and we are not alone judging by the shares' big leap this morning.
Accel Partners are a big deal in venture capital circles. They manage over US$8 billion and have a history of picking big winners, with Facebook, Spotify, Dropbox and dozens of other top-tier online businesses in their catalogue.
After this latest raise Xero now sits with a war chest of over $270 million (NZ$285 million). The funds were raised at a valuation of NZD$20 per share, or around $19.14 per share in Aussie dollar terms. That is above where shares were trading yesterday, and well above the price where we told Pro members to double down.
That $19.14 valuation does put the raise at a discount to our estimate of Xero's intrinsic value, but we are more than happy to trade that for the big boost the extra cash will bring Xero. Doing the cash raise now, well ahead of when its needed, means that Xero can focus 100% on what it does best: building a world beating cloud accounting platform.
Now, as if a massive cash injection from one of the world's biggest and most successful VC funds wasn't enough, Xero also announced some top notch new hires.
Russ Fujioka, former Dell Executive has been appointed at President of Xero's U.S. operations. Fujioka has significant experience in sales and digital marketing – two key areas that Xero's US operation will focus on as it builds its direct-to-customer sales model.
Xero also stocked up on high profile Software-as-a-Service (SaaS) talent with Graham Smith, the former Salesforce CFO, joining Xero's board. Saleforce is one of the world's most successful SaaS companies, and Smith will bring a wealth of relevant experience to Xero's board.
The pedigree of a major VC firm investment and the addition of top industry talent puts Xero in a great spot for a future U.S. IPO which is planned for later this year.
All up, it was an excellent announcement from Xero, and we are looking forward to seeing the company continue to unleash its 'wall of innovation' throughout the rest of 2015.
