Aardvark Daily

Please visit the sponsor!

Avoid, avoid, avoid

Rod Drury has made a dollar or two from the Net. Actually, if reports are to be believed, he made around $15m from the sale of his AfterMail venture to a US buyer.

Good work and a great incentive for other Kiwis to "have a go" by investing their own time and money into developing good ideas.

But I must admit that I'm left a little confused by Rod's latest venture into the online world.

It's not that I doubt his idea or the product that has evolved from it -- just the apparent paradox of his claims in respect to keeping it Kiwi.

The concept behind the product is fairly straight-forward: create an online alternative to the traditional PC-based accounting system that most small to medium sized enterprises (SMEs) run.

Using Drury's Xero system, SMEs can dispense with the capital cost of buying expensive software and simply pay a 'subscription" to the online service.

Will this fly?

It might do -- but so far Microsoft's attempts to replace shrink-wrap software with a monthly online rental option have been a bust.

Of course Google is changing the face of the PC desktop by moving a growing number of applications from your own HD to an online version -- but they're not charging a subscription for most of their offerings and there's a huge difference between free and subscription.

Please visit the sponsor!

In This story it's claimed that "he wants to take on the world again, and needs more money to do so."

"What we want is a global software company that can be run long term from New Zealand," he said in the Stuff story.

In fact, the "news" story is little more than a pitch to attract local investors who, we're told, will be pivotal in ensuring that Xero remains a Kiwi company.

But hang on, surely (after pocketing $15m) from the AfterMail deal, Rod would have more than enough money to fund this entire venture and have plenty left over for a new BMW or two?

Indeed, it makes little sense to start selling chunks of what you're expecting to be a highly profitable world-beating business if you don't have to.

Unless of course, you're worried about the level of risk involved.

And let's face it, trying to succeed in a market where Microsoft and others have failed, and where there's growing *free* competition from highly credible players like Google then the risks are very significant.

The next *BIG* alarm bell for me is on this page.

Phil Norman (Chairman of Xero) is the same guy who successfully took 7am.com from the world's most widely syndicated web-based news service in 1999/2000 to a worthless shell a few short years later.

It would also be prudent for would-be Xero investors to investigate the history of the Strathmore Group and its performance under Mr Norman's Chairmanship.

It's not often I issue a "beware" warning in respect to tech companies in the NZ marketspace but my record of picking the losers is very good. I bet you're glad you didn't buy into IndraNet when I issued my first warning about them a few years back.

My book, which includes quite a bit on the history and unbelievable back-room skullduggery that went on after I sold a controlling interest in 7am.com, is ready for publication. I think that once that comes out, a few eyes may be opened as to just how important it is to choose your local business partners wisely.

In the meantime I would advise anyone considering any investment in Kiwi tech companies to do their research thoroughly -- investigating the product, the market, previous attempts by others in the same market, and the people who are involved -- especially at a management and board level.

Do you think Xero will fly?

If Rod has made $15m and has confidence in Xero, why is he selling *any* of it before the first real customer is even signed?

And does Xero *really* need $15m just to "establish" itself?

Have your say on this...

PERMALINK to this column

Oh, and don't forget today's sci/tech news headlines

Rank This Aardvark Page

Change Font