A venture capital firm backed by PayPal co-founder Peter Thiel has teamed up with another investor to pour US$49 million into New Zealand-founded start-up Xero, increasing the total amount raised to date by the cloud-based venture to US$67 million.
Valar Ventures is a global venture capital firm backed by Thiel who, in addition to co-founding PayPal, has invested in the likes of Facebook and Australian start-up ScriptRock.
Thiel has also set up a $40 million venture capital fund in partnership with the New Zealand Venture Investment Fund.
Valar Ventures, along with a handful of other investors, sunk $15 million into accountancy software company Xero in February this year.
Xero co-founder Rod Drury says the company has raised an additional US$49 million (NZ$60 million) from Valar Ventures and Matrix Capital Management; another existing investor.
This is Thiel’s third investment in Xero. In addition to the funds he contributed in February, he invested $US3 million back in 2010.
“It’s a huge endorsement for what we’re doing and the great work our team continues to do,” Drury says.
“We’re just at the beginning of the business SaaS market and we have the resources to keep our foot on the throttle.”
“It’s been a pleasure dealing with Matrix and Valar. Both of them continue to provide fantastic experience and advice.”
Valar Ventures is investing NZ$24 million and Matrix Capital is investing NZ$58 million. Their total investment of NZ$82 million includes a purchase of NZ$22 million of shares from Xero’s three largest shareholders.
The decision to increase funding follows the announcement that Xero will accelerate its investment in the business to take advantage of market conditions.
Xero recently reported revenue of NZ$38.7 million as of 30 September 2012, up from NZ$18 million a year earlier.
The company expects to double its operating revenue for the full year to March 31, 2013.
“Over the past two years of our involvement with Xero, we have seen the team consistently meet and exceed their ambitious goals,” Valar Ventures’ Andrew McCormack said in a statement.
“The combination of an experienced and focused team, superlative product, good timing and an absolutely huge market give us confidence that Xero has a very long runway.”