Xero spends $1.5 million on online payroll company

Xero spends $1.5 million on online payroll company

The payment software vendor has purchased online payroll start up, Paycycle, targeting SMBs

Online payment software vendor, Xero, has purchased online payroll provider, Paycycle for $1.5 million.

The payment is made up of $500,000 in cash and $1 million in Xero shares, which will be vested during a three year period.

During this time, Paycycle will continue to be sold as a standalone-product until next year when the integration will be complete. It will be part of the Xero platform.

All staff will also move across to Xero, bringing employee numbers up to 25.

Stuart McLeod and John Freeman established Paycycle in 2009 to cater for the SMB market. It has about 750 customers using its payroll system.

“The integration of Paycycle into the Xero platform will happen mainly at the backend with minimal change for users,” McLeod said.

“There’s no doubt that the evolution of Paycycle from a bootstrapped start up to an acquisition target for a global business such as Xero, fills us with a great sense of achievement.”

Xero managing director, Chris Ridd, said the acquisition was a strategic development in appealing to the SMB market.

"Our customers wanted a full featured payroll and we had a look at various players and thought Paycycle provided a solid product and great team of people," Ridd said.

"Small businesses see payroll and accounting as an integrated function and even though we were doing reasonably well with our various partner offerings, we needed to do something around payroll."

Ridd said it did look into the possibility of building a full-featured payroll themselves but decided acquisition was a better option.

"We were able to get access to really solid IP and people that could help build a roadmap into that product," he said.

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Tags softwarexeropayroll systemPaycycle


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