After Guvera announced its intention to list on the Australian stock exchange Wednesday, the music streaming platform faced heavy criticism from some of the biggest names in Australian technology.
Founded in 2008, the Australian company claims to have 14 million users across 10 countries and what it calls a “brand-funded model.” It offers brands the chance to pay to be associated with channels and playlists, allowing music to be offered mostly for free to users. In Guvera’s view, it is a point of difference from streaming platforms that aim to make money with subscriptions, such as Spotify and Apple Music.
The company issued a prospectus indicating it would look for an A$80 million initial public offering (IPO), with a valuation of A$1.3 billion. That raised some eyebrows because, as many have pointed out, the business made A$1.2 million in revenue in the 2015 Australian financial year with a net loss of A$81.1 million, as well as having a variety of creditors.
Mike Cannon-Brooks, the cofounder of Australian workplace software company Atlassian, which went public in the U.S. in 2015, said on Twitter the company’s prospectus left him “terrified.”
Was pitched. Read Guvera prospectus. Terrified. $180m raised, <1m MAU? No revs? Little growth? Dodgy loans? ASX shouldn’t allow this stuff.
— Mike Cannon-Brookes (@mcannonbrookes) June 4, 2016
Niki Scevak, the cofounder of one of Australia’s largest venture capitalist firms, Blackbird Ventures, also had his say, calling it “horrifying.”
So horrifying and more $ than entire credible Aussie vc industry // streamer Guvera raising $100m through ASX https://t.co/mXZEf16WIx
— Niki Scevak (@nikiscevak) June 1, 2016
While he didn’t explicitly call out Guvera, Paul Bassat, the founder of job search site SEEK, also posted a series of tweets that called into question the quality of some of Australia’s tech IPOs.
1 The quality, readiness and valuation of some of the tech companies coming to market is an absolute disgrace.
— Paul Bassat (@PaulBassat) June 1, 2016
3 @ASX and NZSX are about only place in the world where companies are listing way too early and often without a real business model
— Paul Bassat (@PaulBassat) June 2, 2016
Although he emphasised he wasn’t on the business side of the company, Max Hegerman, global director of brand strategy at Guvera, suggested the critics were simply failing to understand the company’s business model.
“I think what’s happening in this particular instance, is we’ve got something that’s different,” Hegerman told Mashable Australia. Unlike Spotify and other streaming platforms, Hegerman said Guvera’s approach is about integrity — making sure that users are listening to music that has been fairly paid for, yet still free — and recognising people don’t want to pay for music.
He said an “apples to apples” comparison with Apple Music and others was not necessarily correct, because Guvera’s business model offered brands the ability to sponsor channels, allowing the music to be free. Critics may not be persuaded that this is a reliable business model, however, because as the prospectus notes, brands could simply advertise elsewhere if Guvera fails to engage users.
“To be perfectly honest, not everyone’s able to wrap their head around that particular equation,” he explained. “It’s important for people to understand we’re a different music streaming platform than what is out there.”
Guvera CEO Darren Herft, for his part, blamed the comments on “the ugly Australian tall poppy syndrome,” he told Fairfax Media. In his view, the company could go from “shaky beginnings” to a multi billion dollar business like Seek.com.au before him.
Hegerman deferred questions about the manner in which the company has raised money and its business model to Herft. Herft has been approached for comment. Guvera has paid fees to AMMA Private Equity, for example, where Herft also happens to be executive chairman.
Nevertheless, in Hegerman’s view, Guvera has not been fairly treated.
“It’s unfortunate that people kind of wait until it’s time for an IPO, a very important time for a startup, an Australian startup, for people to make comments when they may not have all of the facts,” he said. “It’s a small community, it’s a small tech community, and there hasn’t been a lot of tech experience.”
“We are something that’s different, and I would just hope people would give us a moment of their time to think through how different we really are,” he added.
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