Guvera eyes IPO with $100m investment as CEO puts ‘rapid’ user growth ahead of profit

Screen Shot 2015-07-27 at 11.25.02 AMAustralian music streaming firm Guvera claims it is set to receive a “significant” round of funding as speculation mounts over a possible listing on the Australian Stock Exchange.

The company declined to comment on the prospect of an Initial Public Offering, but said an investment bank is involved in a $100 million placement to further grow the business.

“We have had numerous investment banks interested,” chief executive Darren Herft told Mumbrella. “Yes we have chosen one and yes we have engaged one but I can’t disclose which one nor the exact status. But there will be a substantial investment.”

It is understood to be JP Morgan, with an update sent by Guvera to its shareholders outlining how it has taken Facebook, Google and Linkedin to stock exchange listings.

“JP Morgan are one of the top 2 investment banks in the world, with a great understanding of the ad-fund space,” the shareholder note states.

JP Morgan declined to comment.

News of the investment – and speculation it is pre-IPO funding – emerged as Herft set out plans to “become the biggest music company in the world in the next 12 months”, based on registered users.

He said $100m has been invested over the past 12 months with the company now “ready to go and burst into the global market in the ad funded space”.

Herft declined to comment on reports that revenue is “sub-$400,000”, and argued the business was far more focused on “rapidly growing” its number of users than building revenue.

Guvera_Logo_Landscape_K“For Guvera to add value to shareholders, the number one priority is to grow members to 50m, 100m, 200m users in the next few years. That will substantially increase the value of our business more than people in Australia can understand,” he said. “That is our focus. Behind that comes revenue, then profit.

“We obviously understand that the business model we are putting forward needs have a planned strategy and model to be very profitable in the future, which we believe we have.

“But is profit something we are going to strive for in the next two to three years? No, because that would be to the detriment of growth and value to our shareholders.”

Herft said the “clear nexus” between successful ad funded models in the recent past has been building a “solid customer base” which has then driven revenue.

“They haven’t done what you or I would have done in the past by building customers, then revenue, then building more customers, then more revenue. They have first built a well established user base on a global basis. That way you can go and attract the right brands to come to the model.

“Our number one priority at Guvera is to build our member base as rapidly as possible over the next 12 months.”

The company has set targets to grow its current customer base from 13m to 50m over the next six months, with emerging markets including Indonesia, the Phillipines, India, Vietnam, Russia and Brazil central to hitting those objectives.

“We already built 4.5m users in India in just six months,” he said. “Emerging markets is where our focus will be.”

Herft said it has also struck several distribution deals that will ensure Guvera is pre-installed on many phones, with more deals to follow.

“There are four or five major players in the world, and music labels and the industry is looking at us as one of those major players,” he continued. “One hundred million dollars has been invested into the company over the past 12 months… has allowed us to be a platform that is now ready to go and burst onto the global market in the ad funded music space.”

He said Guvera has agreements with 100 labels around the world, a process that has taken five years.

“We run a very unique style of music company that will allow us to be the biggest music company in the world in the next 12 month,” Herft said. “If we were chasing subscriptions it would be different but with the ad funded model it allows us to bring in a massive volume of users.”

Herft admitted it was “possibly correct” to suggest many of its 2,000 shareholders were ‘mum and dad investors’. But he stressed many were “very wealthy individuals”, while more recently larger investment funds have come on board.

Turning to advertisers, Herft said the branded channel nature of its platform presented a far more engaging way for brands to connect with users than traditional banner or video ads.

There will be 10 major brands on Guvera by the end of the month, he said.

“What the brands are looking for as much as we are is seeing the user base growing at a rapid speed,” Herft said. “The more we grow the more they will want to connect and engage in a deeper way.”

Meanwhile, Herft defended the closure of Blinkbox, the UK operation it acquired from British supermarket Tesco at the start of the year, insisting there has been “no cost” to shareholders.

He said that after assessing the business – which Tesco was about to shut down – it was not prepared to sink Guvera capital into a restructure.

“We would love to be successful in the UK but are very mindful of other competitors who have a head start,” he said. “Do we try and take them on in their own digs? What we have chosen to do is focus on emerging markets.”

Steve Jones


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