Guvera eyes IPO with $100m investment as CEO puts ‘rapid’ user growth ahead of profit
Australian 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.
“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…..it 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
I just can’t see room for another streaming co. Even Spotify must be shaking in their boots with the launch of Apple Music.
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This article should also mention that Mr Herft is also the Executive Chairman of the private equity group, AMMA – which is itself a major investor in Guvera.
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Curious if JPMorgan was approached for comment, Mumbrella? And if not, why?
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Hi Bud Fox
Yes, JP Morgan was approached, but declined to comment.
The line has been added to the story.
Cheers
Steve – chief reporter, Mumbrella
Can’t really imagine JP Morgan would be interested in a backdoor listing.
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“Think about the real victims: Calvin Klein, Gloria Vanderbilt, and Antoine Bugleboy — people who saw an overcrowded market and said, ‘Me, too!” – Homer Simpson
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Tough market to be entering into. Look at Tidal as an example, apart from the launch, we haven’t heard much about how they’re faring. From what I understand they’re playing their cards very close to their collective chest. It makes sense for Guvera to go after emerging markets but there’s no revenue there. The big players like Spotify, Apple Music and Pandora are carving up the established markets and their power in the market place will give them an enormous advantage when they decide to move into emerging markets to compete. Also, the sleeping giant is Soundcloud that have enormous respect from artists and listeners alike. If any company was going to make a success of branded channels at the moment it would be them.
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Why would anyone in their right mind invest in these guys if their focus is not on making a profit? Crazy. Terrible business model. For every Snapchat, Facebook there are a million startups that don’t make it. Instead of trying to build a user base and then try and sell, perhaps focus on making a profitable business from day one.
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This is great, this is fantastic. The only problem will be is what to do with all the cash.
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Where are all these users? If you go on their Facebook the posts have hardly any likes or comments. Surely if they have 13m users they should have more interaction on social media.
I just can’t see how this service can compete with large global cos Deezer, Spotify, Rdio, Tidal, google Music, Apple Music and Pandora. Or the Aussie JB Hifi now. And why would anyone choose this over a well known name? It’s not as if Indians can’t use Apple Music
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“growing broke” seems to be a suitable term for this business.
Any business model that is not focused on making a profit is doomed to fail.
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After more than five years in this space, Guvera can’t seem to get a hit. They were last in, also ran, bridesmaid-not-a-bride with a dismal history as an investment, burning through the mums ‘n’ dads. We’ve seen hype from AMMA before that never seemed to pan out. always big announcements with tiny results.
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Read the article for more details on authentic growth metrics.
http://www.coelevate.com/essay.....tic-growth
Some startups pursue vanity metrics in hopes of attracting press coverage. They think that the pursuit of these metrics and press coverage will result in growth, but many companies that pursue them fail to realize that doing so means they will be sacrificing long-term goals for short-term gains. The problem of these in-authentic vanity metrics is exacerbated by the desire to look good, the difficulty of pursuing authentic growth metrics, and the press’s lack of knowledge. Instead, companies should be looking for authentic growth metrics to pursue.
It is clear that Guvera management does not have a clue. They have no track record of success. Everything would be revealed if someone did proper due diligence on the Guvera User data and financials. There are also massive issues with the Board and Governance.
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@John On the contrary, Guvera and AMMA share managemenr, ,they certainly know what they are doing AMMA have done quite well out of Guvera, and they wont lose a penny if they go under.
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Good journalism Steve Jones , keep digging below the surface as all is not as it seems , it’s called talk it up marketing with no substance .
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I cant see them surviving the year.They have no clear strategy or leadership and are just launching all over the place hoping to strike lucky before the money runs out.The way they handled Blinkbox and its staff was very amateurish from what I can see.It seemed as if no-one knew what was going on.They bought a business in the UK then subsequently realised that they didn’t want to be in that market and exited causing a complete mess behind them.
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Good luck Guvera ..easy to use, free streaming for consumers and unique and very cool branding opportunity for business. love it.
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How does everyone know so much about this? Are you internal or is it a case of commenting on everything to appear intelligent? If you don’t like it steel up.
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