After posting weaker than expected financial results this week, Freelancer CEO Matt Barrie is tipping Australia’s tech sector is on the verge of a listing “boom”.
Since Freelancer’s IPO last year the company has been chasing growth rather than profit, reinvesting into the organisation and making several acquisitions. This growth over profit run is something a number of tech companies are executing, with Xero mounting a similar strategy after releasing its financials earlier this month.
It’s a strategy Australia’s big miners used during their boom time, before investment fell off the cliff and shareholders began demanding better returns and heightened capital discipline.
In a post on his LinkedIn page, aside from having another go at Australia’s venture capital market, Barrie is tipping Australia’s tech sector is on the edge of its own boom of sorts. He said the boom will be driven by a lacklustre local VC market and demand from bootstrapped startups to raise funds.
“There is another stock market however outside the US…where technology listings are about to boom,” Barrie said, adding, “this market is the Australian Securities Exchange.”
“After all, what better way to fund a company than by crowdsourcing it? This is what the resources industry already does today.
“If you have an early stage speculative mining company, you don’t go begging down Coal Hill Road pitching to mining VCs and spending six months negotiating a telephone directory thick preferred stock structure; you write a prospectus detailing what you’re going to do with the money and list it on the ASX.”
Since the second half of 2013 there have been 14 tech companies listed on the ASX and since January there have been 55 listings in total onto the ASX.
“Projecting forward, I think that the ASX will be the primary way in which technology companies raise equity in this country in the future,” he said.
The ASX shares this view and is shouldering its way to position itself as the Asian hub for tech.
“If it is successful, and I think there is a good chance it will be, it will cover a massive market. There are significantly more people in Asia (with dramatically rising incomes), significantly more micro, small and medium enterprises (MSMEs), it’s a much bigger market for many industries, and there are a lot more mobile phones than the US to draw comparison to just a few metrics,” Barrie said.
“This is the future for technology company financing in Australia.”
Barrie said regulation changes he believes are on the way combined with the cost and ease of both listing and raising on the ASX means there could be a tech IPO boom coming down the pipeline. Freelancer’s IPO cost the company about $450,000 in underwriting fees, $100,000 in legal fees and about $50,000 for an investigating accountant.
“I believe that Malcolm Turnbull will bring in legislation to allow the general public to crowdfund early stage ventures without a registered offering document, as is starting to happen elsewhere around the world,” he said.
“This will generate further interest and appetite in investing in technology companies from the general public which already actively takes a punt on speculative, early stage mining companies (not to mention the Melbourne Cup).”
Pointing to a wave of tech companies reversing onto the ASX via mining shells as well as a few clean listed tech stocks, Barrie said, “It’s great to see the sector now heating up with recent listings from companies like Ozforex, iSelect, iBuy and MigMe.”
When Freelancer was about to list many people told Barrie it wouldn’t work because Australian investors don’t understand tech companies, however, with the globalisation of markets he said, “money flows to where it gets the greatest return for a given risk profile”.
“We took a calculated risk- nobody wants to be the first to try something new, and so far it has paid off,” he said.
“What surprised me is that the process was significantly easier, quicker and resulted in a more equitable and transparent capital structure than what I have experienced in any of the dozen venture capital financings I have been involved with in the past.”
Barrie thinks Kogan could be the next tech company to schedule a date with an ASX IPO.
“I suspect Ruslan Kogan will also be considering his options given the tremendous effort he has done bootstrapping Kogan to date.”
Kogan was contacted but declined to comment.
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