Music streaming startup Guvera stopped operating earlier this month after 9 years of collecting $185 million from investors. Now there are reports that the chief executive and co-founder were on salaries of more than $260,000 while the business made almost zero revenue.
Guvera co-founder Darren Herft was on a salary of $264,000 for his position as chief executive, according to the AFR, while the other founder Claes Loberg was on $300,000.
The startup had lost $81 million in the 2016 financial year off a revenue of just $1.2 million before its much-criticised initial public offering was blocked by the Australian Securities Exchange in June. In 2015, the business also reportedly tried to raise $100 million from equity funds but failed.
But even before the IPO rejection, Guvera had managed to nab $185 million from private investors, many of them everyday folks that saw slick presentations. The company even sponsored the popular Nine Network television show The Voice.
“So many mums and dads have been burned,” Deakin University tax expert Adrian Raftery told the AFR. “It would have been tenfold if the regulators let [the IPO] through.”
Atlassian co-founder Mike Cannon-Brookes at the time said the IPO prospectus “terrified” him and Blackbird Ventures founder Niki Scevak called the float “horrifying”.
Herft was also the sole director of private equity business AMMA, which facilitated the investments while pocketing more than $22 million in commissions. AMMA was also underwriting the IPO up to $10 million, but was set to grab 5.75% in commission on any capital Guvera would have raised.
The AFR has told of how self-managed super fund investors were put onto Guvera by their accountants, who in turn received share options and subsidised trips to company events.
Loberg and major investor Steve Porch exited the company this month, which only left Herft as director and forced it to stop operating. In his message to shareholders announcing the shutdown, Herft said that the company held “valuable IP” that could be sold or commercialised, and called for two volunteers to join the board.
At the time of the proposed ASX float, Seek co-founder Paul Bassat was scathing of Guvera.
“Some advisers and entrepreneurs will make a killing but it will be a zero sum game and retail investors will be the losers,” he said on Twitter last year.
“Hopefully markets will be able to distinguish between the crap and the high quality tech companies but risk that whole sector will be harmed.”
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