news Three more small technology firms have confirmed plans to follow the high-profile initial public offering of online talent marketplace Freelancer to list on the Australian Stock Exchange, as the nation’s early stage technology sector as a whole shifts into hyperdrive and seeks capital from Australian investors to expand.
The most high-profile company of the trio is a company known as mig33. The group was founded in Australia in 2006, moved to Silicon Valley in the US for three years and is currently headquartered in Singapore. mig33 bills itself as one of the largest social platforms in the world, hosting millions of users in over 200 countries, especially in so-called ’emerging’ markets. It primarily operates via smartphones.
The Next Web reports (we recommend that you click here for the full article) that mig33 has taken investment funds of up to $9.6 million from Taiwanese consumer electronics manufacturer Foxconn in two tranches — $2.2 million initially, with a further $7.4 million being invested once mig33 lists on the ASX. mig33 will open a development centre in Taiwan near Foxconn’s headquarters.
The second company is another social media network, Spring.me, which is owned by Helpa Inc, a US-registered company operated from Sydney.
According to the company, Spring.me is a question and answer based social network that helps members meet new people, express themselves and expand their lives. On the Spring.me network, members from around the world post, comment, question, respond, like, smile, share, flirt, meet, date with friends, followers or other Spring.me members via multiple media feeds they can browse through on the web, mobile or tablet. The site has over four million visits per month.
The company’s founders, Colin Fabig and Ari Klinger are serial entrepreneurs, having founded companies such as the Gadget Factory, iMega, Jump On It, OMG and more. The company will list on the ASX through a so-called reverse listing, being bought by existing listed company GRP Corporation. As a part of the transaction, GRP Corporation (to be renamed “Spring Networks Limited”) plans to raise up to $6 million under a prospectus and seek re-admission to the ASX.
GRP Corporation director Mark Rowbottam said in a statement issued this week: “Acquiring Helpa, and its associated Spring.me social network provides a significant opportunity for the shareholders of both GRP Corporation and Helpa. The GRP Board is very pleased with the Agreement and look forward to working with the Helpa team to complete the Transaction.”
The third company is cloud computing services provider PRM Cloud Solutions, which will similarly list on the ASX through a reverse listing with mining group Minerals Corporation. The company has six years of experience serving Australia’s cloud computing market in the enterprise IT segment, and personnel located in Melbourne, Brisbane, Perth and Austin (Texas). It has two divisions — custom application development based on Salesforce.com’s Force.com platform and a product division, which has recently developed a cloud computing solution for workforce mobilisation in the resources sector.
Through the reverse listing, PRM hopes to raise at least $3 million, although possibly quite a bit more.
The news comes as an absolute bevy of other Australian technology firms have recently revealed plans to list on the ASX. In late March cloud computing player CloudCentral revealed plans to list through a reverse takeover of Dromana Estate. Other companies to recently list include web hosting and cloud computing firm Bulletproof Networks, technology umbrella company PS&C, consumer electronics retailer Dick Smith and online retailer DealsDirect.
During its own listing, Freelancer briefly broke the billion dollar company valuation mark as its shares, initially listed at 50c, exceeded five times’ their value on their first day of trading.
News of the ongoing listings comes after Freelancer chief executive Matt Barrie made a dramatic statement on the issue of local investment in September last year. At the time, Barrie said his company had chosen to list on the ASX instead of selling to a larger multinational or taking direct investment from overseas investors because of the need to continue the drive to develop Australia’s home grown technology industry.
“We have had a wealth of options to consider including a number of term sheets from private equity, late stage venture capitalists and banks over the years,” Freelancer noted at the time in a statement. “Also we have had a number of unsolicited offers in varying stage of completeness to sell the company 100%.”
However, Freelancer.com added, Barrie had been publicly stating for years that it was “a national imperative” to build the technology industry up in Australia. The company’s ultimate goal is to build “Australia’s first big global internet company”, and it is proud to be keeping its operations local. “We believe that out of all the current options in front of us that this path gives us the best opportunity to achieve that while staying masters of our own destiny,” The company said.
Barrie added: “We need to build the ASX up for technology like we have for resources. We have been spectacularly good at that – more money has been raised on the ASX in the last five years than NASDAQ.”
Over the past decade, it has become common for large Australian technology firms to sell to multinationals before gaining sufficient scale to become global powerhouses themselves. This phenomenon can be seen in the IT services industry — with companies such as KAZ and Alphawest being sold — as well as in the software industry, with groups such as Mincom being sold, and in the dot com sector. Usually much of the operations of the companies concerned are eventually moved offshore, as the acquiring companies focus on their global operations.
However, not everyone is focused on the ASX as a source of funds, particularly at the big end of town.
In early April, software group Atlassian, which was founded in Australia but has since formally shifted its company registration to the UK, sold $150 million worth of stock to United States investment firms T. Rowe Price and Dragoneer Investment Group, in what the company has stated is a move designed to reward the company’s employees through buying their shares.
The financing is the second major round that Atlassian has taken over the past several years. In July 2010, the company revealed it had taken a US$60 million minority investment from US-based venture capital firm Accel Partners, with a long-term view to a public listing in the US. At that stage Atlassian said it did not approach any Australian investment houses for funding as the amount Atlassian was seeking would be difficult to source in Australia, and the level of expertise from US-based venture capital houses could not be matched in Australia.
Atlassian founders Scott Farquhar and Mike Cannon-Brookes have been open over the years about the fact that they believe the company will be better served by listing overseas than in Australia, due to a combination of what they see as more favourable regulatory structures and investment options. Additionally, most of the company’s customers are located overseas. However, the company also plans to continue to maintain substantial operations in Australia.
And in mid-April, Australia-based software as a service email marketing platform Campaign Monitor announced that it had taken a $250 million investment from US-based venture capital firm Insight Venture Partners, in one of the largest ever VC investments in an Australian technology startup.
Wow. We’re starting to see a real concrete trend here of Australian technology firms listing on the ASX, especially through reverse listing takeovers of failed mining ventures. If that isn’t some kind of metaphor for how Australia’s future economy will work, then I don’t know what is.
I wrote about this trend extensively for Delimiter 2.0 (paywalled) recently. An excerpt:
“What we’re seeing with these tech-related ASX listings is a recognition by the big end of town and many private investors that the industry is now starting to throw up legitimate growing technology businesses which need higher levels of funding in the tens of millions that private investors generally aren’t able to provide. These businesses are worth investing in — and so investors are starting to forget the dot com bust and to look at the sector once again, as they do every other sector. In short, Australia’s early stage IT industry is actually legitimately booming — and this is having the inevitable flow-on effect for listings.
… It’s not realistic to talk about a revival of the dot com boom in Australia. For starters, investors are much more realistic about the financial fundamentals of tech companies in 2013, compared with 1998. Hype exists, as the Freelancer IPO clearly showed — but investors still look much more closely at underlying ‘organic’ company valuations rather than market value.
But what we are definitely seeing is a return to the ‘normal’ state of play. Once again, after a long drought, Australia is going to be seeing regular tech sector listings on the ASX. The clutch we are seeing at the end of 2013 is just the start of what is, once again, going to be a regular drip feed.
That’s a fantastic thing for the local technology sector and entrepreneurship in general, because it provides a long-term growth path for local companies which doesn’t necessarily involve selling Australian firms to multinationals. It’s a fantastic thing for local workers who want to work for great Australian technology companies. And it’s a fantastic thing for Australian investors, who once again can gain local exposure to what has historically been one of the most exciting areas of the market. It will be fascinating to see where it goes next.
If you were walking past the Sydney building of the Australian Stock Exchange in Bridge Street at about midday last Friday (when Freelancer listed), you would have seen a sight rarely witnessed: Technology entrepreneurs lifting glasses of champagne to celebrate a major tech sector listing with the financiers who made it possible. Even the champagne is back, it seems — and there’s a certain scent of money in the air.”