Gold Coast birth

Guvera was founded in 2008 on the Gold Coast by Herft, a Griffith University accounting graduate; Claes Loberg, a heavily tattooed and long-haired Swedish programmer; and Brad Christiansen, a computer expert from the insurance industry and a member of the Australian Institute of Company Directors.

An early prospectus written by Herft and circulated to investors in December 2008 proposed a grandiose ambition: "Underpinned by a revolutionary business model and technology, Guvera aims to deliver a real solution that allows worldwide consumers free access to digital entertainment content."

At the time, Guvera had no revenue and no product. It was seeking to raise $10 million from private investors to build an app that would allow consumers to download songs for free. The cost of the downloads would be covered by advertisers. Guvera later shifted to an ad-funded streaming music model.

In 2008, legitimate access to music for free was still a novel concept. Piracy was still rampant. Spotify, now the undisputed market leader in streaming music, which currently has over 50 million paying users globally, had only launched in Europe two months earlier.

Going hard early

The Guvera men developed big ambitions early – and the skills to market them. Herft helped convince some 3000 investors to put money into the unlisted public company. They came from across society: an immigrant recycler from Brisbane, a medical sales rep from the New South Wales Blue Mountains, even relatives of Rupert Murdoch, according to Herft.


Investors, 500 at a time, attended presentations at the Crown Promenade hotel in Melbourne and the Hilton Hotel in central Sydney where the deep-voiced entrepreneur spun a vision of a business that could replicate the success of Facebook or Twitter, US technology companies that were given huge valuations early in their lives based on relatively modest revenue, no profits but enormous potential.

At the 2010 launch of its app in New York the company commissioned a spectacular 13-metre ice sculpture of the word revolution. A venture capitalist who had a look at the company felt the software was clunky but was impressed by the sculpture. Afterwards he wrote to himself: "doesn't seem credible. One thing they are GREAT at: raising $$$".

Few if any other Australian companies were pursuing such ambitions in such a glamorous field as music. In fact, to this day, Guvera raised more money than all but a handful of Australian start-ups – far more then hyped firms such as online design software company Canva, which is valued at $500 million, or high-profile custom shoemaker Shoes of Prey.

Raising money through SMSFs

Rather than being funded by venture capital or private equity firms, Guvera employed an unusual money-gathering technique. It raised money through networks of accountants, who recommended unlisted Guvera stock to referred self-managed super fund clients who qualified as "sophisticated investors".

Guvera became a darling of the tech press and tech industry. At the 2013 Australian Mobile Awards Guvera received the gold mobile for the best start-up and the top music app. In 2014 the company beat Spotify to launch in Indonesia and India.

Herft relished the attention. What wasn't publicised was his unusual relationship with Guvera through AMMA Private Equity, of which he was the sole director. Guvera had outsourced financing to AMMA, which was paid to raise money and host fundraising events where investors were dazzled by Herft's smooth-talking tech experts.


The Australian Financial Review reported that some accountants and advisers who directed clients toward an investment in Guvera received share options in the business. The Courier-Mail reported that AMMA had subsidised some accountants' trips to conferences, including an event at a five-star Dubai hotel. Guvera paid for accommodation, meals and expenses (but not flights) for accountants and their spouses for an event it hosted in Beverly Hills in 2014.

Guvera co-founders Claes Loberg (left) and Darren Herft. They paid themselves generous salaries for a start-up. Wayne Taylor

"We got introduced through our accountants as a high-risk investment," says Diane Lucas, who runs a bookkeeping business with her husband. "It sounded great."

Takeover rumours

Rumours spread that Guvera could be bought by a large technology company.

Ms Lucas said Guvera representatives told investors the company was likely to be bought out by a US acquirer for a steep price – a claim corroborated by other sources. "That was part of the shareholder meeting," Lucas says. "[They] were pretty confident they were going to get bought. We all got flown into the Gold Coast and were put up at a nice place there. They made lots of promises and didn't deliver."

Herft was a dynamo at finding cash. From 2009 to 2016 AMMA raised $185.3 million on behalf of Guvera – an extraordinary amount for an unlisted Australian technology company. AMMA was paid $22.5 million for the fundraising, a commission rate of 12 per cent. That compares to typical commission rates of up to 2.5 per cent for big equity raisings by investment banks on the stockmarket, and zero for venture capital funding deals for start-ups.

Guvera promoted itself as a free music streaming service relying on advertising.


Heft confirmed that some accountants received options for referring clients to invest in Guvera. "Yes this is correct," he said in an email, "they received no cash commissions, and the options were only of value through a successful exit, so the Accountants have received no tangible compensation."

He also confirmed that some of its worldwide network of accountants "may have received a contribution" towards its annual conference.

Private equity baulks

Still, even that wasn't enough. In 2015 Guvera tried to raise $100 million from private equity funds, which baulked at funding a business that had negligible revenue.

As an unlisted company, there was no easy way to sell Guvera shares. Even insiders were getting worried. Describing himself as a "motivated vendor" the head of Guvera's UK business, Michael Devere, published an ad in the Financial Review seeking buyers for his 5 million shares at a knockdown price.

Herft decided to go for broke. Guvera began an aggressive marketing campaign, including sponsoring the popular Channel Nine TV show The Voice.

Guvera hired a small Melbourne stockbroker, DH Flinders, to list Guvera on the share market, and Rod North to publicise the float. Under DH Flinders' supervision, Guvera printed a prospectus one year ago that promoted the company to investors, who were being asked to invest $40 million to $80 million so Guvera could clear its debts and expand. The deal would value Guvera at up to $1.3 billion – an eye-watering amount for a business still only generating $1.2 million in revenue, seven years into its existence.

Fired and rehired


DH Flinders negotiated an underwriting fee of 5.75 per cent, which meant it could receive as much as $4.6 million. Because Guvera planned to raise money through a stockbroker, AMMA was sacked, triggering a $500,000 termination fee.

But Herft wanted to keep the relationship going. AMMA was rehired to help raise money for the listing and promised a fee of $450,000 to $600,000 and 5.75 per cent of any money it could raise. Herft cut a deal to build offices and a carpark for Guvera, which would pay him $340,200 a year in rent, a 10 per cent increase on its existing rent.

Guvera was great at generating publicity. Rocker Alice Cooper attended a pre-launch party for Guvera at Metropolitan Pavilion in New York City in February 2010. Donald Bowers

To enhance Guvera's credibility, Herft felt he needed a big name from the music industry to chair the company. A former executive at EMI Music (which went broke after being bought by private equity) from Los Angeles, Phil Quartararo, agreed to become chairman in return for six million shares in addition to options.

The IPO came under attack from Australia's tech establishment. Atlassian billionaire Mike Cannon-Brookes, who was pitched the company, was aghast. On Twitter, said he was "terrified" by the deal, and that the Australian Securities Exchange should not allow the company to list. Blackbird Ventures partner Niki Scevak described the IPO as "horrifying". Square Peg Capital's Paul Bassat also expressed disgust.

The Australian Securities Exchange took the unusual step of refusing to allow Guvera to list, citing the need to maintain "the reputation of the ASX market".

"So many mums and dads have been burned," says Adrian Raftery, a taxation expert at Deakin University. "It would have been tenfold if the regulators let them through."

Some commentators, including the Financial Review's Chanticleer, thought ASX executive chairman Rick Holliday-Smith was sending a message that unprofitable high-risk tech stocks should seek capital elsewhere.


The money's gone

Many Guvera shareholders had been patiently waiting for a stock exchange listing for years. It was their way to cash out. After years of waiting for their pay, most gave up.

"I've written off the investment and I'm sure there is a lot who have invested a lot more than we have," says Diane Lucas. "I can't see that we will get our money back at all, there is no way to get it back."

Guvera continued to assure shareholders the company's outlook was bright. On March 21, Loberg wrote glowingly about Guvera's "unbelievably sophisticated" technology and relationships with big ad agencies.

Guvera's app in 2016.

Conceding Guvera was burning through $6.6 million a year, Loberg said a turnaround was close. "Our forecasts look set to get us cash positive globally by the end of this calendar year," he said.

Six weeks later Loberg resigned, leaving Herft the sole director. Guvera limped along until this month, when it finally ceased trading. North, who stopped working for Guvera after the IPO failed, says he is owed $20,000 to $30,000. He doesn't expect to get the money back.

Others once eager to promote the company are now trying to avoid any association with it. Former chief technical officer Damien King hung up when asked if Guvera was a legitimate business. "I would like to forget about it," he said. "It's in the past."


Other former executives have removed any mention of Guvera from their LinkedIn profiles, including Herft.

As for where the $185 million went, Heft cites a $50 million spend on rights deals with record labels, funds for product development to build the company's technology platform, as well as user acquisition and on setting up sales teams globally.

Herft did not respond to a question about a new technology business called Kwickie that he is reportedly spruiking.

But his LinkedIn profile suggests a new career focus: corporate coach.

ASX executive chairman Rick Holliday-Smith and Guvera CEO Darren Herft. David Rowe

Guvera's IPO prospectus supplied

Guvera CEO Darren Herft in Chanticleer column on June 6 David Rowe