ASX lifting IPOs out of innovators’ reach

| September 19, 2016

Every few months another Australian city is branded ‘the next Silicon Valley’. The hype is usually short-lived, before another aspiring candidate steps up to stake its claim.

The truth is, despite the technology boom we’ve been promised by the current government, Australia is still a long way off having a Silicon Valley of its own.

And applying the US start-up model to Australia is like forcing a square peg in a round hole.

We don’t have the same venture capital eco-systems, accelerator programs and private start-up funds that make Silicon Valley a nirvana for tech entrepreneurs.

Our start-up investment ecosystem relies on the trillions stashed away in our national superannuation scheme (a venture that hasn’t caught on in the US).

It’s this amazing pool of ready capital, particularly through self-managed superfunds, that holds the key to Australia’s innovation boom.

MNF Group (then MyNetFone) officially entered the Australian market in 2006 after reaching the then required IPO (initial public offering) valuation of $10 million. At the time this was no small feat. We were a small tech start-up, still several years away from making a profit. Co-founder Andy and I were all but unknown to the industry, with limited contacts to ask for backing.

Yet 10 years later we’re celebrating a record year of growth with $161.2 million in revenue and more than 250 employees and growing fast.

Going public was the game changer for our business at the time. It allowed us to raise the capital we needed to invest back into the business and become what we are today.

However, if the minimum IPO requirement was higher (say $20 million, like the ASX has recently suggested), we would have never gotten off the ground.

In the decade since we first entered the market, we’ve achieved more than just increased revenue. We’ve been the first company to introduce several new products to the telecommunications market, shaped the evolution of IP telephony within Australia, and our R&D team has designed innovative software platforms that are protecting networks and streamlining services around the world.

If the ASX doubles the IPO valuation threshold, it will not only limit the Australian stock market, but it will stifle the kind of Australian innovation that companies like MNF have been delivering.

The Australian tech-industry is dependent on the symbiotic relationship between a fair IPO and the economic reservoir of Australian superannuation. The $20 million valuation entry threshold for listing will damage this healthy ecosystem.

The ASX’s intention is to stamp out any market risks caused by companies using back door listings and dubious financials to enter the market. There have been recent occasions where Australian companies at listing stage have been denied entry to the market due to questions raised behind their validity. However a blanket block on all small listings is not the answer. The onus should be on ensuring credibility of directors, auditors and quality of investment advisors.

When MNF entered the market, we used a credible auditor, who performed the due diligence on behalf of the market. And our investors used the experience of a well-established broking firm to make an informed decision before deciding where to put their money.

We are a resource rich nation in more ways than one, and we have the capabilities to nurture and encourage the next wave of Australian innovation.

If the ASX chooses to raise the minimum listing valuation threshold, it will in effect choke the funding lifeline that MNF owes its success to.

The ASX has delayed its decision around changing the listing rules until December 19th due to a large volume of industry feedback.

I hope that sanity prevails, and that for the sake of a few bad apples, we do not ruin the best innovation incubator we have here in Australia.