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Published 08 April 2013 08:21, Updated 10 April 2013 15:24
PlayUp chairman Nick Greiner ... several investors have approached the Financial Review to say they are unhappy with PlayUp management. Photo: Louise Kennerley
A Melbourne private technology company chaired by Nick Greiner behind the PlayUp app has big plans, but the company has burned through $70 million in the past five years and raised the ire of some high profile shareholders.
PlayUp has a long list of well-known shareholders including billionaire poker machines magnate Bruce Mathieson, former Telstra chairman Bob Mansfield, Asciano director Geoffrey Kleeman and Justin Ho, a member of the prominent Ho family from Hong Kong, as investors.
PlayUp has built a sports social networking platform for smartphones and has 7 million active users around the world who use the app to communicate with friends while watching sport, some of which is streamed live.
Its management claims that its revenue and EBITDA are projected to be more than $1 billion by 2014-15, but it is now making only about $200,000 revenue a month and a recent shareholder update seen by The Australian Financial Review shows it has racked up $30 million in losses in the past 18 months alone, at a rate of between $4 million and $6 million per quarter.
PlayUp’s executives are trying to raise another $10 million from sophisticated investors in Asia and Europe. The Financial Review understands the company faces a cash shortage if it is unable to raise the funds, which chief executive George Tomeski claims are enough to last the company another 18 months.
Several investors have approached the Financial Review to say they are unhappy with PlayUp management and believe it has spent too much for not enough financial return. However, Mr Mathieson says investors have to be patient. “I am certainly very relaxed about my investment in PlayUp,” said.
PlayUp raised its first $5 million from angel investors in 2007. It also started working with investment bank Investec, which took equity in lieu of fees. It later sold down its stake.
PlayUp raised another $15 million in late 2008 and early 2009. Investors at that time included Mr Mathieson. A further $30 million was raised in 2010, when PlayUp was focused on being a mobile phone sports gaming company.
Among the names that are still shareholders are PlayUp’s directors, Allan Myers, a Melbourne QC, and his business partner, John Higgins, Sydney funds manager David Paradice and Goldman Sachs Australasia chief executive Simon Rothery.
Other shareholders have included former cricketers Steve Waugh, Brendon Julian, Graeme Wood and Adam Gilchrist, heart surgeon Charlie Teo and tennis executive Brad Drewett.
It raised another $20 million in 2011, when it changed its focus to building a sports social media platform due to the rising popularity of smartphones.
The app allows users to buy content from sports organisations, media companies, sports statistics companies and athletes. A chat feature lets users interact with friends and fellow fans of particular sports teams. Its biggest markets are India, China, Europe and the United States, although its headquarters are in Melbourne.It has had positive reviews in technology publications and has been featured in Forbes magazine and several Australian newspapers.
However, the company has only just starting receiving revenue and Mr Tomeski, who established PlayUp in 2007 with former St George Bank and Challenger Financial Services executive Luke Bunbury, says it will break even on a cash-flow basis by either the September or December quarter in the 2013 calendar year.
“We will have revenue of about $1 million per month from July,” he said. “It is now currently at about the $200,000 mark. It has gone from zero to that in two months.”
Mr Tomeski said the company would get revenue from two sources: users buying upgrades or features inside the app, such as a live game or part of a match such as a soccer penalty shoot-out, or from broadcasters or sports leagues or bodies that pay to put their vision on the PlayUp platform.
He says the company is on the verge of a series of big deals with global sports management companies, sports leagues and teams around the world that will provide a big revenue boost.
Its update to shareholders says revenue is forecast to reach almost $350 million in the 2014 financial year and $1.34 billion the year after.
EBITDA is forecast at $318 million in 2013-14 and $1.26 billion a year later.
Mr Tomeski says he is comfortable with those figures. “There are plenty of technology companies out there globally but not many own their own platforms.
That is a huge thing for us. It’s about being part of consolidation to what is a very fragmented market. We think we can do that in sport.”
Mr Greiner could not be contacted for comment .