Blackbird founder backs SafetyCulture after CEO Luke Anear slams mandatory ASIC reporting

Off the back of some recent reporting, SafetyCulture is threatening to domicile in the US over Australian laws forcing large proprietary companies to publicly lodge their financial statements. And Blackbird’s Rick Baker has come out in support of the startup.

SafetyCulture hits back at The Australian

SafetyCulture’s clap back is in response to an article by The Australian that dug into SafetyCulture’s lodging of its 2021-22 audited accounts to the Australian Securities and Investments Commission (ASIC).

SafetyCulture’s founder, Luke Anear, took issue with the report saying that its losses had “spiral[led]” to $62 million. In addition to calling this “sensationalist” Anear told the AFR that the actual losses sat at $35.5 million, though he admitted this wasn’t clear in the documents.

According to Anear, part of the ‘losses’ can be balanced against equity being allocated to acquire SHEQSY and Inauro.

Both of these acquisitions were mentioned in the article by The Australian, as was a $20 million debt facility arrangement that “will be used for continued growth and to strengthen the capital position of the group”.

This is the first time that SafetyCulture has used debt funding. Anear told The Australian that he felt it was good practice for the company in the current market climate so it can think about future acquisitions and opportunities.

“The word ‘spiralled’ implies everything’s going down. In fact, the result was pretty much in line with what we were expecting this year, which was about $2.7 million a month cash burn,” Anear said to the AFR.

SafetyCulture further solidified this stance in correspondence with SmartCompany.

“SafetyCulture’s financial performance in FY22 reflected the significant investment we made in broadening our value proposition for customers. During this period, we prioritised investment in our growth opportunities over profitability,” a company spokesperson said in an email.

“In FY23, due to the global economic climate, we decided to return the business to profitability and are currently tracking ahead of schedule. Our leadership team and board also decided it was prudent to raise a debt facility that can be drawn down if needed to pursue new growth opportunities over the next 12 months.”

One of the other recent cash sinks was the opening of SafetyCulture’s office in Sydney. Leaning into the classic tech startup vibe, it offers a range of fancy perks.

In addition to chefs providing free breakfast and lunch, the Foveaux Street office also has a gym with Peloton bikes, which start at $2145 a pop in Australia, before you add the subscription service on top.

It also sports a Boston Dynamics’ Spot robot dog, which as of 2020 could retail for as high as $US74,500 ($115,020).

Lastly, the office has a Junglefy ‘breathing tree’ that features an “active biofiltration system that cleans the air of harmful pollutants”.

In an email to SmartCompany, SafetyCulture stated that the office fit-out didn’t impact this year’s financials. According to the company, the nine-floor headquarters has been four-and-a-half years in the making.

The company also disputes reports of the headquarters costing $38 million, stating that it didn’t spend that amount.

“We came up with some very creative and cost-effective ideas, which lead to us fitting out a truly unique and inspiring space in Surry Hills,” a SafetyCulture spokesperson said to SmartCompany.

“SafetyCulture HQ has been an incredible asset for attracting great talent, our teams love coming into the office, and it’s led to some incredible opportunities for us to engage with new and existing customers.”

Anear went on to say that The Australian‘s report lacked context, which had the potential to hurt future VC investment if it seemed like the company was operating at a significant loss.

But it’s worth noting that the news outlet’s report also pointed out that investors tend to be alright with losses, so long as there are strong economics and a “path to profitability”.

It also highlighted that SafetyCulture “swung back” into profitability in June 2022 and despite reducing cashflow burn, didn’t engage in layoffs.

Blackbird Ventures certainly doesn’t seem to be spooked. It was an early investor in SafetyCulture and its co-founder, Rick Baker, sits on its board.

“SafetyCulture continues to power ahead. They’ve spent the last 12 months investing in their team and the product and are transforming the business from a single product to a platform that will power more of their customers’ teams,” Baker said in an email to SmartCompany.

“We’re confident this investment sets the company up for the next stage of growth from $100 million of revenue to $500 million, and so we are long-term holders of our shares.”

SafetyCulture says public financial reports leave Australian companies at a disadvantage

Anear’s bigger point around this story seems to be about the ASIC reporting itself. Under Australian law, ‘large proprietary companies’ much lodge audited accounts with ASIC, even if they’re a private entity.

To qualify, the business must have more than $50 million in consolidated revenue, $25 million in gross assets or more than 100 employees. Anyone can gain access to these financial records for a small fee, which Anear says gives US competitors an unfair advantage.

“They can size up how much funding they’ll need to take us on… where we’re investing and where we’re not,” he said to the AFR.

“In the US, companies can remain private until they publicly list. It’s no wonder that Canva and others are domiciled there, and now we’re looking to relocate there too.”

Anear went on to say that the company has no problem submitting financials to the Australian government for compliance purposes. What it takes issue with is the lack of context in the ASIC reports that anyone can gain access to.

He also said that if SafetyCulture were to domicile offshore, it wouldn’t impact the current 600 Australian employees. However, it would start to invest more in the US which “definitely will cost Australian jobs”.

This potential threat to Australian-based growth is something Blackbird’s Rick Baker thinks should be taken into consideration.

“The current Australian reporting requirements for proprietary companies have long been a difficult feature of a startup scaling in Australia. As Aussie startups grow and succeed on a global stage, these settings are worth reconsidering if we want to ensure local founders and their businesses continue to build in Australia,” Baker said to SmartCompany.

This story has been updated with comments from SafetyCulture.