The startups trying — and failing? — to disrupt booking agents

By: Cherie Hu

Published: 2020-02-11

I’m excited to share the latest members-exclusive database with you, centered around investment activity in music startups.

This database has three tabs:

If you want to jump right in, you can scroll down to the bottom of this post to access the database on Airtable.

If you’re interested in reading more about the important context, disclaimers and takeaways behind this database, you can read on below:

Context

As a writer focusing on music and tech, I’ve always been fascinated by the intersection of music and venture capital, particularly as more investment dollars are flowing into music/tech companies than ever before. While the growth philosophies and success metrics behind VC are far from foolproof solutions to the myriad issues plaguing the music business, I think having more capital to experiment with is a generally positive trend in which even the most corporate music companies are taking part.

My first piece for Billboard, in July 2017, was a data-driven deep-dive into the gap between the types of startups that entered music accelerators and the music startups that received actual follow-up funding from VCs. The following year, I wrote (also for Billboard) about how more executives from the VC and finance worlds were moving towards rather than away from music companies, as the recorded sector reported consecutive years of growth for the first time since the turn of the 21st century.

This database is my much-belated attempt to operationalize that interest in the form of a centralized, sortable list of startups, VCs and related news that I can go back to and update on a regular basis, both for my research and for your own perusal as well.

I’m most interested in shedding light on who exactly is providing the money to help grow music as an investment category and as a market. Often, it’s outside investors with a consumer focus, not inside investors with a B2B/industry focus, who are providing that capital, which I think has a significant impact on the kinds of startups that are funded.

Disclaimers

This database is still very much a work in progress. With that in mind, here are a few disclaimers:

1. I’m excluded investment firms that focus on live events or masters/publishing catalogs, such as Superstruct Entertainment, Edition Capital and Round Hill Music. Instead, I’m more interested in tangible software and digital products.

2. For now, the table does not distinguish between active and inactive investments. This is in part because I’m pulling info from VC firms’ publicly-available portfolios, some of which do not make this distinction.

3. Similarly, for now, I’ve largely excluded music startups that are inactive or have shut down, which gives the database a recency bias that I’d eventually like to fill. For instance, I’m just as interested in keeping track of who funded now-defunct music companies like Rdio, Guvera and Crowdmix as I am in who funded startups that are still alive today.

4. Last but not least, the two leftmost tabs of the database do not include any angels or other individual investors, for now. I realize this may be a significant exclusion, especially given that there are many individual artists who now have stakes in startups (e.g. in Triller and Sandbox VR). Perhaps this warrants building out an entirely separate tab just for artists and individual investors in the near future.

Initial takeaways

1. The most prolific investors in music startups come from outside, not inside, the music business.

According to public portfolio data, most of the ten most active VCs in the music startup ecosystem don’t focus on music. Instead, they’re generalist tech, media and CPG investors (e.g. Kima Ventures, Index Ventures, Balderton Capital, Lerer Hippeau).

Sony Corp and WndrCo — the former of which owns Sony Music Entertainment, and the latter of which was founded by film magnate Jeffrey Katzenberg — do have strong entertainment roots, but their core investors do not come from music.

The exceptions are Plus Eight Equity, Raised in Space and Warner Music Group — all of whom are either music companies themselves, or have significant background in and/or backing from the industry (e.g. Plus Eight Equity was co-founded by DJ John Acquaviva; Raised in Space has Scooter Braun on its board).

In general, I was surprised by how few labels and other music-specific companies were on my list. Universal Music Group has been maintaining an “accelerator engagement network” since October 2017, but hasn’t been as active of an early-stage investor as its rival Warner, as far as I know.

Artist-management firm Red Light Management did make it to the second tab of the database, as it’s invested in Stem and Mixhalo; I’d love to see more management companies join the list in the future as well.

2. Virtually no VC firms have invested in more than 10 music-specific startups.

During a panel I moderated about music-tech investors at Music Tectonics last fall, one major theme was a reality check on music’s market size. By 2022, recorded and live music combined might be making around $60 billion annually; in comparison, by that year, global film/TV revenue is projected to surpass $78 billion, while U.S. gaming revenue alone is expected to reach $230 billion.

Hence, music is a relatively tiny niche compared to what investors are used to seeing in entertainment and beyond. As Larry Marcus said on the panel:

“Music deals really have to compete against all the other deals that  we’re doing. And the key signals aren’t really about the technology … I’m interested in seeing that the product  is really working, that it has very happy users … I personally don’t have a lot of interest in the ideas of why things are going to be great. I’m only interested in that once you can demonstrate the core experience is really working.”

This stance is reinforced throughout my database: Virtually no firms have invested in more than 10 music-specific startups, out of their portfolio of dozens if not hundreds of investments. And firms who claim to be focused on digital media and entertainment actually tend to focus on sports, publishing, video and gaming, with little to no commitment to music.

The first firms to reach that 10-investment milestone will likely come from inside or adjacent to the music sector, e.g. from Warner Music Group, Plus Eight Equity or Raised in Space.

It’s also worth noting that music permeates and enhances all other forms of entertainment (including sports, gaming, publishing, video and VR) — so just because generalist firms aren’t investing in music right now, doesn’t mean there isn’t an opportunity for music startups to build relationships and partner with those firms’ portfolio companies.

View our top music/tech investor database here.