The week in music, tech and crypto: NFT royalty investments, VR music games, indie distributor consolidation and more

Music/Audio Tech Investment Dashboard

Music startup funding rounds: More seamless virtual performances, plus DeFi royalty payment solutions

We’ve added 5 new rounds this week, including but not limited to music wearable Mictic ($2.5M), AI-powered Roblox virtual music game developer Splash ($20M) and DeFi royalty advance platform Paperchain ($1.6M).

The funding rounds for Mictic and Splash point to a common thread of enabling more seamless performances and live music experiences in the impending hyperverse*, especially as the URL<>IRL bridge grows stronger.

• Mictic’s product combines hardware and software to turn your dancing and air-guitar moves into actual music, with the hopes of seeing you interacting with the tech the same way you might connect with a DAW like Ableton — namely, as an instrument in itself. Their cap table includes artist Moby, who joins our music investor database for the first time this year.
• Australia-based startup Splash — a developer of a Roblox game that allows players to create music and perform to live audiences in virtual venues — raised a round co-led by BITKRAFT Ventures and Amazon’s Alexa Fund (which has also invested in Cameo and Yousician this year). Interestingly, this is the second Roblox developer on our list so far in 2021, following Warner Music Group’s early October investment in Supersocial, which suggests that investors still see a clear business opportunity in more interactive in-game music experiences.

Paperchain’s goal is to apply a Web3 solution (DeFi-powered royalty advancements) to a very Web2 problem — namely, that getting paid streaming royalties still takes ages. The company’s $1.6M pre-seed round, led by database newcomer Motivate Venture Capital, comes after a successful beta program with around 20 artists from UnitedMasters (which recently raised a $50M round of its own).

• Paperchain’s raise follows two popular trends in our database this year — fintech tools for artists (see recent acquisitions by Hifi and Utopia) and blockchain-based music solutions (too many examples to count). Paperchain may be one of the first companies poised to successfully combine the two, even if their business model still ultimately relies on an antiquated royalty system.

Music startup exits: VR music games, and more consolidation in music distribution

We’ve added 4 exits to the database this week, including Meta’s acquisition of Supernatural, Create Music Group’s acquisition of Nirvana Digital and Bandlab’s acquisition of ReverbNation.

Meta (fka Facebook) now owns two of the most prominent music-based VR apps on the market: Supernatural, which signed a licensing deal with Universal Music Group back in March 2021, and Beat Saber, which the parent company acquired in late 2019 and which has since generated over $100 million in revenue on Oculus Quest. Both of these acquisitions involve VR music experiences with a gamified twist, and fit well within the scope of the hyperverse*.

• Given Meta’s recent history of investing in virtual VR experiences overall (e.g. through Oculus Venues last year), it’s easy to imagine what acquisitions the parent company may target in the future — perhaps a gamified VR concert experience similar to Splash, as detailed above.
• That said, Meta is also going through a whole rebranding process that will get rid of the Oculus brand name altogether, and may only further confuse rather than encourage the music industry to join their tech ecosystem (and even Oculus’ consulting CTO John Harmak seems to think so, too).

Two music-distribution/rights companies have been acquired this week, adding more fuel to the fire of consolidation in the distribution sector that we reported on earlier this year. In particular, there’s a clear trend where companies are consolidating to increase their chops in independent artist services in the hopes of delivering end-to-end solutions to customers, from creation to distribution.

• BandLab’s acquisition of ReverbNation is the former’s first M&A deal of this year. That said, Bandlab, which also runs its own suite of music production and mastering tools, has acquired many other companies from across the music industry since 2017, including media brands NME and Uncut and live video streaming startup Chew.
• Create Music Group’s $50M planned investment in Asia has kicked off with its acquisition of Mumbai-based distribution/music rights management company Nirvana Digital. Create’s previous acquisitions include distributor Label Engine in 2016 and social media company Flighthouse. The case for investing in India’s music landscape in particular is clear; according to music trade body Indian Music Industry (IMI), audio streaming in India grew nearly 40% year-over-year in 2020.

Music Crypto Dashboard

Music NFT drops: The rise of fan-powered royalty investment agreements

As the jaw-dropping, sky-high auction headlines of the early NFT boom become more and more a thing of the past, we’re seeing artists and music-industry leaders utilize NFTs more for other use cases like fan-investment and royalty-sharing agreements.

To that end, two of the five new drops we’ve added to our music/crypto database feature fan funding and investment models.

Republic and Opulous partnered with rapper Lil Pump to launch a series of S-NFTs (the term coined by Republic to describe NFTs offered and sold as securities) around the artist’s new song “Mona Lisa.” The drop sold out within 2 hours, reaching its $500k investment goal in 2 hours, across 927 investors (around three times the number of investors 3LAU rewarded for his Royal drop). The successful $500K raise will be the 26th NFT drop listed in our database to generate $500K or more, and the fourth since Q3 of this year – perhaps signaling that the massive funds generated by the few will be replaced by the crowdfunded success of the many.

• S-NFT owners become de facto stakeholders in the song, receiving royalties every time the song is streamed or synced. However, we’re seeing conversation in our server that highlights the potential downfall of Republic’s unique “S-NFTs” approach: US securities law requires a 12-month lock up period, which as Cherie notes, is an incredibly long time to hold on to an asset in crypto years.

Former X-Factor star Emery Kelly is launching a similar fan funding campaign on Corite on November 17.

• Kelly and Corite’s drop is also part of a cohesive plan for the artist’s forthcoming album release: All NFT holders will also be able to join an exclusive livestream upon the release, and one fan will win a one-time session with Kelly that will be broadcast to his social media — demonstrating a clear path to immediate fan-value outside of just monetary support.

NFT platforms focused on music

It seems that all of the platforms were out at play this week at NFT.NYC because, surprisingly, we only have one addition to our database when it comes to new music NFT platforms, with the introduction of Corite’s new NFT offering,

Mentioned above with Emery Kelly’s NFT drop, Corite is a Swedish-based fan-funding platform who earlier this year received funding from Hitco Entertainment. This makes Hitco one of the only labels to invest in a fan-funding platform — perhaps because other labels think the model might cannibalize their existing market share long-term. Hitco’s other notable investments this year include the crypto-powered music streaming network Audius, whose sketchy tokenomics we will be watching closely after this alleged scam alert.

*By popular demand, we changed the name of the #metaverse channel in our members-only Discord server to #hyperverse to maintain our sense of dignity, and are honoring that name change here.

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