A Fistful of Dollars: Funding The Next Innovative Music Startup

Article by: Julian Weisser

A packed David Friend recital hall at 921 Boylston street on a Thursday night and there was no music being played. This was Envisioning 21st Century Music Business Models: Startup Ventures and the Music Rights Frontier presented by the music business department. A cynic could say that half of the crowd was attending after they found out on Monday that Instagram, the app they upload photos to for free, had been purchased for one billion dollars. That cynic would be partially correct. For a panel that was supposed to discuss music rights, the focus was more about the next big thing and funding. That should not be looked at negatively.

An enthusiastic crowd welcomed professor Peter Alhadeff to the stage alongside Berklee alum Chris Woods, co-founder of TuneSat, and successful entrepreneur and investor Mark Montgomery. Alhadeff mediated a discussion between Woods and Montgomery about being a startup and seeking venture capital funding. One idea that the two parties agreed on wholeheartedly was the view that dumb money is worse than no money at all. Montgomery, who started his own company that he later sold to Live Nation for eight figures, equated it to, “an investor trying to write a song lyric.” That certainly connected with many in attendance.

Chris Woods explained to the uninformed that there is a large lack of transparency in music royalty distributions and how companies such as TuneCore and TuneSat will be vital for bringing transparency to the forefront of these dealings. Mark Montgomery agreed, saying, “Tech is eradicating irrelevant middlemen. I like the idea that the incumbents are in trouble.” Mark went on to say that even if an idea is fantastic nothing good will come of a startup if the right team is not working on it. “I make an investment in people,” he stated. Later in the evening when speaking to a man in the audience Mark said he would rather invest in a A-grade team with a B-grade idea than the other way around.

After the short discussion between Montgomery and Woods the rest of the panelists were invited to join the conversation onstage. Jim Griffin, managing director of OneHouse LLC, was one of the most outspoken panelists and peppered each topic of conversation with witty insight and historical anecdotes. “The real value is starting relations that never end,” said Griffin. Facebook is the most obvious but compelling example of a company that starts a relationship with one user and works hard to keep bringing them back. In the long-term this causes more users to join because their friend is already on it. Retention is almost more important than new customer acquisition because it serves as a catalyst that hooks more in. The same is true for Instagram, a company that asks nothing of its users other than for them to share their photos in as many places as possible thus drawing more users into the fold.

A look at everything that is wrong with the way the industry views innovation and new business models was presented (accidentally?) with the inclusion of Kerri Cockrill of Blackberry/RIM on the panel. Research in Motion (RIM) co-chief Jim Balsillie had just resigned from the company at the end of March. Balsillie had been working on a radical shift for RIM, opening the network and services to carriers and other platforms. Other high-level executives quickly stifled that attempt at intrapreneurial innovation. Cockrill did little to restore faith in the already flailing company saying, “We have Blackberry music preloaded to show off the phone. It’s actually pretty good. One artist per device. I’ve actually seen it first hand. The bands have sent us YouTube comments from users thanking Blackberry for introducing them to those artists.” Hardly innovative when you consider that earlier Windows operating systems from the early 2000s featured David Byrne’s “Like Human’s Do.” It came off as more of a marketing pitch than a discussion. Cockrill described the preload content as “part of the unboxing sense of discovery.” It is rather idealistic to assume that even 1/3 of the people opening a new Blackberry could possibly become a fan of the one artist being presented unless that artist is Adele. It isn’t Adele.

This kind of backwards thinking is not surprising coming from a company that audaciously believed BlackBerry users would pay RIM $5 a month, select 50 songs from their cloud-based music catalogue, and then stream and share those tunes with others on the Blackberry Messaging network. Opening up the service to many platforms is exactly what Instagram does well. Successful businesses are built around Instagram and that is part of what drove the value. Postagram and insta.dm (direct messaging) are only two excellent examples of what can be built off of a more open platform. RIM still has devoted users but they are having their best interests blackballed by a company that seemingly lacks the ability to analyze, retool and pivot.

One of the more interesting bits of data presented during the panel had nothing to do with startups but should be looked at and analyzed more in depth. Kristin Thomson, an Artist Revenue Expert at the national nonprofit Future of Music Coalition, presented those in attendance with a new study that showed most artists earning over 100k a year counted their accountant, lawyer and webmaster as their three most important team members. This needs to be looked into further because as Thomson pointed out, there is no way of currently knowing if these artists have that level of success because of the accountant, or if they have an accountant because they have reached that level of success.

What the audience left with was a sense that the music industry is ripe for change and there is some money out there for good ideas, more money for good people, and an Instagram’s worth of money for both.

About the Author

Julian Weisser
Julian is CCO at Bottol. Read his musings on entrepreneurship and the humanities at ideasthenlemonade.com