Join us as we chat with Bruce Hamilton, General Partner of Everybody Ventures. Bruce's journey from Live Nation and A&R at Epic Records, to startup founder himself, on to his current role in VC provides the backdrop for our discussion. We talk about the current investment landscape for music tech startups – noting the pivot towards more selective funding and the need for VC to focus on truly viable opportunities. With this in mind, Bruce shares advice on crafting a compelling investor pitch, and articulating your story so that it resonates emotionally with investors.
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Episode Transcript
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0:00:17 - Dmitri
Welcome back to Music Tectonics, where we go beneath the surface of music and tech. I'm your host, Dmitri Vietze, and I'm also the founder and CEO of Rock Paper Scissors, the PR and marketing firm that specializes in music tech and music innovation, and if you've been following along our how to Startup series, you know that we've done a little bit on early investment, but I want to get a little bit deeper and find out more about the context there to help you find what you're looking for, but also get ready for the pitch as well. So today I have with me Bruce Hamilton. Bruce is the general partner of Everybody Ventures, an early stage venture capital firm investing at the intersection of pop culture, consumer and technology. He's a music industry expert and a serial entrepreneur, having worked with artists like Travis Scott and Fifth Harmony. He's passionate about using his entrepreneurial experience, business development, marketing and creative backgrounds to develop brands and help them scale Great combo.
Bruce and his work have been featured in publications such as Forbes, TechCrunch, Complex, Black Enterprise and more. Bruce has been at the Music Tectonics Conference. He's a favorite there and I'm excited to have you on the podcast. Welcome, Bruce.
0:01:26 - Bruce
Thank you for having me. It's just an honor to always kind of support what you guys are doing.
0:01:31 - Dmitri
I appreciate it. It means a lot to me and I know it means a lot to our music tech community of startups and companies as well. So why don't you start by giving us a window into your background in music tech and investing and tell us how that influences your view as an investor?
0:01:47 - Bruce
yeah, I mean my background is varied, it's covers a lot of different things, but I think that plays perfectly into what I'm doing now because I've been able to combine all of my experience to tackle venture. But yeah, I started my career in the music industry, so I was doing social media at live nation, then moved over to Sony Music where I was at A&R Epic Records where I worked with artists like Travis Scott and Fifth Harmony, then managed artists, songwriters and producers for a few years. So I had two acts that were nominated for Grammys while we were managing them and then did a big 180 shift, became a startup founder in the tech space, launched two companies, ended up selling my second one and then from there launched my first VC fund called MechVentures Very small fund fully deployed off that capital and then I decided to branch off and launch a second fund under Everybody Ventures. But I wanted to bring in my pop culture experience. From being in music and entertainment for so long.
I realized, you know, looking at the space, that no one was really looking at investments from a pop culture lens and I think if you're going to invest in consumer, then you really need to have kind of a grasp on pop culture lens and I think if you're going to invest in consumer, then you really need to have kind of a grasp on pop culture and consumer behaviors. And there's only so much you can do from sitting behind your computer, on Twitter, on LinkedIn, but you need to be amongst the people and so, in order to predict consumer behavior and those patterns, you need to be amongst the people to make those investments.
0:03:25 - Dmitri
That's interesting. I have a couple of things I want to ask you. One of them is what were these startups that you founded?
0:03:31 - Bruce
Yes, the first one was Instagram growth hacking platform.
So we helped brands, content creators, small businesses grow their followers and engagement on Instagram using our automation tool Back when you could do growth hacking on Instagram, and that was the reason why we ended up shutting it down. I think we ran for about four years, but we knew when we started that we were on borrowed time. But we, you know, we worked with brands like Hilton Hotels, spotify, reebok and just helping them grow their audience on Instagram, and we ran it for a long time and we ended up shutting it down because we hit a point where the price point that we were having to charge for our services we didn't think we were adding that value to our customers. So we realized we had a great run. It was time to shut down.
Second platform was a no code app development platform that allowed people to build apps without code. That ran for a few years. That did very well too, that was featured and that was in forbes, complex black enterprise, afrotech, and then that company ended up getting acquired back in 2022, which then led me into launching my first one.
0:04:49 - Dmitri
Gotcha. Okay, cool, good to hear your background as a startup founder. So the other question I want to follow up on is this idea about this connection to pop culture. It's really interesting because I think it's stated so directly, kind of a unique thing that I've heard among investors.
You know there's a lot of conversations about total addressable market and about you know where industries are going, et cetera, but pop culture almost sounds like it's more like riding the wave of what is actually relevant to you know, a mass group of people, and I'm curious if you could just talk a little bit about what that could mean as an investor. I mean you mentioned getting out, getting away from your computer, you know, going out among among people, and I don't know if whether you mean that in like actually getting up and leaving and going to a club or seeing what's happening in the streets or whatever, or whether you mean like metaphorically, like don't just look at your spreadsheets, actually look at how things are shifting, what people's interests are, how their behaviors are shifting in terms of what everybody's interested in, as opposed to kind of like what should work technically.
0:06:02 - Bruce
Yeah, I mean, I'm in that in both senses. Obviously, you have all the data in front of you on spreadsheets, but there's something to be said about actually being amongst people and seeing what is what people are gravitating to, what lingo people are starting to use, what people are starting to wear, and then by the time you see it on social media whatever you're already behind the curve. You should already be seeing it before it hits social media and you know it's like it's always says when you know, when facebook or myspace were like the popular social media platforms and then it got boring when your aunts and uncles got on there. It's kind of what it's like. By the time hits social media, it's already like the wave is already kind of moving. So you want to be super early on that, and I picked up on this back when I worked in music, when I was in the A&R.
It would be one thing to see the data on Shazam or Spotify, but something totally different than going out to an actual club and hearing what songs people are really gravitating to, and sometimes Spotify and Shazam, they don't have that data just yet, and so that was kind of a thing of just being early and just seeing what type of music people are starting to listen to.
0:07:21 - Dmitri
This sounds like an A&R guy. That's what it sounds like starting to listen to. This sounds like an A&R guy. That's what it sounds like, right.
0:07:32 - Bruce
I bring a lot of those skill sets over and I tell people all the time being a venture capitalist essentially just like being an A&R in tech. It's the same exact thing. Going out, especially if you're early stage going out and you're finding companies early, investing in them, helping them scale. Same concept applies to music, where you're going out, finding artists early, investing in the artists and then helping them become big superstars.
0:07:54 - Dmitri
But in a way, when you say pop culture is kind of like this nexus of pop culture and technology or investment opportunity startups, in a way you're saying these founders should be doing A&R to see what the cultural habits are of people before building 100%, because I've always said pop culture is the underlining factor that connects people of all walks of life, and that's what I like the most about it.
0:08:18 - Bruce
It doesn't matter, you know, age, sex, sexual orientation, it's the thing that just connects everyone and everyone just understands it when they see it. Yeah, and I think you know, for founders, they should be aware of what's happening in trends and start building to address, you know, these problems. You know, one of the worst things I hate to see sometimes is when founders build a problem or they build a solution looking for a problem All right.
0:08:50 - Dmitri
This is great. Thank you for letting us dig into your past a little bit to see how you got here and also to hear your philosophy, but I think it'll help us kind of go through some other questions here. So we had this great interview with Xavier Peters from Lean Square, another investor on this series, about the basics of early stage investment types, and so, with you, I'd like to focus on the landscape and then after that let's get to some very practical advice about pitching investors. So first, how would you describe the investment landscape for music, tech, media and entertainment startups right now, and how's it different from previous eras?
0:09:25 - Bruce
I mean I would say right now it's probably the best it's ever been. You know I'm very early into my adventure career I think I'm on my fourth year so you know from what I've been picking up. Before, you know, people were a little adverse to investing in media and entertainment because, you know, especially if you're looking for VC, they didn't know how well it would scale. But obviously now the mindset has changed and obviously we've seen a lot of models be proven out. So people are very open to music, media, entertainment, startup. So it's a good space to be in right now. Obviously there's a little bit of a market turndown, so fundraising isn't as easy as it was before, but I think that plays into, you know, the super inflated investing that was happening in 2021. And so the market is doing a little bit of a self-correction. So we're in a space now where, if I can be frank, less bullshit is getting funded. And so you know, people are really only looking for the winners.
0:10:26 - Dmitri
They're not just throwing out checks just to throw out checks anymore oh, I mean like it's funny because you've got this investor lens and you're like it's really good right now and there's less bullshit getting funded. And then there's a lot of startups out there being like why can't I get funded? It's funny to hear you say it's better than ever, because some startups are thinking it's tougher than ever but maybe that's a good thing in the long run, right, because, um, yeah, you kind of have to. Really it makes it a little more competitive. You really have to rise to the top to to get the resources needed to be successful. So if you're starting a music or entertainment tech company right now, how would the landscape that you just described influence how you approach early stage investment?
0:11:07 - Bruce
So if I were an early stage music tech founder right now, I would actually start with executives in the music industry or players in the music industry or music and entertainment and start getting their early interest and actually just do a round of angel checks from people that are active in the music industry. And it's much harder when you're coming out starting your first round of venture and then going out trying to get venture capital dollars or something that's not proven yet. But if you can do a small angel round, maybe it's like 250, you have all these major players in music on your cap table. But it's also social proof. So when you are ready to go to venture capital you can say, hey, here I have the VP of marketing at Interscope or the head of promotion at Republic on my cap table, and so it shows VC investors oh, this is a viable product in music because the people that are actually using, that are going to need to use this, are on the cap table. So, yeah, it's really more of a social proof. Play.
0:12:19 - Dmitri
I love that. I think that's great advice. And where should startups find these investors? And then how should they go about building relationships with them, starting from just meeting them in the first place?
0:12:29 - Bruce
Yeah, I mean, I think the first thing is start building a relationship with investors before you actually start your fundraise round.
I think that's where a lot of founders go wrong, as in they start talking to people and it immediately just becomes look at my startup and it's you know.
Obviously, this whole the relationship is kind of transactional, but you want to set it up in a way where it doesn't feel so transactional and so start meeting these people ahead of time and so, with that, start going to some of these tech conferences like go to LA Tech Week or TechCrunch, disrupt, and then that way you can start meeting investors, actually getting engaged on their appetite for this space, and then that will allow you to then start creating a list of potential investors to target, because not every investor is going to be ideal for what you're building Like. What you don't want to do is spend your time chasing after an investor who's primarily only invested in B2B or enterprise and then trying to get them to invest in the music tech startup. It's just not going to work. B2b or enterprise and then trying to get them to invest in the music tech startup it's just not going to work. So I've always said spend more time finding your believers rather than trying to convince skeptics.
0:13:43 - Dmitri
I love it. I love it and it sounds like one of the takeaways here is don't just meet an investor and start pitching them and say, oh, we're raising a round right now. Can I give you my pitch? What's your investment situation right now? It's not the direct pitch, it's much more like hey, I was wondering if I could show you what I'm up to and start to get some feedback from you so you can see what I'm building and we can stay in touch over time, or something like that.
0:14:14 - Bruce
Yeah, and then that helps too, because even if that investor maybe it doesn't work for them or you're still a little too early, most times they will probably say, hey, let me introduce you to some people that this may work for. So then that starts a whole cycle of warm intros and man, warm intros. That's how you skip the line.
0:14:34 - Dmitri
Yeah, oh, so that's great. So always have the question of so it sounds like this isn't a fit for you, but do you know anyone who would be interested in this type of thing? Who else could advise me on this next, you know, or something like that.
0:14:46 - Bruce
Yeah, and that happens all the time where you know you either find a new advisor that you didn't think you were going to have or you get connected to an investor who potentially would invest in it, and you know a lot of VCs. Obviously, you know warm intros are kind of preferred because it's a cosign from someone that's already trusted in their network.
0:15:08 - Dmitri
Do you think it makes sense to hire somebody who's like a matchmaker for investors?
0:15:14 - Bruce
It's tricky. It depends on where you're at. Obviously, you want to run lean, so you don't want to spend an unnecessary amount of money If it's someone that actually has a solid track record, then it could be worth the investment so that you don't spend a lot of your time just trying to chase after people. If someone already has that network built in, then you can do that. Whether you pay them in cash or you pay them in equity, I do think there is something there if you have the means to do it.
0:15:45 - Dmitri
Yeah, all right, we have to take a quick break, but when we come back I'd love to focus on the pitch itself. We'll be right back. You might have noticed that the Music Tectonics podcast is a little different lately. We're still bringing you interviews with the most thoughtful music innovators out there. What's changed is how we're organizing our episodes to make it easier for you to find interviews you're going to love. Starting right now, music Tectonics will alternate between four series. How to Start Up is a series for music tech founders and dreamers. Get expert advice from advisors and investors. Listen to the whole series to get a masterclass in starting up.
The Big Picture features interviews with executives and high-level thinkers. They share their 10,000-foot view on music and innovation. The Big Now breaks down the latest music industry news and rising trends in adjacent industries. Tristra, newyear-yager and I sniff out the stories you might have missed. Colossal Futures is about the cutting edge. Tristra or I get sci-fi with the innovators who are imagining and building musical futures that the rest of us haven't even imagined yet. You can catch up with each series on our website at musictectonicscom slash podcast. Subscribe to Music Tectonics on your favorite podcast app to choose between all our episodes, as they drop weekly and drop us a review, so other innovators in music can find the podcast too. All right. We're back and I'd like to focus on the pitch itself, bruce, because we've never done like gotten into very much detail about that on this podcast. What are the most important and effective elements of the actual pitch to investors?
0:17:20 - Bruce
Well, for one, the business model itself, why that model needs to exist. What is the problem at hand and how is your platform going to solve that problem? And then also also the main thing is revenue. How are you going to generate revenue? Are you generating revenue? If not, when do you predict the generated revenue? How is that going to happen? What potential partnerships do you have of a really good story? I think coming up with a story and explaining the journey that you're on, and you want to make such a compelling story that investors want to join the journey with you. They're like well, we know this founder is going to make it.
0:18:08 - Dmitri
We want to be on that journey with them while they make it. Does that story? Is it usually like a personal story? Is it sort of like why am I the person doing this, or where did I get this idea from? Or is it more like a story about the market or the industry that you're in? Or yeah, how do you what? What kinds of stories resonate?
0:18:26 - Bruce
I mean, I've seen a little bit of both. I've seen someone say, hey, we're going to build this platform, this platform is going to reshape this industry, but also a personal tale of you know, I had this personal problem and so really I built this platform for myself and then I saw that numerous people had this problem as well, and so, you know, we're on this journey and really just telling a super unique story that you know, people just like, oh man, I really liked this founder, I want to join, and that says a lot to the founder, especially early stage, because there's not much traction to go off of. So it's mostly, you know, the founder. Is this someone that you think is really going to succeed at this? And, you know, do you want to stand by their side as they go through this journey?
0:19:13 - Dmitri
It sounds like some of it has to do with personality too, Like you know. Are they a likable person? Are they going to be good to work with? Uh, do they instill trust? That type of thing?
0:19:24 - Bruce
yeah, it's definitely a key thing. Um, I know you had bob maz on here recently. He gave me some very valuable tips on founders. He, you know I picked up this from him and he was like there's three things I look for in founders. He's like one can they pivot when they need to? Two, are they able to learn what they don't know? And three, is this someone that I would want to be in a long-term partnership with Because you're on a journey for the long haul at least minimum.
Sometimes an expected return on investment is around five or seven partnership with because you're you're on, you're on a journey for the long haul at least minimum, you know sometimes an expected return on investment around five or seven years, but it can go as long as 10, because that's the term of a whole fund, and so are you willing to be in a partnership with them for that long? Or just someone whose phone calls or emails I'm gonna dread every time they pop up? And so I took that and it really resonated with me and I even expound on that last one, that last point, even further on. Is this someone I would potentially be friends with?
0:20:25 - Dmitri
Yeah.
0:20:25 - Bruce
And if I don't think this was somebody I would be friends with, then it's just not a good fit.
0:20:30 - Dmitri
Yeah, that sounds pop culture related too, in a way like are they real, you know?
0:20:38 - Bruce
yeah, I mean, a lot of investors try to make it sound like this is rocket science. It's really. We're essentially just doing calculated gambling, but we have all the data in front of us yeah and so it comes down to kind of a personal aspect of you know is this someone that we really believe in and how can we help them get to the finish line?
0:20:59 - Dmitri
Yeah, I'm interested in the first two questions that you, you, you, you said you took away from Bob Miles as well, because pivoting or can they learn things that they don't know almost sounds like there has to be an agility in their personality too, or at least the way they present that they're willing to be wrong about the pitch they're making. Right then you know.
0:21:19 - Bruce
Yeah, you'd be surprised how many founders are, you know. Cause this is their baby and so they hold it so close to the chest. And so when you're like the market just doesn't fit the market, the market's telling you you got to go another way. And some founders just simply refuse to make that pivot because they just they've been building this for so long, it's their baby and they're like, no, I'm gonna force this to work in the market and it just doesn't ever really work that way.
0:21:45 - Dmitri
yeah, yeah, sometimes you have to have that, you have to be able to let go in order to lean in, in a way yeah, you definitely have to.
0:21:53 - Bruce
Um, you know you gotta listen to the market. The market market's saying, hey, this doesn't work, you can't make it fit if it doesn't fit.
0:22:04 - Dmitri
What do startups get wrong the most in their pitch? Do you think?
0:22:09 - Bruce
What do they get wrong? One thing they get wrong is I've seen it a few times I don't see it a whole lot, but I've seen it a few times where they'll run through the entire deck in the pitch, where they'll literally go slide by slide. So imagine you have a 25 page deck and you're going through 25 pages of the deck. I don't think there's a need for that because the investor most likely has already seen your deck, otherwise they wouldn't be on a call with you. So there's no need to run through each slide on the deck. Just give a high level overview of what your company is, what traction you've already created so far and what you plan to do going forward.
And also a nice thing is like say, hey, this is what the next three to five years could potentially look like. Like sell the idea of, like what this can grow into, not just where we're presently at or what it's going to look like in six months. Like really sell, like the long term vision of this company. But yeah, the things that people typically get wrong is running through slide by slide deck Like I recently was on a call with a founder who we had a 30 minute call. They spent 25 minutes of the call running through the deck, and so that literally allowed me five minutes to ask questions, and so I think a good format is spend the first 10 to 15 minutes of the meeting doing your pitch and then leave the last 10 to 15 for Q&A with investors.
0:23:42 - Dmitri
Yeah, you want that dynamic of that conversation. You want to get feedback, you want to see where they stand, you want to see where their stopping points are, so you can see if you can unlock anything, right?
0:23:51 - Bruce
Yeah, exactly, you want to get some feedback, or you just want to ask some questions or do a deeper dive into some things and say hey, can you expound on this point? Where do you see this potential revenue coming from this stream? How does this work?
0:24:04 - Dmitri
Yeah, I mean it also seems like sort of what you're saying is, sometimes people they work so hard on getting their pitch down, they want to succeed at getting their pitch across, and it ends up coming across kind of formulaic as well where it's not really responsive to your audience.
0:24:19 - Bruce
Yeah, and you know, every investor is different. I'm very, very casual in a sense, so I like to have a very casual conversation because that you kind of just get a grasp for the founder just having a very casual conversation. And so I'm, you know, I'm always like hey, let's spend 10, 15 minutes, just tell me the high overview of your pitch, because I've already seen your deck, so we don't need to run through that. Just give me the high overview and then we'll just have a casual conversation and we'll just. The questions will naturally just come out from that conversation.
0:24:51 - Dmitri
So it seems like understanding the potential size of the market is one of the toughest roadblocks for founders, like when you're painting that picture of where you're going to go and what the potential return is on an investment in a startup. That's what you want to know is like, how big is the market? And then how, how prepared is this person in this company prepared to take, you know, take over some market share there or grow a market or something like that? But but actually understanding that size of the market I think is really tough for a lot of people. They don't have access to that data, they don't have industry knowledge necessarily. Are there ways to solve that? And also, what if you can't?
0:25:29 - Bruce
I mean, one of the ways to solve this is good, old-fashioned research and just really diving into seeing whether platforms have done it and how much revenue is being generated from this particular sector. But I think sometimes a lot of founders don't analyze the space and see what their competitors are. And you know, the thing about building a company is it's very rare that you're the only one building this particular product. You're probably building it along with at least 10 to 15 other people as well, and so knowing, like, who your competitors are and figuring out what makes your company better than your competitors, and so just trying, and then that actually helps you tell, like, what the size of the market is and is it a market that's even worth addressing?
0:26:21 - Dmitri
yeah, yeah, so you mentioned research. I can imagine, uh, trade groups could be useful, uh, the media reporting on things. In fact, we do this rock paper scanner newsletter every week on fridays and one of the categories is just industry revenue and the. The reason I picked that as a category is because for this very reason, so that as you're newsletter every week on Fridays and one of the categories is just industry revenue. And the reason I picked that as a category is because for this very reason, so that as you're building out a music tech company, you can start to look at, like what reports are coming in, what stats about the size of this aspect of the music industry, or the size of that aspect, or how big this you know PRO, how much money they're collecting or how much this DSP paid out or things like that. So that's a resource. Check out the Rock Paper Scanner if you want to see that resource. But what happens if you find out that the total addressable market isn't big enough? As a founder, what do you do then?
0:27:09 - Bruce
It's a really tricky one. I would say at that point, realize how much do you actually need to scale this company and build it and really focus on maybe going out and getting angel checks. Carter just put out a report recently that showed that there was an uptick in angel checks in early rounds this year. So it's a very interesting space to look into. Angel checks are checks between $1,000 up to $25,000 or $50,000. And so you can get those smaller angel checks and probably clear a round from there.
I guess one of the things we need to address with the relationship between venture capital firms and music tech startups. I know there is a lot of pushback from firms at times, but it's because you know the returns on some of these music tech investments aren't that big right, because there's only really so much you can do and it really comes down to the total trustful market. So, for example, firms are ideally looking to 10 to 50x their investment. In an ideal world, 50 to like 100x. And so some of these startups are solving really great problems, but sometimes they're just niche and they're and the problem only applies to the music industry. So they they may get an eight-figure acquisition, which is great, but for investors. That's not great because that means we will probably 3 to 5x our investment and that's not necessarily worth the time and effort.
And so I think knowing that market will actually help you realize if venture capital is the way you need to go and if it's not, that's OK. It doesn't mean your company is not something you should build. Just because your company is not venture capital, venture, scalable, doesn't mean it shouldn't exist. There's so many companies out there that have not raised a dime in venture capital that do very well. So if you realize, hey, venture's not for us, it's okay, it doesn't mean you shouldn't build this.
There's something there, obviously, and there's a problem that needs to be solved. So you should build it. Yeah. But I think that's the problem with music is just a lot of the problems just apply solely to music, and so when you're looking at that total addressable market, I think one of the questions you should can this problem be applied to industries outside of music? Not saying that you have to do it at that moment. I've seen a lot of companies that talk to a lot of companies recently that are like that can apply to several, several industries outside of music, but they want to hone in on music and music right first, and then expand out to different industries. That's.
0:30:01 - Dmitri
I think that's super valuable information and insight there. Bruce, I appreciate you sharing that and kind of turning in the conversation. There's something we got to talk about here, guys, because I think that is. I mean, those are two very good responses to this issue of whether the total addressable market's big enough for VC. One is expand the market, see what parallel industries this problem can be applied to. If that's not possible, maybe VC money isn't the way to go. Maybe there's another way to either bootstrap or go to angel funding or to just create the business you want to create and not spend too much time and energy chasing after the investment there so that's super helpful. The investment there so that's super helpful.
It's interesting to think a little bit about the angel side you brought up as well. I've heard that there's angel networks you mentioned. You know going to conferences is a way to meet VCs, and I know you also mentioned meeting music industry execs and bringing them on as angels and advisors early on, both because it's some early money as well as you get kind of proof of concept or social proof. I guess you'd say that people in the industry that are making decisions will be using your system or your company or whatever. Do you have any other tips on meeting angels besides going to some industry conferences? Are there networks I don't know about music specific, but just in general tips on meeting angels besides going to some industry conferences? Are there, uh, are there networks? I don't know about music specific, but just in general. Um, what else can people do to find those angels?
0:31:29 - Bruce
I mean there's a lot of angels out there. I get connected to them a lot. I mean there's angel groups like golden seed gangles. There's always a slew of like these groups that just pull money together that invests, and you know, I know it sounds a little cringe when I give this advice to people, but it might. But start establishing yourself as an expert in the space on linkedin and you'd be surprised the amount of people that come to you once you start establishing yourself as an expert in the space that you're building in awesome, very cool.
0:32:02 - Dmitri
So that'd be a good way to meet those execs who want to rally around what you're working on and it turns out they're angels as well.
0:32:08 - Bruce
Yeah, and there's a lot of execs that want to be at the forefront, but obviously there's just so much noise out there. So, like kind of establishing yourself as an expert, allows you to rise to the top and then bring people to you instead of you having to constantly chase after them.
0:32:25 - Dmitri
0:32:38 - Speaker 1
It's that time of year again when we gather previous Swimming with Narwhal's Startup Pitch Competition winners and other experts to dive into their experiences, sharing tips and insights for navigating this highly competitive landscape of music tech. Join us on July 17th at 10 am Pacific that's 1 pm Eastern, 6 pm UK time. For Startup Start your Engines. We'll be joined by the winner of our 2023 Swimming with Narwhals pitch competition, ben Bauer of AUX, for advice on what it takes to build a successful startup, tips on fundraising, working with industry partners and, more Immediately following, we'll hear from a surprise investor as we dive into what it takes to grab their attention and succeed as a startup. Our Swimming with Narwhal's pitch competition applications are gearing up to launch, so event attendees can find out what to expect this year. Register for free and learn more about our monthly seismic activity online event series at musictectonicscom.
0:33:46 - Dmitri
See you there. Okay, bruce, how do you know where you stand with an investor? What do they say or do that means you're out of luck, and what do they say or do when there might be hope in the future?
0:33:55 - Bruce
I mean it's different for every investor, because I remember when I was in music, when the first things I was taught was how to keep the A&R face. And the A&R face is you show no emotion, no matter how great the song is, because you don't want to give out any sort of hope so that you can negotiate the best deal down the road.
Wow, you heard it here first on Music Tectonics and so you just kind of stay stoic and stone cold, no matter how much. You heard it here first on Music Tectonics, and so you just kind of stay stoic and stone cold, no matter how much you like it. But investing, it's very different. If it's something that just really blows your mind, you're like yeah, I'm very interested. And so they'll immediately say, hey, let's schedule another meeting a week from now, or two weeks from now, or let's jump right into due diligence. Can you send us your data room? There's very telltale signs when they're like I'm super interested.
I think, on the flip side, if they're not really that interested, sometimes they'll say we'll review, we'll circle back if there's some interest. Typically, if that's the case, they're probably not that interested. Or they're maybe talking to a few other companies that are kind of building the same thing you are, so they're trying to figure out what the winner is going to be. Um, that's the thing about music tech too that maybe I haven't dived into. Or like at any given time there's about 10 to 15 companies all building the same product.
It's so crazy and so you know, a lot of times we're trying to figure out who is going to be first, second or third place, and then we would want to invest in those, like we're not ever going to invest in 12th place yeah and so I think that a lot of founders need to figure out like who your? Competition is. And then how do you get to the top and be set for a second or third?
0:35:45 - Dmitri
yeah, you know, earlier in the conversation, um, you mentioned, uh, how, uh, sometimes you don't want to just pitch transactionally to an investor and I guess if you circle back to this question of sort of like, how are investors reacting? How do you know if they're reacting, if somebody, if an, how do you know when an investor says, well, you know, let's stay in touch. We should keep an eye on this Whether they really mean like I'd like to know where this goes versus let's stay in touch someday when I'm dead?
0:36:18 - Bruce
I mean, if they say let's stay in touch, it's not they haven't fully ruled it out. I think they just want a better understanding of the space. Or they probably are talking to a few other companies that are building something very similar. So they kind of want to like, wait and see how it pans out, wait to see if you get any additional traction down the road. So they may not be interested in investing at that very moment, but you know, they may be open to it. Open to it maybe six months down the road or maybe not even in this round, maybe they might jump on or your next round. And so I think when you get a rejection from an investor, and I think most will say you know a no now is not a no forever. It's just for us right now this isn't a fit. That doesn't mean we can't come in on your next round or just whatever you gain a bit more traction. It's just, it was just something that they just didn't give them enough confidence to pull the trigger on that investment.
0:37:14 - Dmitri
As you'd say that and and and. You're talking about how they may be looking, cause you mentioned it a couple of times and they may be looking at other companies in the same kind of space or with the same kind of model. That makes me want to know, like, well, how much do you hold back when you're talking to investors who might, who might be talking to your competitors or might be investing in your competitors? How do you, how do you say, how do you, how do you address that as a as a startup?
0:37:41 - Bruce
I mean, you have to go in knowing that you're probably not the only party building this particular product, but also you kind of want to be as transparent as possible, and I think most VCs are very transparent about hey, we're already invested in your competitor, so they won't even entertain the conversation if they're investing in your competitor.
Yeah, and you know some will say, hey, we're talking to this company as well. So you know, maybe not share too much with us. Like I'm very much um, sometimes when we go into due diligence, some founders will ask to sign an nda, which that's the whole topic. But most VC firms won't sign NDAs because we're talking to we're literally talking to hundreds, if not thousands, of companies a year. There's obviously going to be a crossover at some point and so just to speak to you, we're not going to enter into a legal agreement, just to speak. It's just not worth the time and effort that has to go into because we're not just going to blindly sign an NDA like the lawyers got to come back and forth. That's not worth the effort to do that. And so you know, I think there's a, there's a trust factor there. One of one of my um kind of mentors in this space told me this advice because I was very torn, like very early in um there was a founder who really wanted us to sign the NBA.
I didn't really feel comfortable to do due diligence with that you know, look, it's a.
It's a trust issue. The trust and trust goes both ways. If the founder wants us to trust them with you know a hundred thousand or you know 250,000000 or you know 250,000. On the flip side, we need they need to trust us with this information that we're not going to go to their competitors, and so there's no like for surefire information. It's just trust needs to happen on both sides and of course, there have been horror stories of investors who have shared data to competitors. But that doesn't happen very often. I think most people just operate with a sense of pride and they just don't share that information.
0:39:53 - Dmitri
And I suppose you could do a little bit in layers too. Like the first conversation, you don't lay everything out, you just start to see what the level of interest is, start to find out whether they already know the space well enough to be talking to competitors or uh, or the model you know, um, and then you know. As you go further, you start to reveal more as well. You can kind of do it in layers. That's probably a safer way. Like you're building trust as you go a little bit without starting with. Nobody trusts me.
0:40:17 - Bruce
We don't trust you, you know kind of attitude yeah, it's's like dating, like you don't want to come in abrasive, it's just like you know, over time you'll slowly just you know reveal everything that's there and then when you feel like, hey, we have a good repertoire here, you want to do diligence, we want investment, and then we'll just lay it out on the table and then just go from there all right.
0:40:42 - Dmitri
Um, just a couple more things here before we wrap up. What other tips do you have for startups who are pitching an investor? Anything else that we haven't covered that comes to mind to help our, our listeners think about this?
0:40:54 - Bruce
I think, just just building. I think the key thing is really start building your relationships before fundraising. You'll just have a much easier time when it's time to fundraise. So you can tap into all these people that you have met over the past couple weeks, a couple months and say, hey, I'm actually fundraising. Um, would you be interested in having a talk? Or, if not, can you connect us with someone who would be interested in having a talk? And then you know those warm intros. They go a very long. Know those warm intros. They go a very long way. And I think warm intros are they're not, they're kind of underrated in a sense, like they go a long way because you know a lot of people are pitching to VCs and so if you get there's a warm intro, you skip right to the front of the line.
0:41:38 - Dmitri
Yeah, nice Good, all right Finally let's widen out a little bit.
0:42:03 - Bruce
When you look at where music is going, where do you think the most potential lies for a successful startup and for investment worthy endeavors? What are the trends emerging that you think have the most potential? Now, one that a lot of people aren't really diving into is music discovery. I think if there's anything to be said about TikTok, tiktok has shown that there's still a massive market in music discovery. People are constantly looking for new songs and new artists and you know, spotify can only do so much and Apple Music can only do so much, can only do so much, and Apple Music can only do so much. So if there's a company that comes that can really hone in music discovery and make it easier for fans to just find new music and new artists, I think that's a prime opportunity. Also, superfans I think we might have talked about this on another segment, but Superfans is a pretty big market. Obviously, it's not for casual fans and Superfans aren't your casual fans, but there's the 1,000 true fan theory where if you have 1,000 true fans, that's worth more than 10,000 casual fans because they'll buy whatever you put out. Casual fans because they'll buy whatever you put out, and so I think there's something there and you know a lot of people have tried when no one's gotten it right. But that's something I talk to labels pretty often and that's something they're all like, hey, if there's a super fan experience out there that we think is interesting, like please shoot it our way. So that's something that labels are actively looking for.
Um, and I think another space, a third space, is the intersection of music and gaming. I think the entertainment industry as a whole has now wrapped its mind around the importance of gaming. There's no way to get around it. Obviously, gaming does more than music and movies combined, and so everyone's like okay, gaming is big. How do we build initiatives around gaming? But I think people forget that there are no games without music, and so there's a unique intersection there that I think is still in its very infancy stage of being explored, of either how to implement music into games in a very unique way for the, the gamer side, or gamifying the music experience.
0:44:11 - Dmitri
Yeah, I was just gonna ask you which one you lean towards more. More like getting the music into the games or getting the games into the music?
0:44:17 - Bruce
it sounds like both yeah, it's a little bit of both. I mean, if we look at like back in, what was this 10 years, maybe 15 years ago I'm aging myself out now where you know, rock band and guitar hero were huge, they were massive, and you know, I remember I discovered a lot of music just through playing those games and so, and then I think a lot of people did, too, discover music that they never knew. And so there's obviously something you said about gamifying music, so you just do it in a way, that's just, that's just fun. I mean, people would just throw like I was in college when I came out so people just throw like guitar hero and rock band parties, yeah. And so, yeah, there's a, there's a prime opportunity there. I don't think anyone's really explored it just yet.
0:45:03 - Dmitri
I haven't heard about Beat Saber parties, but I can imagine they're out there, or they were in the recent years as well. It's fun to see what music pops up there too. Bruce, this has been great. Thank you so much for taking the time and being so helpful with sharing your insights, your experience, your insights and advice for these music tech companies that are listening to us. And, bruce, uh, advice, uh, for these music tech companies that are listening to us. And uh, bruce, you're kind of becoming a regular at the Music Tectonics Conference. I know you're going to come back and speak at the conference this October. Um, so people will have a chance to come and meet you and uh, continue the conversation there. Thanks so much for joining the podcast, bruce.
0:45:37 - Bruce
Thank you for having me.
0:45:40 - Dmitri
Thanks for listening to Music Tectonics. If you like what you hear, please subscribe on your favorite podcast app. We have new episodes for you every week. Did you know? We do free monthly online events that you, our lovely podcast listeners, can join? Find out more at musictectonics.com and, while you're there, look for the latest about our annual conference and sign up for our newsletter to get updates. Everything we do explores the seismic shifts that shake up music and technology, the way the earth's tectonic plates cause quakes and make mountains. Connect with Music Tectonics on Twitter, Instagram and LinkedIn. That's my favorite platform. Connect with me. Dmitri Vietze, if you can spell it, We'll be back again next week, if not sooner.
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The Music Tectonics podcast goes beneath the surface of the music industry to explore how technology is changing the way business gets done. Weekly episodes include interviews with music tech movers & shakers, deep dives into seismic shifts, and more.