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Startup Reality Check with Bob Moz: How to Start Up

Updated: May 6

Listen in to the conversation I had with expert Bob Moczydlowsky, former Managing Director of Techstars Music, about what trends and investment shifts he sees shaking up the music tech startup space. This was a live Seismic Activity event, open to all and held monthly. RSVP for the next one here.

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Episode Transcript

Machine transcribed

0:00:09 - Dmitri

Welcome back to Music Tectonics, where we go beneath the surface of music and tech. I'm your host, Dmitri Vietze. I'm also the founder and CEO of Rock Paper Scissors, the PR and marketing firm that specializes in music, tech and innovation. Today's episode is part of our how to Start Up edition and it's also part of our online event series, the Seismic Activity. So if you're listening in podcast land, check out the events at so you can participate in a future edition. In just a few minutes I'll be interviewing Bob Moz, the former managing director of TechStars Music. But before we get started, I have a few announcements for you. The Music Tectonics Conference is back on the beach in Santa Monica October 22nd to 24th, so please mark your calendars and get in touch with Shaley Ankenbrook if you want to talk about an activation or sponsoring a panel. Also, super early bird tickets are going on sale April 23rd. This will be your first chance to sign up to be at the conference. Numbers will be limited, so be ready to jump on them and to get the best deal of the year. It really is a good deal. Podcast listeners, make sure you're getting the newsletter for updates like this and in other news. Our next Seismic Activity online event will take place May 8th at 10 am Pacific, 1 pm Eastern, and the topic is License to Generate Is this music real? We'll focus on emerging technology to protect rights holders in the age of AI and derivative content. Those of you who are here we just posted in the RSVP link. The chat In the chat. We posted the RSVP link. The chat In the chat. We posted the RSVP link. So now to our guest. 

Bob Moz started his career in 2003 as the founder of a small media consulting company producing content for the Sundance Film Festival and other cultural organizations. He then earned a Master's of Entertainment Management from Carnegie Mellon, where he now teaches digital media strategy management from Carnegie Mellon, where he now teaches digital media strategy. Soon after that, bob moved to Yahoo Music, managing music information products during the site's run as the number one web destination for music. In 2009, he went back to startup, serving as the SVP of product and marketing for Topspin Media. He then joined pre-IPO Twitter as head of music from 2013 to 2015, serving as the music industry's point person for commerce, music streaming and video sharing features. Bob left Twitter to create the Techstars Music Accelerator, where he served as managing director from 2017 through 2023. Techstars Music was a global accelerator program that made 70 investments into media and entertainment startups and helped its portfolio raise more than $263 million in post-program funding. I'd like to welcome onto screen and onto the podcast Bob Moss. Hey, bob, hi. 

0:03:01 - Bob

Thank you very much for having me. Thanks for being here. Yeah, awesome. 

0:03:04 - Dmitri

And thanks all of you having me. Thanks for being here yeah, awesome. And thanks all of you in our live audience for joining us as well. This will be fun. We'll have time for a Q&A at the end, but let's jump into this. Over the last five years, Bob, there have been a lot of changes in how music tech startups get funding and develop traction, and a lot of the tectonics community is curious about the role of accelerators, incubators and even conferences in getting off the ground. Let's start top level. What did you learn about startups and accelerators by running Techstars Music? 

0:03:33 - Bob

Oh, my goodness, Too many things right. It's like the process of making investments is like nonstop learning from your mistakes. Investments is like nonstop learning from your mistakes. You get much faster and more visceral feedback from the mistakes than you do from the successes, right. So it really feels like it's nonstop failure all the time, and then you know, two and three, four years later you get some success. 

So the biggest thing I will say about this and maybe this will sort of color our conversation a little bit is that I think that the lesson I learned the most as an investor is really how to make investments. 

And so, in a very sort of ironic way, running the accelerator for seven years and making the portfolio investments we did showed us a better way to make investments. I think and I say that because in the live chat there are actually some friends and mentors and people who are really involved in the Accelerator I see a bunch of familiar names. It's super cool to see them. There's actually a couple people on this call who, as investors in the Accelerator fund. You know we were asking, as we were making these investments how do we make this bigger? How do we make this um more helpful to founders in the category. So a lot of what I will say today is related to, um, I think, how we should be making investments in media entertainment, rather than the way we have been making investments in media entertainment and that's what I'm working on right now is what the next thing sort of looks like. 

0:05:09 - Dmitri

Gotcha. So I mean you're kind of in a unique position that you saw so many different kind of startups pass through the program, work with them, mentor them and then help them seek out funding post-Techstars music as well. 

0:05:23 - Bob

Right, yeah, and look, techstars is great. Techstars is still a super vibrant platform. They're running accelerators all over the world. It's one of the original accelerators started in 2007. The concept there is to try to get some early, professional, pre-seed funding, get your strategy ship shape, figure out exactly what your market opportunity looks like and who would fund you and who are the right investors for you, and make as much progress as possible in a 13-week or 90-day window. And then use the connections of that network and some validation there to go out and raise capital and look it works, it works. We have a very vibrant portfolio. We've got some really valuable companies in it. We've raised more than a quarter of a billion dollars for those companies post-program. There's a couple of them that are really important strategically in the way music and media is working right now. We can talk about those at some point in the podcast. 

So I don't mean to say any of this is like hey, that's the wrong thing or don't do it. It's more of the reality of the accelerator model is that it was created in 2007, 2008, and kind of took off around the financial crisis, that when angel funding kind of dried up and it was really hard to get your initial, you know sort of professional pre-seed investment. There weren't a lot of small party rounds and so the concept of putting accelerators together to put that first sort of 120, $150,000 into the company and allow investors to watch it make progress for two or three months as a sort of as diligence and validation, you know that really rocketed a bunch of companies into you know really valuable positions for people in the 2012-13 range, right? So five years later the fruits of those investments sort of were you know were ready to eat, and then now you know, if you fast forward, that model still works. 

The network is still valuable. The strategic insight and development you can get on your product and the feedback you can get is still really valuable. But the capital allocation is relatively small compared to what things cost now in 2024 versus what they cost in 2008, 2009, 2010. And the equity position that we're buying as an investor is pretty heavily discounted. We're buying a reasonable amount of equity for a small amount of money. That's part of why the value proposition works. You're taking risk on the baby company to do that, but into sort of today's market. Founders need less sort of curriculum and more specialized connection and more capital. 

And so in general, I think there are still a lot of situations where the accelerator model works really well and can be helpful for people, but in general I think there's probably a better of situations where the accelerator model works really well and can be helpful for people. But in general, I think there's probably a better way to do scene stage investing. 

0:08:10 - Dmitri

Gotcha, I want to ask you kind of a stupid question. Then I want to get into a little bit more detail about what you're talking about. What's the difference between an accelerator and incubator? Got into music tech, I saw a bunch. In addition to tech stars, I saw a bunch of other things popping up, ranging from, you know, project music and, um, you know some some some other other ones that have popped up here and there. There was G beta did some music stuff and there was a capital. Maybe that was the collaboration with capital. There there were just a few different ones and I couldn't quite tell what the exact differences were. Can you just run down that and say come back. 

0:08:45 - Bob

Yeah, happy to. Okay. So the most basic way to think about it is if something is an incubator, you are trading real estate or office space for equity. That's the easiest way to think about it. So if it's like, hey, we have an incubator, it means we have a house, we have an office, we have extra square footage. We bring some companies in. We don't charge them rent to be there. Maybe we introduce them to some people and create some sort of community and there's some serendipity around people being around. But the basic economic deal is we're trading office space or real estate costs for equity. That's an incubator. 

An accelerator is we're going to make a cash investment. We're going to write a check and buy equity in this company and we're going to provide office check and buy equity in this company and we're going to provide office space and a sort of a structured curriculum. Some people don't like the word curriculum. I think it's the best way to describe it. You're going to introduce them to mentors. You're going to run through a process. You're going to ask a bunch of questions. There are certain milestones along the way that you want to see these companies get through. But it's not a school. It's grow your business, but it's it's around like hey, we've we've invested capital in this company. Yes, we're providing you a place to office out of and work, but we're really trying to move you into that next round of capital and at the end of that, you know, defined short amount of period of time, you're going to go out on your own and be a totally independent company and leave this office space and go out that way. 

So they really are two separate things. 

They get kind of used interchangeably because there are a bunch of other models and I would warn people, if you are a founder, to avoid these other models. 

If the economic deal is not I'm trading office space for a small amount of equity and you think that's a fair trade. Or I'm investing in your company by writing a check and introducing you to people and putting you through milestones and trying to give you some validation for fundraising. If the model in between is like hey, come around and see us and we'll introduce you to people and you'll trade us equity If I'm not getting a tangible thing that lowers my costs and grows my business either actual capital into my business or saving me a real cost of building an office space and having a place to go and build the company, I would stay away. It's kind of a marker of a less professional founder and a lower grade opportunity to other investors. So other investors will look at companies that are in those sort of hybrid gray area models in between incubator and accelerator and look at them with skepticism around the decision-making of the founder. 

0:11:23 - Dmitri

Good to know, good, good pro tips from an investment perspective. You kind of sort of implied in your in your opening response that the accelerator model is not quite what's needed now, or maybe the type of accelerator might not be what. What is the current state of accelerators? And let's get into just a tiny bit more detail about that before we move. 

0:11:43 - Bob

Let me qualify this with I mean in media and entertainment. Okay, so I'm not. If we're talking about climate tech, right. If we're talking about FinTech, if we're talking about a geographically focused accelerator, as long as that accelerator is writing a check and buying equity in your company and also providing network and platform and validation and tangible value that you can see to help you grow your company Great, those things work. You have to look at them on a cost-benefit analysis basis. 

As a founder, I'm not dissing accelerators right in media entertainment. From a capital deployments perspective, there's a really big opportunity to make a bunch of money in and around media entertainment. From a venture perspective, over the next sort of five to 10 years. I think there's a huge, awesome opportunity, and so my goal and why I'm saying what I'm saying is I would like to be, you know, I want to capture as much of that opportunity as possible with an investment vehicle. The way to capture that is not with an accelerator. That's what I'm saying just sort of specifically. And so the reason I'm saying this around media entertainment is that and it's the only category I'm good at I'm not great at fintech investing. I'm not great at later stage investing. I'm not great at detailed financial diligence, I'm basically a talent scout I'm good at like. Is this a problem? Could we solve this? How would the market react? Are these people credible? Can they build stuff? Do they make good decisions? And I can sort of convene people together and I've been very blessed in my career that I don't think anybody hates me and so I can put people together in a room and convince them to try to help other people right. That's been sort of the basics of it. 

So long-winded caveat at the top. What I really mean is that the better way to make investments in our category has to include solving for the follow-on capital risk problem. And the reason media entertainment has a follow-on capital risk problem meaning like who invests after the accelerator or who invests after the person who has conviction is that investors like to see signal and they like to see participation continuously from people who are in that category and are experts in that category. And what we don't really have in media entertainment at all right now is an entity that will write more than one check at any stage of the company, and so the accelerator is really good at giving founders that first little piece of capital, a little bit of validation, introduce them to people, help them get their strategy right. But then you actually kind of signal to the market that the company gets shoved out of the nest and it's got to fly on its own, whereas if you really believed in the category and the network and the opportunity there, you would keep writing checks into the companies that were succeeding, that you had already funded once before and that would send signal to other investors who might only make one or two media or entertainment related investments out of their whole portfolio or their fund because their fund's not dedicated to the category, it's more generalist, return driven fund. They need to be able to see that there's more capital to back that company and other checks to be there. 

So I'm saying that right now in that, like every founder out there with an entertainment or media related startup should be very you know, in a very detailed way, digging in and thinking about who writes their first check, then who writes their second check, sort of at the seed stage level for a professional investor perspective, and then who might write their next two or three other checks. 

And if you can't, sort of at the seed stage level from a professional investor perspective, and then who might write their next two or three other checks. 

And if you can't sort of see that path through of like, okay, what fund do I match their thesis, or here's my opportunity and as my business gets this big, here's who's going to want to fund this. If you can't see that you're missing out and there's a bunch of investors who are going to pass on your deal and tell you your opportunity is too small or the TAM isn't big enough in your category and it's because you weren't looking forward to show them what it's going to be and tell them and point them to look in the right direction, and so just the accelerator enough isn't going to help. It's going to help you, it's going to be good and I love doing it and it was super rewarding and we bought some great and valuable equity. But the amount of work I've had to do at the later stages for companies that are alumni of the accelerator has revealed to me that we were doing too much work with not enough capital deployed and we need to change the way that model works so we can get better returns. 

0:16:24 - Dmitri

Gotcha. So my takeaway is startups need to be aware that it's not just eking out that first seed investment component to get them to the next level so they can either take a paycheck or hire more developers or build more product, but they really need to have a strategy for a midterm what's going to happen next? And that getting investment later is actually harder if your original investors aren't willing or able to reinvest. 

0:16:50 - Bob

Correct. And also, as a founder, you are spending your most valuable resource, your time and your effort and probably some of your own personal capital, in the prime of your career, and so founders need to be really objective about is this opportunity I am trying to build and trying to fund? Is it actually big enough and valuable enough and worth my own time and investment? Not just can I convince someone to get me through the next year or the next 18 months? Right? Investors don't fund companies to keep them alive or give them time and runway. They buy pieces of opportunities, and if you can't show someone that how big the opportunity is and what it is and want and try and sell them a piece of that opportunity, then you probably shouldn't be working on the company either. Right, if you can't pitch it that way. 

0:17:39 - Dmitri

Got it Great. Some great questions coming into the chat. We're going to save most of those for the end, but there is a good follow-on from Joe too, from Sony Innovation Fund. Oh Joe, hey Bob, how do you think about venture studios versus incubators and accelerators? Let's just throw a quick answer in there while we progress. 

0:17:55 - Bob

Joe's asking that question, I think because we think about it from a corporate perspective right, like, could we make a venture studio where we say here's the problems we want solved as an industry and people come in there and there's some funding to solve these problems. Versus, hey, we have an accelerator over here where you bring us your fully formed company ideas and we say yes or no and decide if we can help make those things work and they go out and go that way? I am going to contradict almost all the other things. I normally say that I actually kind of like the venture studio idea. It's sort of fallen out of fashion. I think there's a couple of venture studios in the world that do this in a really good way, and the venture studio model is for people who don't understand is you bring your concept in and the studio provides product development and design and staffing and office space and some capital to help you build the concept, and they take a very large amount of equity as a result. They basically become co-founders with you of that product. Liquid Death Everybody knows Liquid Death, the water brand that you see at music festivals and sporting events, whatever that's. That is a venture studio product. Dollar Shave Club is a venture studio product, both of them out of the same studio, actually here in Los Angeles, I think, pioneer Square Labs. That's basically funded by Amazon in Seattle. They've done some really great work in their venture studio. So I think there are there are. 

If you are building a consumer product that needs a ton of money and a ton of traction immediately, right, the investor sort of slang for this would be like a bottle rocket, meaning you, you get to light at one time and if it goes, if it takes off and and make something beautiful in the sky really quickly, that's it's success. Otherwise, it's done and it fizzes out and it's over, but you only get to light it once. And so if your business idea is a bottle rocket that requires really fast, well-capitalized, like, let's go do this thing immediately and it's a consumer product, not a business to business product, not a hard tech product, not something that takes years and years to drive adoption, but something that takes years and years to drive adoption, but something that just goes immediately, I can kind of get convinced that the studio model might be a good way to do it. So it's a great point that Joe brings up. 

It is sort of the third credible path. There's the incubator. I trade my equity for real estate. The accelerator Someone writes a check and helps build me, and then the studio is. I partner with the studio to build the company. 

0:20:18 - Dmitri

Got it Great. So I want to get some. We talked about kind of the supply side of investment. We can talk about the demand side a little bit. From your days with Techstars Music. What are some examples of startups that did investment well, and if you also want to share some that didn't well, you don't have to reveal names, but sort of give us a little specificity around. Like, as you know, startups that are here listening to this today can get a sense of, like what are some pathways that worked for specific companies? 

0:20:49 - Bob

Well, probably the most helpful thing I can say in that category. Again, that question is like within my portfolio, there's a category of the most valuable companies and there are things that these companies have in common that are very obvious to see, and some of them are not super big or really valuable. They're still relatively small right, they're in the $20, $30 million value range, but their founders operate and look at these things sort of in the same way, and that is that the biggest thing that the most successful founders in my portfolio have in common is that they are running their business with a spreadsheet and they're looking at it going. If I spend this amount of money on dev supplies, marketing, whatever, I get back this much revenue. And there's only one company in my portfolio that thinks in terms of if I back this much revenue, and there's there's only one company in my portfolio that is that thinks in terms of if I spend this much money, what I get back is not revenue but as users and usage and engagement. And I'm going to and the and the company has been continuously funded based on the size and volume of that engagement and where it was just a very like 2008, 2009, 2010 venture approach, which is like, hey, if we can just get to 150 million users, it doesn't matter if we make any money. No company that ever got to 150 million monthly active users went unmonetized or unsold. 

Those are super valuable properties. Let's just do that and get that big, and out of 70 investments, I have one of those. All of the rest of them manage their business. With how many dollars do I spend to get more dollars in revenue? And the best ones, of which there are two or three that are profitable inside of that portfolio who have realized that they thought they could get to $100 million or $200 million in annual revenue, which would yield venture size sort of valuations, and they can't. They're like, they're stuck. They're like, okay, well, this is probably just going to be a 25 to $50 million annual revenue company. They immediately realized that and stopped pitching venture investors and stopped spending their time trying to get venture investors to fund the company, because even they could see there's no way someone's getting a 10x multiple on their $2 million investment in this company or a 100x multiple on that, and so the thing that founders really have to think about in this structure is if you're pitching an investor. 

So let's say, I had a $50 million fund and you came to me and wanted investment in your company. You should know how big my fund is. I've got $50 million I'm investing. You should also know that I have to evaluate every single investment I make as if it needs to return all $50 million of my fund. I'm looking at you going. 

If I write you a check, I have to believe that all the other investments I'm going to make are going to go to zero and you're going to return all of the money that I've invested. So I need to get at least $50 million back from you. But in reality, what I need to see is that you're going to return the fund, and by return the fund, what I mean is you're going to get me into profit, so I need to make $3. I mean I need 3X on top of that right. So if I write you a $5 million check, I need to believe that my $5 million check into your company could be worth $150 million in returns. Okay, whoa right, that's a big number. That's a big number, that's a lot right, and that's the way the investors are thinking about it. And so if you start thinking this way as a founder, you can then sell me the thing I'm trying to buy right. I'm trying to buy a piece of an opportunity that's going to be worth that much money in the future. 

So sell it to me that way right, and the thing that these founders that I have in common in my portfolio and I think to the gist of what your question is is how do founders do this? What's like if the founder's not looking at a spreadsheet going, hey, if I lose $10 million over the next five years, I'll be in a position where I have this many users. I can start making $75 million a year and then from $75 million a year I can go to $150 million a year and then next thing, you know, this thing is worth $800, $900 billion on the valuation of the company and a founder. Just explaining that in really simple, practical language is really compelling. It's not about like, oh, we got to get $5 million together so we can build a team. It's like you should have already thought about who the team is. Yeah, cool. 

0:25:16 - Dmitri

So as I was talking to our Chief strategy officer, tristra New Year Yeager at Rock Paper Scissors about this topic I think it was her she referred to this conversation about accelerators and incubators and conferences and competitions. As the startup circus, we've seen a lot of startups, you know, get a lot of visibility through kind of activating, through these types of things. I'm curious to ask you what about conferences and competitions? I know this is a totally different direction than where we just were on the last answer, but how should startups be thinking about those in their roadmap and path to traction? 

0:25:48 - Bob

They shouldn't be Build your product. The only reason, the only in my opinion like listen, you run a really good and valuable conference. Opinion, like listen, you run a really good and valuable conference. And that people who have startups should only be at your conference if they're going for a specific reason. And the specific reason is there is a person at that conference that they need to do business with. If they are going to the conference to pitch the company or to get awareness for the company, or to win the pitch competition, so investors will think we're interesting, they should stay home and work on their product. 

Um, if they can go to the conference and demo the product and in addition to having a one-on-one meeting that they know is 100 for sure going to happen with the person who they need to meet with. Right, I'll pick on jo Joe because he's in the chat and he's delightful. If you know that Joe is a series A to series B level two to $5 million co-investment check investor, which he is, and you have a round that is 40 to 50 or 60% committed and you have a lead, and you know that there's a strategic reason why you would want the Sony Innovation Fund to write a check into your company and why you want to do business with Sony. You're an idiot if you don't buy an early bird ticket to Music Tectonics and go to the conference and in the meantime, ask Joe to have you take a walk down the beach and talk to him about your business, right? 

But if you're trying to just meet Joe, and pitch him to lead your round as a seed investor which he isn't right and be the lead, which he isn't right. What are you doing? These are known things, right? These are things that you like, and so in in the whole startup circus around the world, pitch competitions. This come, whatever. All of them should be a means to an end, and if you can't tell me specifically what the means to an end is, you should stay home and build your product I. 

0:27:57 - Dmitri

I have to say it's very hard to recruit the kinds of people we get at the conference, and Joe is one of them. That's what I mean. 

0:28:03 - Bob

Your conference is great but it's great because people can go there and do business. You can't go there and build awareness or build your brand or be seen. You're wasting your time and money and to be, honest, you're providing a negative signal to investors, who know what they're looking at. 

0:28:20 - Dmitri

We also try to bring in potential partners record labels, managers, agents, things like that too who are sometimes beta users for music tech companies. And then there's the carousel where we have demos where people investors can quietly go around and actually just check out and get a point A on sort of like, what is this company up? Should I keep an eye on them? Kind of stuff like that. But I think it's a healthy dose of realism about what expectations you can get. 

0:28:45 - Bob

I mean, look, look, I, you know you should have the same expectations of people there. You should be saying the same thing, right, and like it's expensive to come to music, not tectonics. It's not relatively expensive, right, but it's time and effort. You spend a lot of time and effort putting a really good group of people together. That really good group of people is there to do real work. And so if you can't come and do real work, come, go home, do this thing, come back next year, right, like that. And if you need to learn how what real work looks like, come and watch and lurk and pay attention and note and watch what happens, right, and that's a different, that's totally different thing. But in general, you see founders traveling around the planet, going from conference to conference to conference, you know, and it's just like or when do we work on the company? 

0:29:31 - Dmitri

Right, yeah, got it. So I got my takeaway. Guys has come to music tectonics and that's the only conference you need to come to. Anyway, you know, let's widen out a little bit. How's the music tech investment market looking in 2024? You've kind of like touched on that a little bit. What types of entities are investing, what kind of trends are changing in investment, et cetera. 

0:29:54 - Bob

Well, so right now I don't. If someone knows, I don't know and I'm not like you know, please correct me in the chat. Music is a subset of media and entertainment, right? No-transcript? No music right. If those companies happen to change the way the music business works or are beneficial for music or are related to music, great, that's cool. Right, but I have always made investments around future of entertainment, live events and self-expression, and these are companies that, if they succeed, the music business would benefit, which is why I had capital from the music business, right. Capital came from the music business to benefit, which is why I had capital from the music business, right. Music capital came from the music business to me to go invest in startups. 

Dirty secret and not so secret of Techstars Music is we didn't invest in that many music pure music companies, right. The most popular and biggest pure music company I can even argue it's not a pure music company is Endel, right, it's a functional music company. It's an AI soundscapes company. It is also a personal health and wellness company, right. So I keep saying it that way because there are a lot of funds. 

Who will write one or two checks that are related to media, entertainment, live events as part of their broader portfolio and thesis, but I am unaware of a fund that has that as their sole focus, and so the prospects for media entertainment companies raising capital right now in this current market are not very good. It's tough, right, because what you have to do is find the investor who's looking for you, and there's no regular set of places to go. And if I'm a seed investor, a generalist seed investor, or a generalist series A investor, I'm looking for signal below me, and what I mean by that is I want to see really good angels writing checks. I want to see really good pre-seed investors writing checks. And then I want to see, like I mentioned earlier, I want to see those investors continue to back the company and take their pro rata and invest in the business and grow it. And that entity doesn't exist right now. I'm working on it, but my point is so, if you're a company in this category. 

It's tough, and so what you have to do is realize that you can't just go get the Midas list of VCs or a bunch of famous investors and hope that you're going to pitch them and they're going to be persuaded to invest in your company. What you have to do is do a bunch of really deep homework and you need to be able to identify and talk about investors the way I just talked about Joe. We'll keep picking on Joe for the sake of the podcast. Right? 

Sony Innovation Fund is a corporate venture fund. They have outside capital, but they use their position to benefit Sony and their investors, and a lot of the stuff they invest in sort of has to have a strategic benefit, like if it wins, sony wins, or it helps Sony accomplish something, or there's a reason why they would back it, or it replaces a business unit or challenges them in some way. Right. But they're primarily co-investors and they want to be with other good investors, and so there's a lot of people who are like, oh well, I could go get the labels to invest in me or a manager to invest in me, or I could go pitch the corporate venture fund, but there isn't really a signifying fund that if I'm a grade A venture fund in New York or Boston or the Bay Area that I look at and go, oh, that's signal, that's a grade A deal. There's lots of co-investment money but there's not a lot of lead money. 

0:34:00 - Dmitri

And so you, as a founder, have to figure out where that's going to come from. Let's, let's wind down on the other side, what, what trends do you think have legs and the most potential for the music to? I mean media and entertainment space there you go. 

0:34:08 - Bob

It's dangerous to be a trend spotter, right, it's dangerous business. The way I will answer this is to say that I think we are at the end of a really amazing era that I will call streaming 1.0. Right, and in streaming 1.0, the goal if you really oversimplified everything was make all the media play. Give me access to all of the media all the time, where I want it, when I want it, how I want it, at a reasonable, convenient price, and make it work on my phone, on my laptop, on my TV, in my car, everywhere. Just make all the media play. Make the media play. That's streaming 1.0. And if you look at growth rates for subscriptions, if you look at engagement rates, if you look at sort of the, it feels like we're pretty mature at this point. Right, we have our. We have really good streaming fitness stuff. We have really good streaming video stuff. We have incredible streaming audio and music stuff. Everything kind of works and it's all. Those are all pretty good sized businesses and but they're growing a little less than they have been. Right, the curve is not quite as steep as it, as it used to be, um, and I think that puts us at the we're about to be at the beginning of streaming 2.0, and my version of streaming 2.0 is, instead of make all the media play, it is to play with all of the music. It is to allow me to have experiences that I'm in control of, where I manipulate the music, I combine it, I change it, I change who the singer is right, I move around the genres, I make stuff myself there's I generate media that I need, that I use for my own personal work. All of these things are, I would, lump into the bucket of play with the music or play with the media, right. So in that way, I think there's a bunch of things that are going to show us different user experiences and people are going to tell us what the products could be, because the fan and the consumer is going to tell us what the products can be. 

But we're in this really wild and I'm crazy optimistic. It's going to be really awesome for the next decade because we really are in the digital natives controlling the world. Part of the story it's not just convert your library into streaming and organize it and charge me 10 bucks to access it. It's going to be hey, I can generate songs with an idea and a verbal prompt right to an AI engine or to a model. Great, now we have even more songs, right? What business is now possible because we can do that? What video game experience can we create because we have unlimited access to music or media or visuals? What storytelling opportunities, what self-expression opportunities are there? And that's the way I think you know, that's the way I'm thinking about it and that's the way I think investors are looking at. The next sort of 10 years is if you let people play with the media, what you know, what are the new experiences and new products that we can create? 

0:37:17 - Dmitri

what are the new experiences and new products that we can create? Awesome, great. I have more questions for you, but I'm really digging a lot of the questions that are in the chat, so I might just read some of those out to you and then, if there's, more questions. We can even bring folks on mic. Ivan Totorov asks do you see founder investment requirements going down significantly as they leverage AI to build their apps, content and experiences? Is their world of one-person billion-dollar media properties and companies? 

0:37:43 - Bob

I mean, I think there are definitely going to be really valuable larger, two or three developers, one person I use a bunch of democratized tools sort of thing that are wildly profitable. Yes, I think we have a crazy weird story that I'm not an expert in antitrust. I follow it professionally because we have the EU and the US having a pretty chilling effect on startup acquisitions and liquidity events people buying things and other products. We have big tech getting bigger every day and we have it getting harder and harder for small companies to compete and for startups to get liquid and move out. They're really like the I'm going to sell the company to a larger platform. 

Company era is pretty frozen. That era seems like it's it's it's over, and so I do think that there will be the ability for three or four really talented people to build a product and keep it private and not have to raise outside capital and grow it with revenue. I think the ceiling for those businesses has never been higher. I think it's totally possible that you could have people making 4040, $50, $60 million a year on those businesses. I also think there are just the real opportunities that investors are looking at are going to require upfront capital and really high quality teams, and really high quality teams have never been more expensive, and so I think that's the counterweight to that reality. 

0:39:16 - Dmitri

Got it. We've got another good question here from Donnie Canter. Acquisition seems to be the main exit for media tech. In what part of the music industry is there space for a unicorn that might go public? How can music be the business? 

0:39:29 - Bob

I mean, come on, man, If I knew the answer to that, I'd be out there hounding that founder and writing checks. That's the goal, right. I believe there is like I wouldn't be doing what I do and I wouldn't have the position that I have if I didn't believe that that was the case all the time. So I absolutely think there are. I think there's more than one opportunity for a publicly traded, gigantic unicorn style entertainment. You know, live events, self-expression company and I'm not trying to duck the question, but I kind of already said what I think it is. 

I think it is the thing that allows you to play with the media. I think it could look like a game. I think it could look like a social platform, I think it could look like entertainment or a television experience. I don't think it's limited to any of those categories, but I think the thing that's required inside of it is give fans all the freedom to manipulate the media in a totally different way, and maybe that means you're going around the way IP works now and you're generating all of the media so that you can control both sides of it, or generate all of the media so it's totally owned and operated by the entity. Maybe that's what's required for that to happen. I think there probably is one that's like that, but I don't necessarily think that it has to be that for it to get that big. But yeah, I definitely think there's room for it. Give kids control, I think, is where the money is. 

0:40:56 - Dmitri

Got it Cool. These questions are great, so I'm just going to keep going and your responses are super helpful to hear. William Gary asks why do investors only write one check if they own equity, are they more likely to want to just have ownership of the business rather than pour additional money into after the initial funding? 

0:41:13 - Bob

So great question. I'm making those comments specifically to venture investors, where you are taking a minority position in the company. Maybe you have some control with a board seat and you have some information rights or you actually have some voting power or control over the staff of the company. I am not that investor. I make passive investments, I'm sort of servant and my equity eventually gets diluted because other investors come inside. So the thing that investors will look for venture investors, not private equity investors or people who want to own the company. Those are different categories, different kind of investing. Those investors are really focused on profitable businesses that can either be optimized by cutting costs to make more profit or be grown with investment to make more profit and bigger revenues. 

We're talking about loss making private companies that have just started up, that are not yet to that stage, and so the judgment call that investors are making is is this company making enough progress? Is the execution good? Is the team healthy? Are we hitting milestones Even though at these milestones we are thrilled to be hitting, we are still losing money, but we are losing money, less money, on an overall basis. Maybe our unit economics are now positive, but our overall overhead is too high. But we're growing enough that we believe we're going to get to the place where our revenues are $100 million plus annually, or we have 100 million users plus on the consumer side, and so everybody's making a judgment call. In those cases, you're guessing right, you're doing as much research and diligence as you can, you're interviewing the team, you're playing with the product, you're checking everything you can, but you're really making an educated guess as to whether this thing moves forward. 

Well, a very practical way to make a better educated guess is to go well, the people who have already invested in the company, who have been helping it and watching it for the last two years are they still writing checks into the company? Are they still putting capital against it and funding the opportunity, or are they sitting back on their hands waiting for someone else new to come in and put capital in? These things have a social effect. Capital is not rational, it's emotional. And in that moment, if the people who have been funding it for two years are still funding it, it sends a message to the downstream people that this is something that's valuable and worth having. 

And if the insiders are not funding it, I want to the downstream people that this is something that's valuable and worth having, and if the insiders are not funding it, I want to know why. Oh well, the CEO is a little squirrely, the company is making good progress but we don't really trust them. Oh well, that would have a chilling effect on my willingness to rent a check. So that's why I talk about it that way, and I think that signal is both positive and negative for the founders. The founders sometimes are like well, I'm so stuck, I need help. We got to get through this channel and my investors won't back me and keep me going. Those are all the human tensions involved. But the next check writer wants to know that the existing shareholders are participating. 

0:44:12 - Dmitri

Yeah, Super interesting. There's psychology of investors that we're hearing from you. It's super interesting. Look man, it is not rational by any means. 

0:44:17 - Bob

Yeah, Super interesting. There's psychology of investors that we're hearing from you. It's super interesting as well. Look man, it is not rational by any means. Yeah, it's humans. 

0:44:23 - Dmitri

Here's another great question from Eddie Miklovich Do you think venture-backed startups can realistically help more artists create sustainable careers, or do the demands that naturally come with venture investments, such as become bigger than the music market, return a hundred times return make it difficult to stay mission aligned in the long run? I like the question because we see a lot of music tech startups that are here to like help to fix things for the artists, fix things for the, for the industry. Um, so it's interesting to hear whether those types of startups are already kind of a mismatch for the kind of funding you're talking about. 

0:44:57 - Bob

They are. If the artist is your customer, it's probably not a venture opportunity and there are examples of that where you can counter that. I'm not saying black or white, but I'm saying the easy position from a founder's perspective is hey, there's not that many artists. The easy position from a founder's perspective is hey, there's not that many artists. There's a whole vast solution of you know source, you know section of them or whatever that that are going to fail, that are aspirational and the handful that are going to make it inside of there. They're not going to pay there. You're going to have to pay them and the the they don't act as a block, as a rational group of things that move around. They're all self-motivated individuals and there just aren't enough of them compared to the consumer side of the fan side. 

So if your startup is tools for artists, it could still be a good business. You still could make money doing it. You still could have a really rewarding and awesome life. You should just look to a different kind of investor and think about how you run that business from your boat in the Caribbean rather than run that business where the demands of the capital are. We get to $100 million in annual revenue. 

0:46:05 - Dmitri

Gotcha, Are you cool with this? I got a couple more good questions. Let's go. Yeah, this is great, Great questions to our audience too. Love the Music Tectonics listeners because these are in-depth. Talman Chodakiewicz hope I got that right says with the likes of major money generating tours like Taylor Swift in 2023, how are investors weighing future live event, live media entertainment investment opportunities as opposed to investments around home media manipulation via Gen I tools like Sunoai, ChatGPT, et cetera? 

0:46:42 - Bob

Okay. So is there anything involving Taylor's dangerous business? Because she's Taylor Swift, she's their own thing, right? She's a sort of cultural phenomenon. 

That said, the live events thing is interesting to investors because it has built-in scarcity. If you could figure out a thing that works in that setup, the demand for those experiences in a world where we're all on screens and we're all remote and whatever, the visceral in-person event has become really desired. I mean, it's not a secret, what's happened to prices of attending live events? The prices have never been higher, right, and it's because there's enough people to go, and so the more people want to go, the higher the price goes, because it's limited, it's scarce, there's only so many seats, there's only so many tickets to get in the building. That said, because their demand has been so high and prices have been so high, there's been very little innovation in what actually happens inside of a live event, like even a Taylor's show. There's 100,000 people there that have supercomputers in their pockets. How do they play with the music? How do they play with the media and the entertainment, right, like, how are they interacting? Like there's all of the things that have happened in terms of audience interaction and inclusion or whatever, um, have been gimmicky, in my opinion, to this point, um, but if you think about it from a sports perspective rather than from a music or a concert perspective, you can see where the opportunities are a little easier. Right, like, if anybody on here is lucky enough or wealthy enough to be a season ticket holder for a professional sports team. 

I'm not. I wish I was, I would love to be a Dodgers season ticket holder, but that isn't happening. If you're in that experience, you are paying the maximum price to be there. You're sending, you're bringing friends in. The people you're bringing with you are paying the maximum price to be there. You're sending. You're bringing friends in. The people you're bringing with you are really valuable to the team. 

They're incredibly potential. You know high level potential customers. You're buying food there all the time. You probably have gear and merch. You're probably attending playoff games, doing what? All these other things, right so? But your revenue potential is basically maxed until it becomes your experience becomes personalized. Well, I have to know your identity to personalize your experience and I have to have really good software and I have to have really good dynamic pricing and opportunities and marketing stuff in order to prioritize and greet you by name and give you different experience and different product offerings, and figure out, when I offer you the opportunity to run on the field or get your autograph from your favorite player or whatever it is that are upsells and more revenue, that we're at a point basically in live entertainment where the revenue is budding is stuck against the ceiling until we can personalize those experiences and there's a lot of software required for that to happen- Nice, I've got a question for you. 

0:49:39 - Dmitri

This one comes from me. Dimitri, you had talked about um at the beginning, how you don't define things around music tech and actually a lot of your investments at tech stars music weren't all directly music per se yeah, community replica hello tickets. 

0:49:54 - Bob

There's a, you know, there's a, there's a long list. 

0:49:56 - Dmitri

yeah, yeah, yeah. But I am curious to hear from you what other industries or verticals you're keeping an eye on parallel universes of music for your own learning or verticals that have the biggest potential, partner potential with the media, tech and entertainment stuff you're looking at as well, just to get, like you know, like what is Bob kind of pulse checking these days for the larger media folks to think about? 

0:50:21 - Bob

So I said this to a friend of mine the other day and he thought I was crazy. But I think we're at a moment where entertainment is just one category. There's no more verticals inside of it and the product mix is just varies based on whatever the entity is. And the example I was using is like LeBron James and Lil Yachty right, lebron and Lil Yachty both have podcasts, they both have video production teams, they both have merchandise and logos and fashion lines. Right, lebron gets paid to play basketball. Lil Yachty has a recorded music income right. So LeBron's recorded music income is zero. Lil Yachty's basketball income is zero, but out of the other 100 available points of where their income comes from, there's a lot of crossover. There's documentaries, there's television appearances, there's name, image and likeness, right? So I feel like we're in an era where, if you are an entity that people pay attention to, you're all kind of the same, you're all kind of in the same vertical, and I think you can see the classic entertainment companies starting to operate this way. Right? Casey Wasserman, who, if you don't follow you should. He's really amazing, thoughtful guy. He's running the Olympics for LA runs. The Wasserman who, if you don't follow you should, he's a really amazing, thoughtful guy. He's running the Olympics for LA. He runs the Wasserman Agency. They own Paradigm and a bunch of other booking agencies. They sort of built their business in alternative sports. They do skateboarders and action sports athletes and bikers and all that sort of stuff. They bought a television production company so that they would have those capabilities for their entities and for a long time I think publicly he would say we're not going to get into traditional media production. And yet when it became time to realize that we need those capabilities, quickly changed course and bought Brill City Entertainment. So you can see these things start to happen where it's like what vertical is the end? It's entertainment, it's all entertainment. And inside of entertainment there's live events, there's stuff on screens, there's stuff you pay to go see in person and ticketed stuff. There's fashion and merchandise and products all kind of converged into entertainment, in my opinion. And then when you add the self-expression part, that's the combination of a bunch of kids wanting to become those entities how do I become one of those entities that people pay attention to? That's a whole category too of like. I'm now having these experiences where I'm participating in that as an equal player. Obviously some people get you know, collect more attention than others. But the reality is like it's kind of a level playing field for the most part. But the reality is like it's kind of a level playing field for the most, for the most part. 

0:53:03 - Dmitri

So in a way you're talking about the same types of tools for leveling up in the creator economy apply to celebrities, athletes, music artists, etc. And so that's kind of the field that you see it in is sort of like that chutes and ladders of getting up there, but regardless of whether they're grassroots or major label or, you know, major sports team or whatever, what are all the things around that? 

0:53:27 - Bob

Yeah, I mean it's like um, little Yachty is the like study little Yachty Dude is the best, he's the best. Got it all, Got it all. He's like he's. He's confident in the gaming environment and the game experience. He's confident in the music experience, confident in the fashion. Action Bronson is a good one going by in the chat Also. I mean Lil Yachty is a different level than Action Bronson but like the way to put it, like I think these things are, there are examples of people who are showing you that it's just one thing. 

0:53:54 - Dmitri

Yeah, great, awesome. Well, this has been incredible. Bob Moss, thank you so much for joining us. Can't wait to see what you do next. Hopefully we'll have you out at the conference this year or sometime soon again, plan on it and really appreciate you taking the time. 

0:54:08 - Bob

I mean, listen, let me plug your conference really quick. If the conference has half of the quality of the discussion that I'm watching, go by in the Zoom chat really fast and we're pulling questions out of there like it's worth it. Right, get there. But you know this is high quality stuff. There's not a lot of, there's not a lot of folks that think and talk this way. Be friends with each other, talk to each other, share ideas, help each other. There's no other way to move it forward. 

So thanks for having me and thanks for doing what you, what you do. It's very cool. 

0:54:39 - Shali

Will you be at Music Biz this May? Some of my team is hitting the ground in Nashville and I'm leading a music tech meetup. Meet the movers and shakers of music tech and innovation will be taking place on Wednesday, may 15th at 1 pm in the JW Marriott room, griffin FGH. That's the community hub. Join me and other music industry innovators to meet, share ideas and learn from one another. Come ready to expand your network or make a friend. 

0:55:21 - Dmitri

See you in Nashville. 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 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.

Music Tectonics at NAMM 2024

Let us know what you think! Tweet @MusicTectonics, find us on LinkedIn, Facebook and Instagram, or connect with podcast host Dmitri Vietze on LinkedIn, Twitter, and Facebook.

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.


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