SXSW's "Getting Your Music/Tech Startup Funded" panel brought together a spectrum of financial backers, from the bottom level to the very high end. Moderated by the San Jose Mercury News' Peter Delevett, the panel was populated by Brian Zisk, founder/creator of the San Francisco Music Tech Summit, Larry Marcus, managing director at Walden Venture Capital (an investor in BandPage, SoundHound and Pandora, among others), and Hany Nada, co-founder and partner at GGV Capital (also an investor in BandPage, as well as a number of music tech companies in China).
Each panelist offered different advice relevant to the level of investment they typically offer; Zisk's focus on smaller companies caused him to emphasize easy working relationships, Marcus' mid-range ($500,000-$1.5 million) investments focused on concise, compact demos from companies on the cusp of breakthrough, while Hany's high-end ($100 million) level investments are reserved for companies with a macro vision such as China's YY, an audio communication service with 350 million registered users and an average peak of 10 million users per day.
One of the most important things for startups to display, says Marcus, is "a clarity of purpose and efficiency of execution," while all three articulated the importance of persistence, building relationships, and staying available to attract investors. "Our average time of investment is seven years, so it's a marriage not a date," says Marcus. "And you don't want to marry someone after the first date."
The panel also noted the relative ease and importance of securing "angel investments," or small-scale investments by people with extra cash, whether they be friends, relatives, or investors from web sites like AngelList. "A lot of angel deals are about people wanting to get involved in something cool," says Zisk, while Hany added that a lot more angel money will become available after Facebook's IPO goes public. "If your company needs $100 K to get up and running, go talk to your rich uncles," says Hany.
The current opportunity for music and tech startups lies in finding ways to monetize the music industry. "Music wants to be free," says Hany, "and that opens up creative ways to get paid. Instead of monetizing art, monetize the fans - that's where the big money is."