Music startups used to get more attention from investors. But the graveyard of failed companies has become crowded, persuading would-be partners to shy away from putting money in new music ventures due to what they see as modest payoffs, high licensing costs and a recording industry that isn't embracing new ideas fast enough.

In recent months, companies like Pandora, Spotify, OurStage and Thumbplay have reportedly secured venture capital funding. But the overall investment climate clearly hasn't been an easy one for music startups.

David Pakman has had a bird's-eye view of the role of new companies in the developing digital music market. Before joining the venture capital firm Venrock as a partner in 2008, Pakman was CEO of the independent digital music retailer eMusic. Prior to eMusic, he co-founded MyPlay, which introduced the digital music "locker," and was VP for N2K Entertainment, an early developer of online music services.

Click here to read what David Pakman believes are the challenges facing entrepreneurial music ventures and how the music industry can help.

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