Business

Tech Investor Says VCs Avoid Music: Even a Success Like Spotify 'Lost a Couple Hundred Millions Dollars Last Year'

Sitar Teli photographed in London
Anthony Harvey/Getty Images for TechCrunch

Sitar Teli photographed at The Old Billingsgate on Oct. 20, 2014 in London.

Sitar Teli, managing partner at investment firm Connect Venture, dispensed with the backlappery often associated with business conference panels and offered some real talk at Midem, which took place this last weekend in Cannes, on whether tech startups and the music business work well together. After being asked whether she believed music was ahead when it comes to big corporations cooperating with startups, Teli let it fly. "No, it’s not," she said at the Startups & Corporations: From Competition to Coopetition panel. "And it’s been a really shitty industry to work with for years."

Teli quickly expanded on that bomb by explaining her thoughts on the origins of that lack of trust. "[The music industry] was hit much harder by a lot of the early internet stuff that happened, particularly file-sharing, much more than other content industries," she said. "And the reaction to that was one to be distrustful of technology companies. So while there has been a history of trying to work with [labels], and some of the deals done have been ones with collaboration, it hasn’t been in a way that’s sustainable for the startup, and has led to the startups being quite dependent on the labels for much, much longer. It’s become really difficult for startups to be profitable."

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Teli argued that tech startups only have a few entities within the music industry to negotiate with, giving the latter the veritable upper hand. She said that the structure of the music industry just doesn’t have the same kind of flexibility of other creative industries. "Unlike film and TV where someone like Netflix can just say ‘we’re gonna make our own movies,’ the nature of music doesn’t really lend itself to taking artists that are already signed to labels and just having them do a whole other album… a musician can collaborate with other musicians but their contracts don’t often let them do that in a way that’s beneficial to a startup."

Asked for her perspective as a venture capitalist on whether there have been successful partnerships between tech startups and music, Teli drew a blank. "As a VC, when you have to define success you have to think about companies that have scaled to the point where they’re then independent and profitable, and I actually can’t think of a music tech company that’s done that," she said. "Which is very worrying, right? 

And then the kicker: "If you’re a VC and you’re looking at different industries, music is one which VCs generally avoid. Because even the largest, most successful company in the sector – that’s a venture-backed startup… is Spotify, and it lost a couple hundred million dollars last year." He comments echo opinions given to Billboard by noted VC Ben Horowitz two years ago.

Watch the entire panel, with Teli answering her first question at 4:20: