As paid subscription streaming services like Spotify and Apple Music continue to drive the music industry's aggregate growth, a crucial component of Techstars Music's investment thesis is ensuring continued innovation across all product categories in music, beyond just streaming.
“We have to change the definition of what makes a ‘music company,’” Bob Moczydlowsky, managing director of Techstars Music, tells Billboard. “As an outside investor, you might think a 'music company' has to make a business out of licensing large catalogs from rights holders, but that’s a challenging model where only the largest players on the planet can currently compete, and that's not the sum total of music. There are so many other use cases across live events and ticketing, artist-fan engagement, brand interaction and creative collaboration, where the people engaging in these activities number in the hundreds of millions. That scale is a really great test of what makes a good venture investment.”
Part of this wider approach involves more international outreach: roughly half of the accelerator's investments over the past two years have come from outside the United States and international markets represented in this year's cohort include Tokyo (Edison.ai), Berlin (Endel), Madrid (HelloTickets) and Paris (Soundcharts).
Throughout the 13-week program, the Techstars Music team also helps each startup curate and book meetings with over 100 different mentors across the industry catering to founders' specific needs, which are highly dynamic and evolve over time as their businesses grow. “We are very reluctant to use the word ‘curriculum,’” Moczydlowsky says. “Techstars is not ‘school.’ Techstars is about growing your business.”
Another benefit of the accelerator is the opportunity for industry veterans and novices to exchange honest feedback, without any political barriers or pressure for mentors to become paying clients. The Techstars Music team employs the hashtag #givefirst, which is emblazoned on a giant neon sign in the accelerator's offices.
“This is not an environment for the faint of heart,” says Moczydlowsky. “There are plenty of meetings that happen here where a high-level music executive and a startup CEO sit down, and one of them walks out of the room saying, ‘Those guys are not for us,’ or, ‘I don’t buy it.’ Maybe that one meeting wasn’t what you were hoping for it to be, but imagine how valuable that is -- the speed at which you see these companies making decisions, and realizing early on that you might be misaligned with certain industry players. The value is not just in what the decision is, but also in getting to that point as quickly as possible.”
So far, this approach to innovation seems to be paying off: the 11 companies in last year's inaugural cohort have nearly doubled their funding since graduating from the program, from $10.5 million to over $20 million. In addition, more than a third of Techstars Music companies have raised over $750,000 in follow-on capital from institutional investors after finishing the program, which Moczydlowsky claims is “a planetary leading number unmatched by any other accelerator in the world."
The resulting ecosystem has been equally invaluable for both member companies and investors. “One benefit that opened up for me in a completely unexpected way was the ability to engage with other top digital execs outside Concord across DSPs, management companies and labels,” Josh Berman, senior vp digital marketing at Concord Music and Techstars Music mentor, tells Billboard. "We’re all in our own bubble day-to-day, and I don’t always get to interact with people in similar roles at other companies.”
In future iterations, Techstars Music hopes to make more investments in AI-driven products across content creation, predictive analytics and back-office data processing tasks, as well as in ticketing, artist tools and music education. The five- to seven-year plan is to "have five music-tech companies out there in the world that become essential parts of our daily lives" go through the Techstars Music program, says Moczydlowsky.
In exclusive interviews with Billboard, this year's Techstars Music founders and CEOs took time out of their busy schedule to describe their distinct visions for the music industry, and to share key takeaways and surprises from their experiences in the accelerator and from interactions with industry mentors. Read on ahead of their demo day tonight -- and decide for yourself which ideas you might fund in the future.
The Problem: In the live music industry, the average fan buys between two to three tickets per transaction for a show. But there is currently no widely-adopted method of determining who actually walks into the venue, or where those tickets go after that initial transaction -- meaning that venues and ticketing companies have historically gathered accurate data only for around 1/3 to 1/2 of concertgoers. Several incidents over the last year have also triggered concerns about heightening venue security, while keeping the concert experience enjoyable for fans.
The Solution: Co-founders Mary Haskett (CEO) and Alex Kilpatrick (CTO) previously worked together for a decade on large-scale biometric identification systems for the military, but ultimately joined Techstars Music in part because they wanted to engage in research for commercial uses of their software. For music, particularly in the live sector, Blink Identity sees both back-of-house and front-of-house applications: providing heightened security and safety backstage and streamlining identity verification at the door to provide expedited, personalized experiences for VIP fans.
Just today, the team announced a brand-new pilot program with Live Nation to incorporate Blink’s technology into select Live Nation-owned venues through Ticketmaster's venue access control and fan engagement platform TM Presence, as well as in Live Nation's own corporate buildings.
Techstars Takeaways: "As an industry, music iterates really quickly," Haskett tells Billboard. "With the Department of Defense, it could take months or even years just to get a meeting. We were also looking at healthcare as a potential market with the importance of patient identification, but that industry also moves very slowly. How do you start a company from scratch when it takes you two years to get a pilot off the ground? In music, we found a group of partners who were really open to trying new things, were creative in their thought processes, and moved really fast. It's been a really wonderful place for us."
The Problem: Artists, managers and labels often struggle to analyze and understand their social-media fan bases in a digestible way, particularly along the lines of brand and influencer affinities. The average manager might talk to as many as 10 brands and influencers in a day trying to secure deals for their artists, without smart tools to point their efforts in the right direction. And as Instagram grows in importance, there is no way to scan and filter photos by visual cues such as brand logos or landscapes, which could prove useful for industry execs seeking brand partnerships.
The Solution: Edison.ai has developed patent-pending image recognition technology that works across any social media platform with visual and photo capabilities -- such as Instagram, Twitter and Weibo -- to measure brand, influencer and interest affinities more efficiently. Say you're an A-list celebrity like Bruno Mars with 19.5 million Instagram followers: Edison.ai can scan public photos from all 19.5 million fans' Instagram profiles, extract their interests, hobbies, demographic info and brand affinities, and then form distinct personas around those traits that managers and labels can leverage to engage and target fans and influencers in a more meaningful way.
The company is in the process of shifting from an agency/consulting model into a self-serve product, with which managers and labels can generate custom fan reports. The team has previously done similar work for Amazon, Cold Stone Creamery and Mitsubishi and has helped the management teams for artists like Chromeo identify otherwise overlooked opportunities for influencer partnerships.
Techstars Takeaways: "We found that the mentors we spoke with have basically no tools to do this right now," TT Chu, CEO of Edison.ai, tells Billboard. "They're relying mostly on 'gut feeling' for securing partnerships and understanding fans. But we found in our studies that only 30 percent of the meaningful, organic interactions that happen on social media actually make it to the desks and attention of these executives and overlap with their 'gut feeling' that they're so proud of. The other 70 percent of interactions are equally important, hidden relationships that execs may have never heard of before that we want to surface."
The Problem: Few technologies enable deeper customization of sound and environment across multiple connected devices, and the music industry is still in early stages of incorporating their IP into these applications.
The Solution: Endel has developed an algorithm that generates an adaptable sonic and visual environment based on several inputs -- including heart rate, walking cadence, time of day, weather and temperature -- for specific scenarios like focus, relaxing or working. The core product is a mobile app for iOS and Android devices, but also has active integrations with connected devices such as Nest, Sonos and Philips Hue smart light bulbs. The team is also working on a “car mode” that incorporates traffic conditions into its algorithm, and is opening conversations with car manufacturers for native integrations.
Techstars Takeaways: Working with major labels on adaptive music applications is both exciting and challenging from a legal perspective. "We can take stems and other smaller elements from an artist’s body of work -- say, Lana Del Rey or Brian Eno -- and plug them into our algorithm to create a 'focusing' or 'relaxing' version of Endel, building on those artists' sounds," Oleg Stavisky, CEO of Endel, tells Billboard. "There would be no vocals, only certain frequencies or tones based on the scientific research we're incorporating, but it will still be recognizable as the original artist. The only challenge there is the licensing: we currently own 100 percent of this product and technology that we're building, and we're not sure whether we want to relinquish some of that ownership, at least for now."
The Problem: According to recent Nielsen research, people will spend $43 billion this year alone on music-related items like albums, concert tickets and merchandise. Passionate music fans make up 14 percent of these consumers, but spend 34 percent of the $43 billion pie -- an average of $36 a month per person. But the likes of Spotify and Apple Music, at just $9.99 a month, are not speaking to those passionate fans or capturing that money.
The Product: Gimme Radio, an online music radio service and marketplace devoted exclusively to metal -- and featuring shows by the likes of Megadeth frontman Dave Mustaine, Lamb of God vocalist Randy Blythe and Eagles of Death Metal touring member Dave Catching -- is the company’s proof of concept. The team is currently exploring how to translate that success into building artist-fan communication tools in other genres, like jazz and classical.
“We started Gimme Radio with this idea of serving the underserved,” David Rosenberg, COO of Gimme Media, tells Billboard. “When we met with all of our mentors, we realized that every genre is underserved and needs help in its own way.”
While Gimme Radio currently makes substantial revenue from merch sales, it hopes to introduce a membership model with access to premium content and exclusive experiences, such as a vinyl-of-the-month club or an event similar to Megadeth's fan bootcamp., as well as a personalization component.
Techstars Takeaways: “We learned that we really shouldn’t be afraid to ask our listeners, who are the biggest evangelists for what we’re building, about what features they want,” says CEO Tyler Lenane. “A huge percentage of them want access to archives of past shows, so we’re building out that feature now.”
The Problem: Various reports claim that concertgoers spend anywhere from $8 billion to $12 billion annually on secondary tickets worldwide. Not only does little of that money make it back to the artists, promoters or ticketing companies, but there is also no way for them to control what happens with a ticket after it's sold.
The Solution: HelloTickets is creating a new “smart ticket" standard based on the blockchain. Each smart ticket comes with a normal QR code just like any average ticket, but the QR code updates every 30 seconds and syncs with a central blockchain database, so that the ticket cannot be duplicated and resold. Artists, venues or other stakeholders can set rules for how ticket transactions work in the secondary market: the maximum selling price is $100, or five percent of the transactions must go back to the artist, for example.
For the last several months, HelloTickets has been the exclusive ticketing platform for The Cambridge Club, a festival in the U.K. attracting approximately 11,000 people per year, and is currently in the process of transitioning fully to a “smart ticket” system for the festival. This week, the company is also launching its own global ticketing platform across 15 countries.
Techstars Takeaways: “To be honest, I thought the music industry wouldn’t be ready for something like this,” says CEO Jorge Díaz Largo. “In our roadmap, we planned for 2018 to be just about evangelizing rather than implementing the technology, because we thought the music industry was still more traditional and old-school. In certain parts of the world, it’s still very much that way. But the Techstars mentors are so informed about all new kinds of tech, and with the positive impact of companies like Spotify, the industry has become super open to helping companies like us build a product that can change the entire ticketing industry.”
The Problem: As music consumption continues to shift from physical to streaming -- and as mobile phones only seem to be getting bigger, not smaller -- few companies are working on bringing the mobile streaming experience outside of the phone in an accessible and inexpensive way. Companies like Apple are making music a key marketing tool for their smartwatches, but those devices are “expensive, and not music-first,” Anthony Mendelson, CEO/founder of Mighty, tells Billboard.
The Solution: Mighty is a small, square, water-resistant device that is reminiscent of the iPod shuffle, but is much more technologically advanced: it allows users to stream over 1,000 Spotify tracks on the go without an internet connection. The device comes with a mobile app where users can log into Spotify's paid tier and manage the songs and playlists that are cached offline to the device via Bluetooth. The app also features a "Stay Fresh" setting that can wake up the device and sync playlists such as Discover Weekly or Release Radar automatically. Mighty already has over 33,000 users, half of whom live outside the U.S. and around 12 percent of whom are in Mexico and Brazil, where data plans are still relatively expensive and there is active demand for low- or zero-data streaming options.
Techstars Takeaways: “The idea of using Mighty as a new means of delivering content to users has been exciting for labels and artists,” says Mendelson. “Also, 10 percent of our new users converted from free to Premium Spotify accounts just so that they could start using their Mighty properly. We’re looking into how we can expand that pool, help the industry grow premium subscriptions, and then get our users consuming even more content once that premium subscription is there. Part of that is studying where Mighty fits in a voice-enabled world and how we can incorporate voice assistants into Mighty devices.”
The Problem: "Artists are the best marketers in the world, and they understand more than anyone else what their fans want, but they don’t have any proprietary tools to sell their own tickets," David McKay, CEO/co-founder of seated., tells Billboard. "The venues and ticketing companies still control that, and artists still have to rely on opaque, third-party tools that hijack traffic away from their own sites. We're trying to build tools to help artists capture more buyer data across the lifecycle of an event and generate more revenue for themselves. You should own your traffic as an artist, not bounce it off to third-party sites -- that's e-commerce 101."
The Solution: Seated. is a ticketing platform designed to fill in key gaps in buyer and fan data both before an onsale date and after a show sells out, then deliver that data directly to artists. Prior to an onsale, fans can sign up to receive text reminders; when shows sell out, fans can join a waitlist with their credit card info, which will only be charged if more tickets open up. The company currently has a pilot resale marketplace with select bands.
Techstars Takeaways: The very first week of Techstars, the seated. team met with Lindsey Stirling’s management and installed their technology onto Stirling's official website the following week. Sony Music is also working with seated. on Leon Bridges' tour, while Warner Music launched a ticketing integration with Death Cab for Cutie earlier this week.
The Problem: The music industry is still warming up to the idea that artificial intelligence can elevate and augment, rather than directly compete with, human artists and lyricists.
The Solution: "One night, I locked myself in a room with my computer and said, 'I’m not going to sleep until my computer raps like Snoop Dogg,'" Steve Wilkinson, CEO of SecondBrain, tells Billboard. The initial result, RAPGOD.ai, was framed as an "AI ghostwriter" for hip-hop lyricists; the team demoed an interactive arcade cabinet at SXSW in 2017, and tested their technology with local hip-hop artists at intimate warehouse showcases in East Austin.
At Techstars, SecondBrain is focusing on making RAPGOD.ai more usable for artists, turning the user experience from "just pure petition with rote mechanical tests into more of a sense of discovery" and launching a mobile app.
Techstars Takeaways: "We've been thinking even more about how we can apply this technology to other problem sets within and beyond creative writing," says Wilkinson. "You can even think of email as a creative writing problem. I just spent 30 minutes this morning trying to write the perfect pitch email that should've taken three minutes. I go through that struggle every day, and so do many people in music and beyond. How do we take the lessons we’ve learned breaking through writer’s block, working with artists who make their living writing lyrics, and apply them to these small but insurmountable writing and communication problems we have in our daily lives?"
The Problem: CEO David Weiszfeld formerly served as executive vp of international development and marketing at UMG France, and also has experience managing smaller artists like Petit Biscuit. He had the idea to build Soundcharts out of a personal need for more efficient, affordable, real-time artist and music analytics.
The Solution: Soundchart is a market intelligence and analytics platform providing real-time analytics across charts, social media, playlists and radio airplay. The company already has 250 B2B customers from 28 countries using the platform daily, like Beggars Group, Sony/ATV and Atlantic Records.
Techstars Takeaways: "It’s been an amazing experience for me running Soundcharts not as a music company, but as a tech company," says Weiszfeld. "It's a completely different challenge from managing an artist. If you’re doing your job right as a manager or label, you don’t mess around the artist’s product or vision -- you just touch the strategy and marketing plans to help impose that creative vision onto the world. With Soundcharts, I have both hands deep in the product and am constantly changing features, and balancing whether we need to focus on backend performance and scaling our dataset or honing our front-facing UX, and measuring important KPIs far beyond things like stream counts, like-to-comment ratios and offline save rates that we focus on in the music industry. That’s what I wanted to get from Techstars: shifting from being a music executive driving global campaigns to actually building a technical company that helps the industry at large."
The Problem: Aside from costly licensing challenges, entertainment options for bars and restaurants (jukeboxes, karaoke, etc.) represent an opportunity to use music as a vehicle to engage customers and drive loyalty beyond lean-back listening alone.
The Solution: Spark DJ for Business is an interactive curation system for bars and venues. The company curates a specific selection of songs that will be projected onto a TV screen, and visitors can vote via their phones on which song they want to hear next. Once a song ends, the TV reveals the votes of everyone in the room, and if your song gets picked, you win points that can be racked up over time and redeemed for food, drinks and other prizes at the venue.
Spark DJ has already piloted the technology with Target, Amazon and the Capital One Orange Bowl, and plans either to partner with "digital locker" services like MediaNet or 7digital or maintain their own catalog.
Techstars Takeaways: “Coming into the program, we were focused on building an ‘AI DJ,’” James Jones, CEO/co-founder of Spark DJ, tells Billboard. “We were diving into all these granular, technical questions of how DJs mix, how they blend vocals and instrumentals, how they match tempos and do the best transitions. We did build out that product, but when we brought it to mentors, they weren’t as excited about making the best transition from one song to the next -- they wanted to know how people interacted with the end product, and how we could get them to interact even more. We realized that our north star maybe shouldn’t be replicating the DJ, but rather creating a fun, new and engaging environment within a venue. We shifted our focus toward creating new value, as opposed to replicating an experience that already exists.”