Web3 Music Fund Coop Records Raises $10M to Invest in Startups, NFTs and Artists
The fund will debut a unique way to invest directly in musicians: "At some point in time everyone will be able to invest $5 into their favorite artist."
Is there a future where fans can invest in their favorite artists? Or where the music industry invests in a musician’s entire brand, rather than just their music catalog? A new venture capital fund aims to explore this concept. Coop Records — the first dedicated Web3 music fund — has raised $10 million to invest in early-stage companies and support musicians directly through a new artist business model.
The fund’s founder Cooper Turley describes it not only as a capital vehicle to fund emerging Web3 companies but also a “pseudo record label of the future,” which could change the way the industry invests in new talent. The money was raised from several prominent Web3 founders and investors.
Turley is a curator and collector in the Web3 music space, as well as an angel investor in more than a dozen music NFT platforms including Royal, Audius and Catalog. He was previously a venture partner at Variant Fund, where he would scout deals and bring them into the fund.
While he has risen as an influential name among the community, Turley’s career has not been without controversy. In January, derogatory tweets from his youth (from 2011 to 2014) containing the N-word and f-slur, were resurfaced. He apologized for their use, saying “I was young, stupid, and careless … back then, I developed a terrible habit of using racial and homophobic slurs to fit in,” but was removed from a leadership role in the crypto social club Friends With Benefits and stepped back from his position at Variant.
He has since focused his time on music NFTs, working with rising star Daniel Allan, launching an artist accelerator and now founding Coop Records. Turley believes the total addressable market of music could grow up to “100 times” as a result of revenue unlocked by Web3. “Selling collectibles as NFTs is something that’s never really existed before,” Turley says, calling it the biggest new monetization model since the advent of streaming. The way he sees it, Web3 also creates new revenue opportunities through secondary markets, membership cards, ticketing, streaming, virtual events and on-chain royalties.
The majority of the fund will be deployed into pre-seed and seed stage investments in Web3 companies, but there’s also scope to bring Web2 startups into the fold. “A company doesn’t have to be in Web3 today,” Turley says. “But if there’s an opportunity to add Web3 rails I’m very excited about that.”
Turley aims to build a portfolio of companies that can work together as a community, which he characterizes as the antithesis of Web2. “The existing music industry became very fragmented, siloed and competitive where everyone was competing for listeners, streams and ticketing,” Turley says. “One thing that’s different about Web3 is that companies can share their code, their infrastructure and their assets together to increase the net value of everything.”
The most interesting aspect of Coop Records, however, is its direct investment in artists. A small portion of the fund is reserved for approximately five artists and their teams. “People are very afraid of this concept of investing in artists,” Turley says, but he believes it might unlock a better way to fund emerging talent.
Rather than a traditional record label – which buys “catalog” on a song-by-song or album-by-album basis, Coop Records will invest in the musician as a whole by setting up a company around them. Says Turley, “What does it look like to have a small piece of equity in the artist brand and have longer-term exposure to everything they create?”
Describing it as a Web360 deal, Turley continues, “It’s taking all the income from all the places an artist touches: streaming, touring, NFT sales, merch, synch, publishing. Instead of it going directly to the label’s pocket, we’re putting it in the LLC. [The artist then sells] equity in small portions to investors.” In other words, the artist keeps ownership and control of their music, but shares equity in their overall brand.
In a world where Kanye West’s music catalog makes up just a small part of his multi-billion dollar net worth, could we see a future where investors own a stake in the entire Kanye West brand, not just the music catalog?
Using this model, after several rounds of early investment, the artist could “go public” by issuing a token, which could then be traded on something like a creator stock market. “At some point in time everyone will be able to invest $5 into their favorite artist,” Turley says. “In the same way you’d invest in a tech company.”
Of course, this is wildly experimental and there are many unknowns to answer. For example, how do you establish a starting valuation for emerging artists? Turley admits the valuation process is quite abstract, though he argues it’s no more so than valuing an early-stage company. Also, what happens to the artist-fan relationship if the fans’ investment goes down? That remains to be seen.
As for whether the model would replace the need for traditional record labels, Turley says probably not, because artists will still need distribution. That said, it might give artists more leverage to negotiate since they can raise capital from elsewhere. And if it works, it could disrupt the model for investing in new talent and create a much-needed alternative monetization model for artists.
“Once we start to unlock these creative markets for artist brands, the value … will be tremendous,” says Turley, “and I don’t think we’ve ever seen that before.”