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How Kobalt is betting on music’s middle class and DIY stars

Published September 20, 2019

Streaming services have made music ubiquitous, driving more exploration by consumers who don’t have to pay for each song or album individually. Musicians are correspondingly able to find their own niche of fans scattered around the world.

(This is the third installment of our EC-1 series on Kobalt Music Group and changes in the music industry. Read Part I and Part II.)

As Spotify gained rapid adoption in his native Sweden in 2006, Kobalt’s founder & CEO Willard Ahdritz predicted music streaming and the rise of social media would increasingly undercut the gatekeeping power of the major label groups and realign the market to center more on a vast landscape of niche musicians than a handful of traditional superstars.

Both of these predictions have proven directionally true. The question is to what extent and how are industry players actually realigning as a result?

What musicians need in addition to the administrative collection of their royalties (explained in Part II) is a menu of creative services they can tap for support. Kobalt’s AWAL and Kobalt Music Publishing divisions provide such services to recording artists and songwriters, respectively, and do so on purely a services basis (getting paid a commission but not taking ownership of copyrights like traditional labels and publishers do).

How a Swedish saxophonist built Kobalt, the world’s next music unicorn

Niche middle class vs. Global superstars

Image via Getty Images / rolfo eclaire

The whole music industry is growing substantially due to streaming music’s mainstream penetration in wealthier countries and increased penetration in emerging markets.

As the overall pie is growing, the non-superstar segment of the market is indeed growing faster than the superstar segment, taking over a larger portion of industry royalties.

According to data from BuzzAngle, the top 500 songs in the US in 2018 accounted for 10% of on-demand audio streams — a dramatic decline in market share compared to 2017 when the top 500 songs accounted for 14% of streams. Stepping back, the top 50,000 songs made up 73.2% of all US streams in 2017 but that declined to 70.5% in 2018.

‘The best VC on Instagram’ is now VC-backed

Published September 19, 2019

About 18 months ago, Jenny Gyllander created an Instagram account by the name of @thingtesting.

The premise was simple. Gyllander, who was at the center of the London startup ecosystem as an investor with the British seed fund Backed.VC, would upload photos of interesting direct-to-consumer products with a caption that served as a bite-sized review. The experiment began with Birchbox, a provider of curated boxes of beauty products that rose to prominence amid the subscription box hype of yesteryear. In her short review, tailored perfectly for the Instagram generation, Gyllander admitted to being “like 10 years late to this much hyped subscription-everything party,” adding that “after two boxes and ten products, only three products were relevant to me.” Her honesty, and perhaps more importantly, her brevity, garnered her a small following of venture capitalists, founders and consumer-brand enthusiasts.

View this post on Instagram

A post shared by thingtesting (@thingtesting) on Apr 4, 2018 at 3:22am PDT

Since that first post, Gyllander has featured and reviewed more than 100 products on her Instagram account — which today counts 32,800 followers. And she quit her day job and began building an Instagram-inspired, full-fledged review business.

“I found something I am very, very passionate about,” Gyllander tells TechCrunch. “Finding the D2C niche was for me a little bit of a Holy Grail. It’s where brands and startups align for the first time in a concrete way.”

With a $300,000 pre-seed investment from angel investor and Homebrew co-founder Hunter Walk, who previously called Thingtesting “The best VC on Instagram,” early Spotify investor Shakil Khan and more, Gyllander wants to create a full-scale D2C review platform with a team of reviewers and content creators, and a portal for her loyal followers to write and submit their own reviews. She compares what she envisions for Thingtesting to that of Rotten Tomatoes. Akin to the popular website for movie and television reviews, each product review on her future website will include a Thingtesting score and an audience score. The goal is to help consumers shop smarter and filter through the D2C noise.

“People are confused right now by the sheer amount of products launching,” Gyllander said. “I want Thingtesting to be a filter for people to consume better … It’s a role department stores used to have back in the day, but nobody has really filled that role in the online world.”

Gyllander, already making money from what was once a side project, has plans in store to generate significantly more revenue. Currently, she’s capitalizing off Instagram’s Close Friends list, which the social media hub launched last year to allow users to share content to fewer people. Gyllander, like a slew of other Instagram influencers, however, quickly realized an opportunity to monetize content using the feature, a trend explained in detail in a recent report from The Atlantic.

Gyllander charges a lifetime fee of $100 to her followers hoping for a spot on her Close Friends list. Those followers are then provided exclusive content, including behind-the-scenes looks at her product review journeys. So far, 300 people have been granted access to the exclusive group as others sit on the waitlist. Gyllander explains she hasn’t green-lit every request to enter the coveted group because she wants to maintain a sense of community as the account grows in popularity. Early next year, she hopes, she will have launched a Thingtesting website and a new subscription-based membership tier targeting D2C connoisseurs, investors and anyone interested in a front-seat view of the booming D2C industry.

As Thingtesting morphs into a digital review platform and expands from the bounds of Instagram, Gyllander will have to work harder to differentiate what she’s built from other review sites and D2C blogs. Her secret weapon, she believes, is her authenticity.

“It’s my honesty,” Gyllander said. “And it’s the fact that there’s no payment involved from the brands and that I’m not being paid to review products. That’s something quite rare in the Instagram world today. There aren’t that many accounts that are just talking about new products with non-monetary incentives.”

View this post on Instagram

A post shared by thingtesting (@thingtesting) on Oct 29, 2018 at 10:03am PDT

Since launching with a review of Birchbox, Gyllander has shared her thoughts on Magic Spoon, a D2C cereal company: “one bowl kept me full for hours,” she wrote, ultimately concluding she wouldn’t continue eating the cereal. More recently, she referred to the D2C aperitif brand Haus as “stunning;” wrote a lukewarm review of the blue light-protecting eyewear brand Felix Gray; and posted a glowing summary of Dripkit, a D2C coffee brand.

To secure a spot on Gyllander’s grid, a product must bring something new to the market, as well as boast killer branding and packaging. The former VC says she tries out about 20 products a month and shares official reviews of four or five.

“The majority of people today, when it comes to modern brands, they have their first interaction through an ad or an influencer telling them about the product,” Gyllander explained. “Discovery is in a weird place right now when it comes to the general consumer.”

It’s difficult to imagine a venture-scale business within Gyllander’s vision for Thingtesting. But one should never underestimate the value of an exclusive and hyper-focused network. Gyllander, in a short time, has created a meeting place for D2C aficionados and venture capitalists and, as she’s proven, her thoughts are worth paying for.

How Kobalt is simplifying the killer complexities of the music industry

Published September 11, 2019

Backed by over $200 million in VC funding, Kobalt is changing the way the music industry does business and putting more money into musicians’ pockets in the process.

In Part I of this series, I walked through the company’s founding story and its overall structure. There are two core theses that Kobalt bet on: 1) that the shift to digital music could transform the way royalties are tracked and paid, and 2) that music streaming will empower a growing middle class of DIY musicians who find success across countless niches.

How a Swedish saxophonist built Kobalt, the world’s next music unicorn

This article focuses on the complex way royalties flow through the industry and how Kobalt is restructuring that process (while Part III will focus on music’s middle class). The music industry runs on copyright administration and royalty collections. If the system breaks — if people lose track of where songs are being played and who is owed how much in royalties — everything halts.

Kobalt is as much a compliance tech company as it is a music company: it has built a quasi “operating system” to more accurately and quickly handle this using software and a centralized approach to collections, upending a broken, inefficient system so everything can run more smoothly and predictably on top of it. The big question is whether it can maintain its initial lead in doing this, however.

The business of a song

Image via Getty Images / Mykyta Dolmatov

Spotify expands its new Premium Duo plan to Latin America

Published September 4, 2019

Spotify’s newest paid subscription, the Premium Duo plan designed for two people, first launched this spring as a pilot test in Ireland, Colombia, Chile, Denmark and Poland. Today, Spotify says the plan is being more broadly rolled out to 14 more Latin American markets.

The new markets include: Argentina, Bolivia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru and Uruguay.

The Duo plan is meant mainly for couples, though it could apply to roommates or any other two people who share the same home address.

In terms of pricing, it’s a step up from a single Premium subscription but more affordable than a Family Plan, as it’s limited to just two accounts. However, the Duo plan is discounted so it’s a better deal than buying two separate Premium accounts.

The benefits are similar to those on the Family Plan. Like the larger group plan, Duo keeps each user’s music preferences and recommendations separate from one another. And like the Family Plan, which recently added a custom mix composed of tracks everyone in the family enjoys, the Duo subscription also includes its own shared playlist, the Duo Mix. Members can easily share their playlist libraries with one another, too.

Despite now reaching 19 total markets, Spotify still refers to the Premium Duo plan as a “pilot,” which typically means the company hasn’t fully committed to bringing the service to all its users at some point. Instead, that terminology typically implies the company is continuing to evaluate the new service’s impact.

In Spotify’s case, Premium Duo’s launch in March hasn’t yet led to a massive subscription bump. When reporting its Q2 2019 earnings, the company said it added 8 million new subscribers in the quarter, which was below the estimated 8.5 million figure. It now has 232 million monthly users and 108 million paying subscribers.

That said, Duo hasn’t reached many of Spotify’s key markets where such a plan could have more of an impact to subscriber counts, including the U.S.

If you live in a supported market and already have a Premium plan you can visit your Account page on Spotify’s website to add a partner and upgrade. Both plan members will need to share the same home address.

Startups Weekly: Peloton’s 29 secret weapons

Published August 31, 2019

Hello and welcome back to Startups Weekly, a weekend newsletter that dives into the week’s noteworthy startups and venture capital news. Before I jump into today’s topic, let’s catch up a bit. Last week, I wrote about a new e-commerce startup, Pietra. Before that, I wrote about the flurry of IPO filings.

Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets. If you don’t subscribe to Startups Weekly yet, you can do that here.

What’s new?

Peloton revealed its S-1 this week, taking a big step toward an IPO expected later this year. The filing was packed with interesting tidbits, including that the company, which manufacturers internet-connected stationary bikes and sells an affiliated subscription to its growing library of on-demand fitness content, is raking in more than $900 million in annual revenue. Sure, it’s not profitable, and it’s losing an increasing amount of money to sales and marketing efforts, but for a company that many people wrote off from the very beginning, it’s an impressive feat.

Despite being a hardware, media, interactive software, product design, social connection, apparel and logistics company, according to its S-1, the future of Peloton relies on its talent. Not the employees developing the bikes and software but the 29 instructors teaching its digital fitness courses. Ally Love, Alex Toussaint and the 27 other teachers have developed cult followings, fans who will happily pay Peloton’s steep $39 per month content subscription to get their daily dose of Ben or Christine.

“To create Peloton, we needed to build what we believed to be the best indoor bike on the market, recruit the best instructors in the world, and engineer a state-of-the-art software platform to tie it all together,” founder and CEO John Foley writes in the IPO prospectus. “Against prevailing conventional wisdom, and despite countless investor conference rooms full of very smart skeptics, we were determined for Peloton to build a vertically integrated platform to deliver a seamless end-to-end experience as physically rewarding and addictive as attending a live, in-studio class.”

Peloton succeeded in poaching the best of the best. The question is, can they keep them? Will competition in the fast-growing fitness technology sector swoop in and scoop Peloton’s stars?

In other news

Last week I published a long feature on the state of seed investing in the Bay Area. The TL;DR? Mega-funds are increasingly battling seed-stage investors for access to the hottest companies. As a result, seed investors are getting a little more creative about how they source deals. It’s a dog-eat-dog world out there, and everyone wants a stake in The Next Big Thing. Read the story here.

Rounds of the week

Time to Disrupt

Don’t miss out on our flagship Disrupt, which takes place October 2-4. It’s the quintessential tech conference for anyone focused on early-stage startups. Join more than 10,000 attendees — including over 1,200 exhibiting startups — for three jam-packed days of programming. We’re talking four different stages with interactive workshops, Q&A sessions and interviews with some of the industry’s top tech titans, founders, investors, movers and shakers. Check out our list of speakers and the Disrupt agenda. I will be there interviewing a bunch of tech leaders, including Bastian Lehmann and Charles Hudson. Buy tickets here.

Listen

This week on Equity, TechCrunch’s venture capital-focused podcast, we had Floodgate’s Iris Choi on to discuss Peloton’s upcoming IPO. You can listen to it here. Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast and Spotify.

Learn

We published a number of new deep dives on Extra Crunch, our paid subscription product, this week. Here’s a quick look at the top stories:

How Pivotal got bailed out by fellow Dell family member, VMware by Ron Miller
How to use Amazon and advertising to build a D2C startup by Matt Altman and Tyler Elliston
Customer success isn’t an add-on — Start early to win later. By Dale Chang and Jay Nathan.

You can now share music from Spotify to Facebook Stories

Published August 30, 2019

Spotify this morning announced a new way for you to share music with friends (or fans, if you’re an artist) — by way of a new Facebook Stories integration that includes 15-second song previews. Viewers can also optionally tap on the “Play on Spotify” button in the Story to be redirected to the Spotify app to hear more.

The feature is designed largely with artists and their teams in mind, as it gives them another way to promote their new music across Facebook’s social network. Musicians and their managers often today use the Spotify app’s sharing feature to post their content across social media, including to Instagram, Twitter, WhatsApp, and elsewhere.

Last year, Spotify introduced a way to share music to Instagram Stories, including their albums, tracks, and playlists, as part of Facebook’s announcement that it was opening up sharing to Facebook and Instagram Stories from other, third-party apps.

At the time, the company said an integration with Facebook Stories was coming soon.

Since its launch on Instagram, the sharing feature has been mutually beneficial for both Spotify and Instagram alike, as it made users’ Stories more engaging while also sending traffic back to the Spotify app for further music discovery.

Add some music to your story
Audio sharing to Facebook Stories is now available. pic.twitter.com/HSBgmxYd8G

— Spotify (@Spotify) August 30, 2019

There’s likely not as much demand for sharing to Facebook Stories, however.

In order to share the 15-second clips to Facebook Stories, you’ll tap the “Share” button from the Spotify app and choose Facebook as the destination.

Side note: We’re not seeing the option to share to News Feed as the picture Spotify published shows (see above. Instead, tapping “Facebook” launches you right into the Story interface, as shown in the tweet above.

You can then customize your Story as you would normally using the Story editing tools and post it to your profile. Viewers will get to hear the 15-second song clip, and can then tap to go to Spotify to hear more.

Spotify had offered Facebook Story sharing in the past, but the access was later pulled.

Hi there! We’re afraid the “Share to Facebook Stories” feature is no longer supported on Spotify. Give us a shout if you have other questions /MT

— SpotifyCares (@SpotifyCares) January 30, 2019

These song previews only work when you’re sharing a single track to Stories. If you choose to share other content, like albums, playlists, or an artist profile page, viewers can click into that content, but won’t hear any preview, Spotify says.

Could Peloton be the next Apple?

Published August 30, 2019

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

This week we were back in the SF studio, with Kate and Alex on hand to chat venture, business, startups, and IPOs with Iris Choi. Choi is a partner at Floodgate, and one of the very few folks who have ever been invited back on the show.

Despite Floodgate being an early-stage firm, Choi was more than willing to dig into the week’s later-stage topics, starting with the Peloton IPO filing. Kate was stoked about the offering (her piece here, Alex’s notes here). Peloton, a fitness, media, hardware (and more) company, is a lot different than your run-of-the-mill enterprise SaaS exits.

Next Alex ran the team through a list of impending IPOs that we care about. There are a number of venture-backed companies looking to go public before the stock market falls apart. More on each when they price.

After the S-1 march, we turned to personnel news, namely that Instacart’s CFO is leaving the firm after about four years with the company. Ravi Gupta is joining Sequoia Capital. We’ll tell you why.

Next, we touched on two rounds. First, a Kleiner deal into Consider, an app that brings power-tooling to email. And then we chatted about Inkitt, another Kleiner deal. Why the pair of early-stage rounds? Because Alex recently went to Kleiner to chat with its new partner team about where they’ll deploy capital in the future.

And that took us comfortably over our time. A big thanks to Choi for joining us, again, and you for sticking with the show. More next week!

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast, Spotify, Pocket Casts, Downcast and all the casts.

Mobile gaming is a $68.5 billion global business, and investors are buying in

Published August 22, 2019

Omer Kaplan
Contributor

Omer Kaplan is CMO and co-founder at ironSource.

The gaming phenomenon

Today, mobile games account for 33% of all app downloads, 74% of consumer spend and 10% of all time spent in-app. It’s predicted that in 2019, 2.4 billion people will play mobile games around the world — that’s almost one-third of the global population. In fact, 50% of mobile app users play games, making this app category as popular as music apps like Spotify and Apple Music, and second only to social media and communications apps in terms of time spent.

In the U.S., time spent on mobile devices has also officially outpaced that of television — with users spending eight more minutes per day on their mobile devices. By 2021, this number is predicted to increase to more than 30 minutes. Apps are the new prime time, and games have grabbed the lion’s share.

Accessibility is the highest it’s ever been as barriers to entry are virtually non-existent. From casual games to the recent rise of the wildly popular hyper-casual genre of games that are quick to download, easy to play and lend themselves to being played in short sessions throughout the day, games are played by almost every demographic stratum of society. Today, the average age of a mobile gamer is 36.3 (compared with 27.7 in 2014), the gender split is 51% female, 49% male, and one-third of all gamers are between the ages of 36-50 — a far cry from the traditional stereotype of a “gamer.”

With these demographic, geographic and consumption sea-changes in the mobile ecosystem and entertainment landscape, it’s no surprise that the game space is getting increased attention and investment, not just from within the industry, but more recently from traditional financial markets and even governments. Let’s look at how the markets have responded to the rise of gaming.

Image courtesy of David Maung/Bloomberg via Getty Images

Games on games

The first substantial investments in mobile gaming came from those who already had a stake in the industry. Tencent invested $90 million in Pocket Gems and$126 million in Glu Mobile (for a 14.6% stake), gaming powerhouse Supercell invested $5 million in mobile game studio Redemption Games, Boom Fantasy raised $2M million from ESPN and the MLB and Gamelynx raised $1.2 million from several investors — one of which was Riot Games. Most recently, Ubisoft acquired a 70% stake in Green Panda Games to bolster its foot in the hyper-casual gaming market.

Additionally, bigger gaming studios began to acquire smaller ones. Zynga bought Gram Games, Ubisoft acquired Ketchapp, Niantic purchased Seismic Games and Tencent bought Supercell (as well as a 40% stake in Epic Games). And the list goes on.

Wall Street wakes up

Beyond the flurry of investments and acquisitions from within the game industry, games are also generating huge amounts of revenue. Since launch, Pokémon GO has generated $2.3 billion in revenue and Fortnite has amassed some 250 million players. This is catching the attention of more traditional financial institutions, like private equity firms and VCs, which are now looking at a variety of investment options in gaming — not just of gaming studios, but all those who have a stake in or support the industry.

In May 2018, hyper-casual mobile gaming studio Voodoo announced a $200 million investment from Goldman Sachs’ private equity investment arm. For the first time ever, a mobile gaming studio attracted the attention of a venerable old financial institution. The explosion of the hyper-casual genre and the scale its titles are capable of achieving, together with the intensely iterative, data-driven business model afforded by the low production costs of games like this, were catching the attention of investors outside of the gaming world, looking for the next big growth opportunity.

The trend continued. In July 2018, private equity firm KKR bought a $400 million minority stake in AppLovin and now, exactly one year later, Blackstone announced their plan to acquire mobile ad-network Vungle for a reported $750 million. Not only is money going into gaming studios, but investments are being made into companies whose technology supports the mobile gaming space. Traditional investors are finally taking notice of the mobile gaming ecosystem as a whole and the explosive growth it has produced in recent years. This year alone mobile games are expected to generate $55 billion in revenue, so this new wave of investment interest should really come as no surprise.

A woman holds up her cell phone as she plays the Pokemon GO game in Lafayette Park in front of the White House in Washington, DC, July 12, 2016. (Photo: JIM WATSON/AFP/Getty Images)

Government intervention

Most recently, governments are realizing the potential and reach of the gaming industry and making their own investment moves. We’re seeing governments establish funds that support local gaming businesses — providing incentives for gaming studios to develop and retain their creatives, technology and employees locally — as well as programs that aim to attract foreign talent.

As uncertainty looms in England surrounding Brexit, France has jumped on the opportunity with “Join the Game.” They’re painting France as an international hub that is already home to many successful gaming studios, and they’re offering tax breaks and plenty of funding options — for everything from R&D to the production of community events. Their website even has an entire page dedicated to “getting settled in France,” in English, with a step-by-step guide on how game developers should prepare for their arrival.

The U.K. Department for International Trade used this year’s Game Developers Conference as a backdrop for the promotion of their games fund — calling the U.K. “one of the most flourishing game developing ecosystems in the world.” The U.K. Games Fund allows for both local and foreign-owned gaming companies with a presence in the U.K. to apply for tax breaks. And ever since France announced their fund, more and more people have begun encouraging the British government to expand their program, saying that the U.K. gaming ecosystem should be “retained and enhanced.” But, not only does the government take gaming seriously, the Queen does as well. In 2008, David Darling, the CEO of hyper-casual game studio Kwalee, was made a Commander of the Order of the British Empire (CBE) for his services to the games industry. CBE is the third-highest honor the Queen can bestow on a British citizen.

Over in Germany, and the government has allocated €50 million of its 2019 budget for the creation of a games fund. In Sweden, the Sweden Game Arena is a public-private partnership that helps students develop games using government-funded offices and equipment. It also links students and startups with established companies and investors. While these numbers dwarf the investment of more commercial or financial players, the sudden uptick in interest governments are paying to the game space indicate just how exciting and lucrative gaming has become.

Support is coming from all levels

The evolution of investment in the gaming space is indicative of the stratospheric growth, massive revenue, strong user engagement and extensive demographic and geographic reach of mobile gaming. With the global games industry projected to be worth a quarter of a trillion dollars by 2023, it comes as no surprise that the diverse players globally have finally realized its true potential and have embraced the gaming ecosystem as a whole.

Revenue-based investing: A new option for founders who care about control

Published August 19, 2019

David Teten
Contributor

David Teten is a Venture Partner with HOF Capital. He was previously a Partner for 8 years with HOF Capital and ff Venture Capital. David writes regularly at teten.com and @dteten.

So what is Revenue-Based Investing?

RBI structures have been used for many years in natural resource exploration, entertainment, real estate, and pharmaceuticals. However, only recently have early-stage companies started to use this model at any scale.

According to Lighter Capital, “the RBI market has grown rapidly, contrasting sharply with a decrease in the number of early-stage angel and VC fundings”. Lighter Capital is a RBI VC which has provided over $100 million in growth capital to over 250 companies since 2012.

Lighter reports that from 2015 to 2018, the number of VC investments under $5m dropped 23% from 6,709 to 5,139. 2018 also had the fewest number of angel-led financing rounds since before 2010. However, many industry experts question the accuracy of early-stage market data, given many startups are no longer filing their Form Ds.

John Borchers, Co-founder and Managing Partner of Decathlon Capital, claims to be the largest revenue-based financing investor in the US. He said, “We estimate that annual RBI market activity has grown 10x in the last decade, from two dozen deals a year in 2010 to upwards of 200 new company fundings completed in 2018.”

How a Swedish saxophonist built Kobalt, the world’s next music unicorn

Published August 9, 2019

You may not have heard of Kobalt before, but you probably engage with the music it oversees every day, if not almost every hour. Combining a technology platform to better track ownership rights and royalties of songs with a new approach to representing musicians in their careers, Kobalt has risen from the ashes of the 2000 dot-com bubble to become a major player in the streaming music era. It is the leading alternative to incumbent music publishers (who represent songwriters) and is building a new model record label for the growing “middle class’ of musicians around the world who are stars within niche audiences.

Having predicted music’s digital upheaval early, Kobalt has taken off as streaming music has gone mainstream across the US, Europe, and East Asia. In the final quarter of last year, it represented the artists behind 38 of the top 100 songs on U.S. radio.

Along the way, it has secured more than $200 million in venture funding from investors like GV, Balderton, and Michael Dell, and its valuation was last pegged at $800 million. It confirmed in April that it is raising another $100 million to boot. Kobalt Music Group now employs over 700 people in 14 offices, and GV partner Avid Larizadeh Duggan even left her firm to become Kobalt’s COO.

How did a Swedish saxophonist from the 1980s transform into a leading entrepreneur in music’s digital transformation? Why are top technology VCs pouring money into a company that represents a roster of musicians? And how has the rise of music streaming created an opening for Kobalt to architect a new approach to the way the industry works?

Gaining an understanding of Kobalt and its future prospects is a vehicle for understanding the massive change underway across the global music industry right now and the opportunities that is and isn’t creating for entrepreneurs.

This article is Part 1 of the Kobalt EC-1, focused on the company’s origin story and growth. Part 2 will look at the company’s journey to create a new model for representing songwriters and tracking their ownership interests through the complex world of music royalties. Part 3 will look at Kobalt’s thesis about the rise of a massive new middle class of popular musicians and the record label alternative it is scaling to serve them.

Early lessons on the tough road of entrepreneurship

Image via Kobalt Music

It’s tough to imagine a worse year to launch a music company than 2000. Willard Ahdritz, a Swede living in London, left his corporate consulting job and sold his home for £200,000 to fully commit to his idea of a startup collecting royalties for musicians. In hindsight, his timing was less than impeccable: he launched Kobalt just as Napster and music piracy exploded onto the mainstream and mere months before the dot-com crash would wipe out much of the technology industry.

The situation was dire, and even his main seed investor told him he was doomed once the market crashed. “Eating an egg and ham sandwich…have you heard this saying? The chicken is contributing but the pig is committed,” Ahdritz said when we first spoke this past April (he has an endless supply of sayings). “I believe in that — to lose is not an option.”

Entrepreneurial hardship though is something that Ahdritz had early experience with. Born in Örebro, a city of 100,000 people in the middle of Sweden, Ahdritz spent a lot of time as a kid playing in the woods, which also holding dual interests in music and engineering. The intersection of those two converged in the synthesizer revolution of early electronic music, and he was fascinated by bands like Kraftwerk.

Spotify

Niche middle class vs. Global superstars

The business of a song

What’s new?

In other news

Rounds of the week

Time to Disrupt

Listen

Learn

The gaming phenomenon

Games on games

Wall Street wakes up

Government intervention

Support is coming from all levels

So what is Revenue-Based Investing?

Table of Contents

Early lessons on the tough road of entrepreneurship