Forget Music Labels - Find an Investor

We’re living in the DIY age. The term bedroom producer is taken very seriously these days and a guy or a girl with a laptop can move tens of thousands of people at a live show. Add social media marketing which costs almost nothing but will help spread the word if you’re good, and you can understand what sparked Wunderkind Diplo to advise artists to find an investor rather than a label. Just to be clear: when we speak of finding an investor, we’re not talking Kanye West begging Mark Zuckerberg for a billion dollars on Twitter, or Robbie Williams who was searching for a money lender after leaving EMI in 2009 (he since endet up with Universal, and now Sony). We’re talking about up and coming, independent artists.

Diplo: “You don’t need as much money”

Here’s what Diplo said in an interview with GQ at the beginning of last year:

“I’m spending literally all the money I have on my videos. Shit that labels just won’t do. You know, you don’t need a label anymore. Major labels, they come to us anyway for, like, ideas for videos and marketing. We’re better at it than they are. Now I’m like, ‘Why did I ever do anything on major label?’ Well, I never had the money. But now I’m just investing in myself, which is what you should be doing. Always. I think more artists, honestly, should find an investor. Like, an up-and-coming rapper, they should have angel investors. You need venture capitalists to invest in music.

“You don’t need as much money. You need like a hundred grand. You don’t need like two million. But you need a hundred grand to launch a young guy’s album. And it sucks if you waste it, if it’s a bad investment, but you’re probably gonna get your return back. And if the guy does become Drake because literally Drake needed an investor then he fucking made a shitload of money! And you put out awesome music. You’re not just putting out a fucking new vacuum cleaner or some shit. You’re putting out awesome music that’s gonna last forever.”

A cynical mind might suggest that labels have already been reduced to the role of mere investors, but that is not true. They indeed lend you money in order for you to produce a record. And they expect a full return on investment, which is called recouping in the recorded music space. But they still do a lot of priceless marketing. And they know the business inside out, they’re expertise is worth gold in the development of an artist.

Between “not interested”…

There are some artists that have a knack for marketing. It comes naturally to them. Any social media campaign they initiate goes viral and develops a life of its own because it strikes a cord with a lot of people who will re-share the content, which multiplies the marketing effect. But no matter how good you are music and marketing wise, you still need money to fund that initial album and to pay musicians. Even if you create the entire album on your laptop you’ll want to master it, maybe create a box set with all sorts of nice gimmicks, in short: quality costs money. And that’s were an investor could help. At least according to Diplo.

However, most investors we reached out to said they weren’t interested in funding an artist career. Most said that investing in artists was simply not their cup of tea. Others elaborated a bit, saying that they wouldn’t feel comfortable funding artists, because they know nothing about the music business. “We wouldn’t invest in this area. We simply lack the expertise and experience for this particular market. I also don’t know anyone from the professional investor’s milieu, who has specialized in this segment. But that could change, of course,” says Christoph Osburg of Aurelia Private Equity.

…and “yes, we would”

Then there’s Omnis Mundi, its slogan being “we believe in the very few people who will change the world. Are you one of them?“ The company’s CEO Gerald Heydenreich says that “rather than asking if we would invest in an individual artist, the question should be whether we’d invest in an artist and a good agent. The answer is yes. We would. If we had to invest in the artist only the answer would probably be no, as we know nothing about the music business.”

Jochen Schweizer, one of the most famous investors in Germany, generally doesn’t invest in music start-ups. He’s not the only one. The reasons for this reluctance are up for speculation. It could be that hardly any music start-up ever makes it. No matter how ingenious their idea – take a look at our five start-ups any independent musician should have on their radar – they seldom turn out to be the next Soundcloud, Shazam or Pandora. Or take a look at the generation of start-ups that came with the blockchain revolution. Their business models sound too good to be true, but it seems the music business is pretty content with were it is. Maybe that is why investors don’t show a great interest in dealing with it, because they require a certain willingness for change and risk-taking on behalf of their clients.

If not even Robbie Williams is able to do his thing with the help of investors rather than the traditional label giants, how can you? It seems that if you’re looking into acquiring funds for your first album and campaign, and if you don’t want to take the traditional label route, the only way right now seems to be crowdfunding. Based on what investors told us, you could also get an experienced agent who will not only convince an investor that he knows the business inside-out, but also that every single dime will be well-spent on you. And that the return on investment will be amazing. Because that is the main thing investors are concerned with.