Would you trust a Fintech Start-up founded by a DJ?
A few weeks back, I decided to do a bit of research on some of the more prominent music tech businesses operating in the world today. I particularly wanted to take a look at the music streaming space and its founders. Even though I had already drawn some big conclusions on what I would find, I was secretly hoping the data would prove me wrong.
My question; How many music tech founders actually have a background in music?
In order to keep my scepticism at bay, I interpreted the terms “music background” very loosely.
Music streaming was my main focus, because I do believe a big part of their value lies in having a firm grasp on how people listen to music. Understanding in what context people listen to music, is critical to creating the right tools for your users and the perfect user experience around it.
There are of course hundreds of companies in the music tech space, around the world, but I narrowed it down to the most popular ones in every region, which left me with 33 companies — including the obvious ones like Apple Music, Spotify, Amazon Prime and Soundcloud but also Asian companies like KKBOX, Saavn and platforms like 8Tracks.
I researched who the original founders were and tried to find out as much about them as I could, via social media, blog articles etc., to see what connection, if any, they would have to music.
Of these 33 companies, only 3 have founders with any kind of musical background. The majority had founders with a strong business background or straight up techies (developers and engineers).
This is not a revelation, but I wanted to see if I could find any stark pros vs. cons between a music tech company founded by a “business” or a “music” founder.
It turns out that the platforms I personally deem the most user friendly, are the ones created by “music” founders. In my view these platforms took into consideration both the consumer and the artist. Coincidentally they also experienced the most organic growth compared to their competitors. Two of these companies had a product that consumers had not seen before.
But if history has taught us anything, it’s that first or better, doesn’t necessarily mean winner. If we think back at the iPod, many would easily believe that Apple was the first to release an mp3 player. They most definitely did not, but after the launch of the iPod, it certainly felt that way!
A similar thing is happening with Spotify. Their core product in itself is not necessarily very magical and they were not the first to market — KKBOX for example, was a few years ahead with the on-demand model. But, Spotify is the company we often think of, when we talk music streaming. Why? Spotify has had the ability to lead aggressive marketing campaigns and customer acquisition, as well as buying up other companies that have created some really great IP — think Echonest, Tunigo, Soundwave and Cord Project. A combination of the above has made Spotify a force to be reckoned with. Amazing, considering they are not profitable yet. So even though the founders are from a “tech” and “business” background, their continuous growth and ability to raise ridiculous amounts of cash has meant they have been able to hire some amazing talent around the world to keep evolving their music product.
“Music” founder companies such as Pandora and Soundcloud are doing it the other way around. They started with an incredible product and team and are now more focused on tweaking their business model to be successful. Which inevitably also leads them to acquiring other companies (especially Pandora).
But that still leaves me with the question; Is it easier or better as a “music” founder to hire a very experienced business exec or as a “business” founder, to find the music talent you need to create that amazing “novel” product.
Surely, something has to be said about a founder and their expertise on their subject matter? Or to put it another way; Would you put a lot of faith in an accounting software start-up founded by a DJ?
I have often had this discussion with investors and the resonating response is clearly in favour of a founder that knows their s*** about the space they operate in. Somehow this does not always translate to music tech. Is that because the music in “music tech” is not that important or is it because music is considered a by-product of a larger consumer offering?
Which approach is best? Time will tell and I personally have my reservations on the matter, but what is evident, is that the music tech behemoths are looking more closely at innovative startups than ever before, to create that point of difference and advantage over their competitors.