Where is the next wave of music startups?

As someone from the music industry who has transitioned into the wider world of venture, I’m frequently pitched by music tech startups or get asked to give my opinion on investor appetite for music-related startups. A couple of weeks ago Musically called me up ahead of their new NY:LON conference and what felt like a long, rambling conversation, was excellently written up by Stuart Dredge. I hadn’t been planning to write anything about music here, but I thought this was a good opportunity to signpost the interview and further summarize some of my thinking.

Go and read the full interview here, below is just a summary.

2007 to 2012 marked 5 years of huge disruption in the music industry. Now we’re seeing the end game play out. Spotify bought The Echonest and is preparing for its (potentially delayed) IPO. Something is likely to happen to SoundCloud this year, if press reports are to be believed. Songkick merged with CrowdSurge. NextBigSound and Rdio were acquired by Pandora. It feels like the end of an era. The music industry was one of the first major industries to be ‘eaten by software’ and investors are now focused on sectors where we are still seeing this play out, for example finance, law, property, agriculture etc.

Most new startups and technical innovations in the music-tech space feel incremental and not disruptive. It’s not obvious what the next wave of innovation in music tech is. Incremental innovation is no bad thing and now that the industry is restructuring itself around a new digital music economy I believe there are plenty of smaller £5m — £20m businesses to be built and maintained. By definition, most of those aren’t VC-backable and probably shouldn’t be either, even if investor appetite was higher. The best sources of funding for those companies are probably the industry itself (either through investment or simply building revenues) or Angel-led rounds. There are also several industry-led initiatives such as Abbey Road Red, Techstars Music and Marathon Labs.

So where will we see large, new music-related businesses being built?

✓ VR and other immersive tech. I’m on the side of the optimists here. It’s easy to dismiss VR given the amount of hype right now. But personally I think we’re overestimating the short term impact, but underestimating the long term one. So the challenge of investing either time or money on this is more one of timing than anything else. At Seedcamp, we’ve backed TheWaveVR and at some point I should write a longer post about this, but a lot of my thinking is nicely explained in my recent MusicAlly interview.

✓ Creative AI. Again, this is something I hope to dive into more in a separate post, but I think we’re just starting to see a wave of companies creatively leveraging artificial intelligence. This post serves as a great primer for the concepts of augmented creativity, computational creativity and creative systems. I’d point to Jukedeck as being one of the startups that I’ve seen be most ambitious in building a business in this space to date. Only partially related, but I’m also still fascinated by what is possible in the area of computational sound, voice interfaces and hearables.

And what is less interesting?

✗ Blockchain. I‘m on the side of the skeptics here, but I’d love to be proved wrong. Undoubtedly there are huge problems to be solved, with so many entrenched rights organizations and a minefield of politics, egos and complexity. Blockchain could be one part of a solution, but certainly won’t be a silver bullet.

✗ Other. I still get pitched by a lot of bad music startups. If you’re doing something in music discovery, streaming, direct-to-fan or music marketplaces then please think about why what you’re doing is unique. If it’s something else, then maybe you’re on to something, but is it a big enough opportunity to warrant your own time pitching VC’s?

For a more complete read go and read the full interview here.