Our start-up of the week is Cork-based Subwoofr, a platform that helps music artists to make more money.
Subwoofr gives artists a single dashboard view of their sales and enables them to engage with paying fans directly.
“It’s no secret that artists are making paltry amounts of money from recorded music these days,” said Joe Lennon, founder and CEO of Subwoofr.
“The devastating effects of digital piracy have led to the financial value of music being eroded away. These days, listeners flock to streaming services, where they can listen for free (or for a low monthly subscription) to any of tens of millions of tracks from virtually any artist around the world. The net effect of this shift is that artists get paid tiny sums of money for their efforts.
‘With the exception of live performances, artists and record labels aren’t selling what the modern consumer wants. Subwoofr helps them to change that’
– JOE LENNON, SUBWOOFR
“In spite of this, we live in an age where people have more money than ever before, and with online payments becoming increasingly simple, it is easier than ever for them to spend that money.
“People still love music – one might argue that people love music even more these days as they have such wide-ranging access to it. The missing link lies in the product. With the exception of live performances, artists and record labels aren’t selling what the modern consumer wants. Subwoofr helps them to change that.”
Subwoofr’s target market comprises independent music artists, record labels, management companies and industry-specific PR/brand/marketing agencies.
“Basically anybody who creates, sells and promotes music. Through our product, artists will sell to music fans globally.”
He said that the largest market for music by some distance is the US ($4.9bn annual revenues – 33pc of global revenue). “So that’s a key target for us. Other major markets include the UK, Germany and Japan.
“Ireland has a healthy music scene, and we are currently testing the product with primarily Irish artists. Relatively speaking, however, Ireland is a tiny market, with just €30.7m in revenues in 2014.”
Lennon’s background is in software engineering and product management.
“After graduating from the Business Information Systems (BIS) degree programme in UCC, I joined CoreHR as a software engineer. During my seven years at Core, my roles included product manager and eventually head of technology, allowing me to put the various skills I learned in BIS to good use.
“Prior to starting Subwoofr, I was CTO at Vearsa, a global publishing technology company. Vearsa was recently named second fastest-growing company in Ireland in the Deloitte Fast 50. In addition to my day job, I am an avid tech author, regularly producing content for IBM, O’Reilly and other media that has been translated into a dozen languages and viewed by millions globally. I have also written two books: Beginning CouchDB and HTML5 in Action.”
Simon Cogan is CFO and co-founder of Subwoofr. Cogan is a qualified chartered accountant, having trained with EY in Dublin. Following this, he worked as a project accountant with Glaxosmithkline, before going on to become group financial controller for Ardmore Shipping. He played a key role in Ardmore’s $240m IPO on the NYSE, and has experience in financial modelling, forecasting and business strategy.
Lennon said Subwoofr’s approach to supporting artists is very straightforward.
“The customer signs up for an account on our website and, following a few simple steps, they have a fully functional site. From here, they can upload all of their content (music, videos, photos, etc), decide what to sell and how they want to price it.
“We take care of the tricky parts like secure payment processing, recurring subscription billing, digital goods delivery, converting their music into multiple formats and tagging it with their cover art and up-to-date information and so on.
“The customer can use our dashboard to view all of their sales, customers, and engage with their paying fans directly.”
Lennon said the ultimate goal is to help the music industry recover the $6.9bn in annual revenues it has lost over the past 10 years, and then some.
The outsiders intent on saving the music industry
Subwoofr is still at an early stage and launched a beta programme at the end of October that will run until early 2016 as additional functionality and product iterations are deployed based on feedback from participants.
“We’ve primarily working with local artists and record labels right now, but will push out internationally once we formally launch the product early next year,” Lennon explained.
“We are currently looking to raise seed investment of €500,000.”
Lennon said that being outsiders to the music industry is challenging but also an advantage.
“I think this gives us a unique perspective and this definitely helps us. It does make customer acquisition and marketing more challenging though, but we’re finding the industry is quite receptive to innovation and welcomes new entrants to the markets.
“Another challenge is the diversity in our target market. Each and every artist is so different and has varying ideas of what the product should do for them. There’s also a huge range in spending power – everything from absolutely nothing up to millions of dollars per artist, making pricing a unique challenge.”
‘Raising money takes a while, even the simplest of investment deals can take quite some time to agree. Never consider investment final until the money is in your bank account’
– JOE LENNON, SUBWOOFR
Being from Cork is also an advantage. “Although the scene here is pretty quiet, there are plenty of companies doing great things, such as Teamwork, Trustev, Zartis, Barricade, Vearsa and Treemetrics.
“We’ve met a lot of start-up founders, investors, and advisers over the past few months and everyone has been very approachable and happy to help and give advice.”
Leap of faith
The hardest part of starting a business is the uncertainty and, for many founders, it requires walking away from the stability of a regular salary.
“Make sure you can go without salary for a considerable amount of time – i.e. if you have financial commitments, make sure you can cover them with savings for a while. Raising money takes a while, even the simplest of investment deals can take quite some time to agree. Never consider investment final until the money is in your bank account.
“If you don’t already have a co-founder, get one – ideally one that has complementary skills to you. I have a tech background and my co-founder has a finance background.
“This allows us to focus on product and raising money at the same time. If you’re building a product, make sure one of the founders has the skills to build it so you don’t need to hire someone or outsource its development.
“Spend your money on getting to market and promoting the product instead,” Lennon advises other start-ups.