Invested Engagement w/ Sean Peace | Ep. 154

In this episode of the Biz/Dev podcast David and Gary talk to the CEO and Founder of SongVest- a fan engagement platform where you actually can “own” pieces of your favorite artists’ catalog. This isn't your same old investing…

Links:
Sean Peace's LinkedIn
SongVest Website

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David Baxter has been designing, building, and advising startups and businesses for over ten years. His passion, knowledge, and brutal honesty have helped dozens of companies get their start.

In Biz/Dev, David and award-winning Creative Director Gary Voigt talk about current events and how they affect the world of startups, entrepreneurship, software development, and culture.

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Transcript

[00:00:00] Sean: The collaborations I think we're going to see, to me is what's going to be the most exciting. It's not that we fractionalize or securitize music royalties. It's what have we created in this ecosystem? That's going to allow fan and artists to collaborate in ways that we haven't even thought of yet.

[00:00:20] David: Hi, everyone. Welcome to the BizDev podcast, the podcast about developing your business. I'm David Baxter, your host, joined per usual by Gary Voigt. Hello, sir.

[00:00:29] Gary: Hey, how you doing this week?

[00:00:31] David: I cannot complain. Cannot complain. I'm about to go on vacation, so I'm really not able to complain. Very excited. Anyway,

[00:00:37] Gary: Are you halfway here or are you going to be here? Today for this podcast, are you thinking about vacation or are you thinking about a guest?

[00:00:44] David: here. I got four more days. Come Friday, I'm probably useless, but it's Monday, so I'm here.

[00:00:51] Gary: All right.

[00:00:52] David: More importantly, we are joined today by Sean Peace, who is the CEO of SongVest. Welcome, Sean. How are you?

[00:01:00] Sean: Doing good. I'm not about to go on vacation, so I wish I was.

[00:01:04] Gary: Yeah, me too.

[00:01:05] David: we don't let, we just chained Gary to the chair. He's not allowed to go on vacation. That's what you don't see. It's nuts off camera. It's all the weights we have keeping him in the chair. So tell me about SongVest.

[00:01:18] Sean: Song Fest is really a journey. It's not It's not, even though we still consider ourselves a startup The idea hit me all the way back in like 2006. And a good friend of mine became a a pretty famous songwriter, And she mentioned one day, She might sell her catalog. And me being a consummate entrepreneur, although on the tech side, I had a lot of questions.

I was like, I didn't know you could buy and sell music. Like, why would you do it? Who would you sell it to? How would you do it? And the lightning bolt moment for me was, Wouldn't a fan pay more than an investor to own a piece of song? Because how cool is it to own like a piece of your favorite song?

And and that has really been a journey since then. The first version of SongVest, you know, started in 2008. And when you start to fractionalize something, especially an asset, All of a sudden lawyers said you know, you're creating a security. And I'm like, what's that? So I've learned learned a lot about security laws and and so the long story or the short story is fast forward to 2020 and restarted song best backup, and you probably don't want to hear all the gory details in between, but we raised enough capital to where I could.

Kind of get to that ultimate dream because the jobs act which allows you to fractionalize different asset classes. So there's this thing called regulation a plus and Fast forward a little bit more after covet in 2021, we were the first company to fractionalize music royalties and get sec qualification to do it so song vest right now has three cores We sell music catalogs, we do advances on music catalogs, and then we allow artists to use our fractional model to carve up small pieces of royalty shares to share with their fans and create what we call an elevated version of a super fan or casual fan, which is an invested fan.

And we're still continuing to learn about what it means to be an invested fan. How can artists engage invested fans in ways that we haven't even thought of before? Because as soon as you have that concept of ownership, like what does that mean? What does it mean for you to be a co owner with an artist?

Like what can we empower those invested fans to do? So that's what song best is today. It started a long time ago. It's been a very long journey to get here. But but yeah we're super excited about creating this. This new world of invested fans and seeing where That collaboration between artist and fan are going to are going to take not only the fan but also the artist

[00:04:03] David: So if you're an invested fan, are you investing in the artist or a specific song or an album

[00:04:09] Sean: So usually it's it usually is song by song it could be an album but what we're focusing on more today is that song so it could be Like for example, we have tlc on the site You Or actually we'll be back on the site because of an sec requalify every three years. So we're going through that process right now but it will be back up on the site.

And so like with TLC, it was a rerecord. I think I liked Taylor Swift when she rerecorded her masters. We have a lot of artists who are interested in doing that as well. Because that way they, you know, depends on what kind of record label deal they have, et cetera. But they could do, use an old song, meaning the royalties from that old song, or it could be a remastered new song of a classic hit.

So TLC did Digging on you, Creep, No Scrubs. And in that particular example you know, fans have purchased over 150, 000 of those song shares for those remasters. So it just all depends on what the artist is interested in. So we really have that discussion with them and You know, what do they feel their fans are going to want most?

But pretty much any kind of royalty stream we can carve up and sell to the fans

[00:05:28] Gary: Okay. So this is more than just being like a Patreon, you know, where you're not just giving money to an artist that you like to watch them and grow or whatever. You're actually getting something in return from that.

[00:05:39] Sean: Yeah, so there's actually a couple things so you are getting the monetary Meaning that the income from the royalty stream, although we are not selling this as an investment, we're really selling it more as a fan engagement. You know, it'd be like if you bought, say, you know, a box set of vinyl and the vinyl actually paid you every quarter, right?

So what we include, and this has also been an evolution of where we're going, is before it was just, you know, a digital certificate. And that's all you got in these royalties. And now we're really figuring out, okay, what is it that fans want? So like in this next big launch that we're getting ready to have, it's going to be a seven inch piece of vinyl and with cover art on it, you know, on, on the on the center.

That's going to showcase what you've purchased as well as the cover of that seven inch vinyl, which is all going to have, again a unique graphic design on it so that what you purchase, you can actually take and open and feel it and frame it if you want to there's upsell opportunities where if you want, you know, a bigger version instead of my dog in the background, you know, you want.

A big, you know, triple platinum album award, like you see on TV. You can even upgrade to that, you know, maybe it has handwritten lyrics or hand signed lyrics, and that's really all up to the artist to decide, Hey, what are the perks of being an invested fan with that artist? And then the second piece of that is ongoing engagement, right?

Because this isn't necessarily a one and done. We believe that artists will want to continue that fan engagement with those invested fans to think, you know, here's an easy example. Even though I may own an old song of that particular artist, maybe that artist is dropping a new album. I'm an invested fan.

I want to help. So if that artist says, Hey, listen, I'm dropping, you know, a new album next week. So instead of just in their Instagram, they're posting it, you know, we provide all this information so that the invested fans, 5, 000 or 10, 000 or 20, 000 of those invested fans are all posting on Instagram organically.

And now we have something that can maybe move the needle, right? If they're going on tour, you know, maybe there's a ways that you can help promote that, or, you know, you can get a group of friends together and maybe there's a, the artist says, Hey, if you're an invested fan, come back and see me backstage, et cetera.

So we think there's a whole bunch of different ways that artists are going to learn. And same way with invested fans, like what can they offer? Maybe they can offer things to the artists that we've never even thought of before. Hey, I run a marketing agency. I see you're going to drop a new album.

Can I help promote it? So. 

The collaborations I think we're going to see, to me is what's going to be the most exciting. It's not that we fractionalize or securitize music royalties. It's what have we created in this ecosystem? That's going to allow fan and artists to collaborate in ways that we haven't even thought of yet.

And that's what's most exciting for me. 

[00:08:47] David: So you mentioned that you don't consider this a financial vehicle. This is, so you should do this as a fan of the artist. There may be some sort of financial thing to it because you do have royalty rights, but It is possible, maybe unlikely, but it's, there's a new artist. Let's say it's a new rap artist and you just like his stuff.

He's new. He hadn't come out yet really. Or he's barely, you know, local, let's say he's a local regional kind of artist and you invest in a song that you're super excited about. And then that song explodes, you know, a year later goes national and he's got a billion streams out of nowhere. That could become a decent amount of something, 

[00:09:29] Sean: oh for sure, yeah exactly it's just you know in the music industry no one, you know, it's like When beyonce reese, when beyonce releases a single we know it'll be successful. We just don't know how successful. Will it be a hit? We have no idea, right? So when you're looking at a mid tier band Who knows, man, no one has that kind of crystal ball.

So that's why we always say, Hey, listen, you know, you are buying a share in a song because you love the artist because you love that song. It's no different. The price points are like 75. So it's no different than going to the concert and buying a t shirt. Hopefully you can get a concert ticket for 75.

I don't know if he can anymore.

[00:10:16] Gary: going to say, you can't do both. You do one or the other for 75.

[00:10:19] Sean: Yeah, exactly. And we do have tiers, which is cool because if you think back to the kickstarter days and things like that, you know, if you buy five units, you know, you might get a zoom call or you buy 10. We did a bullet boys campaign and if they bought, I think it was Wasn't a hundred units, but at a certain level the number of units you got you know, they would, of course you had to pay their expenses, but like they would come in and do you know, an acoustic set in your house.

So artists can, you know, can layer based on how many units you purchase, different kinds of fan incentives which is which is always cool as well. So it's not just about, again, buying that one chair it's Hey, if I get five I get, you know, a signed lyric sheet or something like that

[00:11:05] David: When I think of startups, especially most tech startups, they are usually two sided markets. You have Airbnb as a classic example. I have people who own houses, who would like to make some money. And I have people who are going to a location and I would like a house. There's a two sided market, right? You have a two sided market here.

Pretty, pretty much. What's different, off just off the top of my head, what sounds different is Generally speaking, when I talk to startups, getting the house side of Airbnb, the vendor, as it were, is relatively easy because they are just desperate to get their name out there and they want their house and they want to make some money.

That's the whole point. They're fine. You just, if you market to them pretty easily, they're an easy sell. The hard part generally is to get the consumer who has no idea who you are to sign up for your service and be that middleman that you want to be as the two sided market. I, when I think about yours, Yours is hard on both sides, right?

Cause you got artists. And I'm thinking like a TLC or something. A known entity, not a completely newcomer. You've gotta convince them that this is worth their time. 'cause these are, you know, TLC is a famous group. People know them and I'm sure you have others in that genre. I doubt you have the Taylor Swifts in the world.

But you know, that's a rare breed in of itself, but that's now a hard sell for you. So your two-sided market is tricky, it sounds am I wrong in that assessment?

[00:12:32] Sean: no, you're 100 right and and It flip flops on both sides, right? The music industry as a whole is not very entrepreneurial, you know They don't like to try new things They probably feel like they've been burned on some of the entrepreneurial things i. e streaming So they're very protective of their fans You they're very protective of their brand and they want to see it work several times with artists that they know or respect or you know, have some kind of visibility in before they're going to do it.

The good news is, what we've seen normally in the music industry is, there's a snowball effect. So that while right now I would say we're in the very early phases of finding the right mix of artists, finding the right mix of what it is that we're packaging and selling, like a big thing that we're figuring out right, like right now, for someone who drops into our page from an artist, Is what is it?

You know, what is it that we're selling? What is this thing? This invested fan and what does it mean to them? And how can we make it more tangible? Just like I was saying, you know, it used to be purely digital and now we're like, okay, we really need to treat this as memorabilia. We need, they need to have something they can see, they can touch, they can feel it says, Hey, this is what I'm buying.

I'm buying the seven inch vinyl in this awesome cover art. And it also comes with this, you know financial incentive on top of it so those are all the things that we're figuring out But what we feel on the artist side is while You know, we're having a hard time knocking down each one individually We know that in six months or 12 months from now once it's successful That our outbound team will actually slowly turn into inbound because once the music industry really sees again If we're successful then we're we will have that nut somewhat cracked.

Okay. The reverse of it is if you're a masterworks or rally road or, you know, real estate, fractional real estate, the hardest thing that you have and where you're going to spend most of your money, Is on the consumer side, you know, trying to break down to get to those consumers. And that is the, actually the easiest thing for us now, granted, we still have to figure out what that, what it means to be that invested fan and the packaging and all of that.

But at the end of the day, the artist brings their fans. I don't have to go out and find a fan. You know, we just need to make sure that we target already We target artists that already have that fan base. They've already sold merch to them before They already have a you know, whether it's a email database or they've already got, you know X number on instagram and facebook, etc They've sold tickets, you know, sold things at venues.

So that particular piece is a lot easier for us because then what we're doing is we're basically saying, okay, here are the, here's your marketing plan. Here are the things that I want you to do over the next 30 days to engage fans. To do live streams, videos. We're going to boost all of this through collaborative posts and everything else.

And we'll put some of our own marketing dollars into it as well, but that's actually the easier part of the equation. And really it for, from my standpoint is the game changer on our model because we don't have to spend a dime. You know, outside of what we have as a profit margin to go out and engage those fans, you know, ours is not getting people, you know, to the landing page.

It's getting them all the way through the funnel. So that's the difference in our model from kind of other types of companies, like you were saying that that, you know, it makes me excited because of a scalability and cost and profitability perspective. For

[00:16:30] Gary: actually, you know, Worried about like developing a product that you have to give out. You're just giving a toolkit to the artist for their fans, for them to interact with their fans. I'm sure the tool gets going to change based on the artists and the fans and what they want to accomplish with it.

But so you don't even have to worry about connecting any kind of networking between the two groups. You're just basically an in between and an idea provider.

[00:16:53] Sean: That's exactly right. And then the next evolution of our company, though, will be in between artist and fan. You know, that is like the next level, is saying, Okay, you're going to release a new album, or you're going to drop a new single. Okay, we're going to take that information, make sure it gets to those invested fans, and then we're going to track was there lift in between those two.

So the next phase, or the next evolution of SongVest, really it becomes that fan engagement platform. being able to say, Hey, we know artists when you're dropping new music. If you have 10, 000 invested fans, we're going to get, you know, 7, 500 that are going to post on socials. That's going to give you lift of X.

We're going to have X number of people that are going to do Y and make sure that we track all of those metrics. Because again, if we're successful in showing what invested fans can do for you as an artist, Then that makes doing a campaign with us even more compelling and that's also something we could potentially charge for because we own those invested fans So being able to get access to them has to come through us.

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[00:18:44] David: From a business perspective, you guys have been around almost five years, the current iteration, I should say. And so where are you guys? Are you on a runway? Are you self sufficient or is this just getting its legs? Where are you guys sitting at from a business perspective?

[00:18:59] Sean: So we're really lucky in that back in, again, 2007 2008, in the kind of the first version of SongVest we found out really quickly that this kind of fractional model that we created would not scale because we needed the artist involved. And what I had is I had one artist that was super successful and then I had a whole bunch of songwriters but they were songwriters, you know, who wants the songwriters version of a Beyonce song?

They don't. I found that out really quick. In 2011, I started the first company, I started a company called Royalty Exchange, which was the first company to allow songwriters, producers, and artists To package up their royalties and sell it to investors and I sold that company in 2015 So my core background was selling catalogs and this can be a catalog for as small as twenty five thousand dollars as high as It's on best now.

Our highest transaction was 10 million dollars So these are catalogs that we were selling to high net worth individuals Then the music catalog market took off after 2015 after I sold the company so I still stayed doing private catalog sales, but i'm a tech entrepreneur at heart I started co started a company that did food truck scheduling For like office parks and things like that.

And then of course when covid hit You know all of that came to a stop and so i'd already been doing catalog sales that's when I pulled song vest off the shelf because I never got rid of that domain and What has been our bread and butter keeping the lights on has been the catalog sales So we were actually doing really well with the catalog sales and advances and again profitably and that's when I said, you know what there's enough business here for me to go Raise a little bit more capital because to get through the sec process is a highly painful and very expensive.

So we raised some capital and got qualified in 20 end of 2021. And of course during that time, this is just great. I don't know if you remember, but in the end of 2021 was when like NFTs had just exploded. So we thought

[00:21:11] David: them since about that. That sounds right.

[00:21:12] Sean: Yeah, so we thought, hey, this is great. We're going to launch at the end of 2021.

No one has ever done this before. Fractionalized music royalties. This is great. And then NFTs, they were like NFTs can do that. NFTs can do anything, you know? We can fractionalize the world with NFTs. And we were just like, I promise you, you can't see there's this whole thing about the SEC that I've been trying to do this since 2008 and I know that NFTs

[00:21:45] David: one would listen back that and

[00:21:48] Sean: we didn't even. No one even cared about what we had done. And it was amazing to me. I'm like, Oh my God, like I've been waiting so long to do this. And then I finally do. And no one cares. So anyway just fast forward, we had to get through that, you know, whole NFT thing and it had to explode.

And so the good news is the catalog business keeps the lights on. You know, and then trying to raise capital, right? Here's some lessons here. Like we, we, you know, All the capital we have raised have been from people inside the company inside our ecosystem So people who are investors on the platform And tried to raise venture capital, you know tried to raise outside And then finally two years ago i'm like going you know what guys why am I spending my valuable time?

to go out and do this when We're almost cashflow positive. So like beginning of this year, I stopped. I said, you know what, our focus now is to get to cashflow positive, which we've done for this year, and to get profitable next year. And then just rock on from there, you know? It's just there, you know, People think that like when you get a press release or when you get funding, like that solves something.

It doesn't solve anything, you know? It's just one more step that you have to take, but it doesn't solve the core problem of the business, which is, you know, you have to get people that want to buy your stuff and ultimately buy it At a price that, you know, outweighs your expenses, at least for 99 percent of the other companies out there, except for the ones that somehow get bought out at some point. So yeah, that was our story of how we got

[00:23:27] Gary: How big is your team? You keep saying R and we, I was just curious, like for something like this, does it require a lot of people at least, or is it just managed pretty well with just a small team?

[00:23:37] Sean: No, I would say it's still a small team. It's myself. My CFO on the sales side and a lot of these people are, everyone's still 1099, you know, everyone's still a consultant. We have on kind of the sales side, one, two, like five people that are out in the field. Meaning that, you know, that, that are what I would say, business development people.

And then we've got probably another three folks that are internal that are, you know, doing contracts and moving the process along, customer support, things like that. So it's not a huge team. We've done, you know, I'm a CTO at heart. So I've done all the technology. We've done that on a shoestring.

You know, just because we needed to. But everything is up and working and, you know, it's always fun. Building technology is always fun to me.

[00:24:32] David: So what is, do you guys have patents or something? What is it that stops a universal or whatever, big, huge music company from going, that's a cool idea. Let's do that for our library of people.

[00:24:46] Sean: Yeah so from the music industry, it's just, You know, they have a lot of other stuff that's going on and and maybe once we're big enough, they may think of doing that, but we've already had one company that has done what we've done, who came after us that, you know, they've already come and gone.

And I think the main reason is that it's really hard to, you know, to create something new for the music industry. And it's really hard. If you don't have a cash flow business that allows you to take three years to get to where we are right now, right? If this were, if song shares were our only business then we would have been gone a year, two years ago.

But it's great that we have had this whole catalog, you know, company to support us so that we can try this and then try that and try this and, you know, continuously try and figure this out. And I would say, you know, that's three years in, I think this fourth year is going to be our year, you know, we have finally got all the little pieces in place that I think we'll start to really accelerate and what's great is, you know, it doesn't take much for us to get, not just profitable, but highly profitable without having to put a whole bunch of extra infrastructure in place.

So that's the most exciting piece is I can go, wow. Man, actually, if we just do 50 percent of our forecast, you know, we're going to be not only profitable, but, you know, pay back some people that we owe some money on and, you know, really start to rock and roll it by the end of the year.

So that, that's what's super exciting for me.

[00:26:25] David: So let me, Ask you, this should be a fun question. So put on your little wizard hat and jump in front of me for five years. And all of your aspirations have come true. Where does song vest, what is song best doing?

[00:26:41] Sean: I think that SongVest will ultimately move further and further into the new. Economy of music and this is just where things this is where I think it could go, but it's just depends on whether the music industry could support something like it. all of this works out and fans can get on board and they understand what they're doing.

Then I really could see this as a destination for up and coming music. To where you go, Hey, you know, I heard that band they're playing. You know here in the southeast and that wouldn't be me But let's say you're in college and you know, you're following the local bands and you know, you go. Hey, you know I really like that band.

Oh my gosh, that band is on this like kind of fantasy football portal and I can buy some shares in that band for you know five dollars a share and try and track that band and You know see if that band starts to go up to where you know It's because right now we're it's all memorabilia But where I could see it go at some point where again you really go towards brand new bands that you could see it as more of kind of a fantasy football You know, i'm i'm just betting on a whole bunch of bands that I like and you know Maybe one of those will do well and that's the buy low sell high mentality You We do not want that in our marketplace today.

But if you were to say, where could this end up? I could see that it could end up over there. And a lot of people want to try and start there, right? They're like, Oh, that would be so cool to create now. And I'm like, no, it would one take a hundred million dollars. And two, the market's not ready for it.

Like you have to, to me, you have to prep people to understand what it even means to, to engage in that. And maybe that's where it might end up

[00:28:32] Gary: Now wrapping up with the question that we ask everybody else, you've already had, what, two businesses now related to music. So I'm assuming music is a passion of yours, but other than that what are three pieces of advice that you would give to an entrepreneur or a business starting up?

[00:28:47] Sean: Yeah, I think for any entrepreneur, it's No, or no. Thank you is a good word, if there is Going to be one thing that you're going to hear a ton, you know, it's Going to be well, i'm not you know, that's not for me. I wouldn't invest in that. Why are you doing that? and so the overall advice that You know, I give any entrepreneur is okay, you're going to hear that a lot.

And if you can't get through that, then you're, you really can't be successful. There's people that have ideas every single day. The difference between them and a successful entrepreneur is that they just don't listen to know, right? They're just a bull in a china shop. So that would be the first piece.

I think the second piece is especially for folks that are going out and really raising some serious money is like raising money is not the end game. You know, it's not the goal is not to raise money. The goal is to build a successful company and to know the money that you raise. You know, you should think of that as the last money you're ever going to get.

Because I've been told, you know, by a venture capitalist who invested in us at one point, we're in a different company. They said, no, we'll never, you know, not fund you, you know, at our board meeting, like we're never going to let you run out of cash. Yeah, they are, you know, if you're not that next unicorn, you know, and that's the big fallacy that I think people see in VCs.

VCs are just betting. They're not betting on you to create an operational company. They're betting on you to be a unicorn. And as soon as you're not a unicorn anymore, they will drop you like a hot coal. Because you're not important to them anymore. You know, they're not like who's the guy on CNBC?

Marcus, you know, he's not a Marcus out there, you know, giving you some money to run, you know, just a profitable company so that'd be the second one And then the third one is, you know, focus on your product to make money You know just Unless you really think that there is some Facebook or whoever that's going to buy you because you know, you have a million people on your platform, doesn't necessarily equate to, that's a gamble, right?

That's not a business model. You're hoping that someone is going to acquire you because You know, you've built a ton of traction, but if you have no revenue, then you have no help, no hope of being a successful company, you know, then you're betting on everyone in that company's life that, you know, it's only a purchase or else we're going to go bust.

And that always, you know, that always scares the hell out of me. They're, you know, anyway, so those would be my three main suggestions for any kind of entrepreneur.

[00:31:33] Gary: Very practical. So if anybody wants to learn more about song vests or yourself, how can they get in touch or reach out?

[00:31:41] Sean: it's just songvest. com. I'm on LinkedIn. It's my email is super easy. Just Sean at songvest. 

[00:31:48] OUTRO: Hi, I'm Christy Pronto, Content Marketing Director here at BigPixel. Thank you for listening to this episode of the BizDev Podcast. We'd love to hear from you. Shoot us an email, hello at thebigpixel. net.