Investing in Music Tech Startups Is Risky but Worth It

Jakob Wredstrøm

And just so you can see how works, basically how Riverside works is that it streams, downloads and uploads at the same time, which means you might get a tiny bit laggy here in two seconds when you start doing that. Which also means if you lose the connection or it gets a bit wobbly, at times it doesn't really matter because I will get the full quality at the end. The only thing I just need to check is how fast your internet speed is.

Collette Tibbetts

Sounds great.

Jakob Wredstrøm

So I'll just see them two seconds when it starts uploading to first side.

Collette Tibbetts

Mm-hmm.

Jakob Wredstrøm

Looks like it's. What does it say at the top of your screen? Does it say like uploading percentage?

Collette Tibbetts

Um, no, on mine, yeah, there's a percentage that says a 99 % 88 keeps calibrating.

Jakob Wredstrøm

Good, good. Yeah, it's faster than mine, so that's fine. Good. Then I'm ready.

Collette Tibbetts

Sleep.

Collette Tibbetts

Born Ready.

Jakob Wredstrøm

Okay. The twinging. Okay, I'll start in five. Yeah.

Collette Tibbetts

Let's begin. Hey Jacob, nice to meet you.

Jakob Wredstrøm

Hey, what's it's Luke The Cloudcast. Today is a partnership episode with Wallifornia, where we will see each other in a couple of weeks. And I've been looking forward to that because we do know each other personally. And I think this is going to be an investor episode in partnership with Wallifornia, but I'll actually use the opportunity to have a bit more free conversation than I usually do about this subject and topic. And that's because I know that you loved it to talk with. And I saw the opportunity to maybe have a bit more free agenda today talking about

Collette Tibbetts

Really looking forward to it.

Jakob Wredstrøm

Investment music and any use investor. I hope that's okay

Collette Tibbetts

Lawer. That sounds delightful.

Jakob Wredstrøm

Great, but for people who don't know you, who are you and what do you do?

Collette Tibbetts

Well, I'm Collette Tibbetts. I am the founder and head joker, I like to say, of Joker Deck. It's an angel syndicate that is still in its pre-launch that should be launched by the time Wallifornia comes around, which is very exciting. And it's an angel syndicate that focuses primarily on music tech companies with the intention of bringing value-add through smaller check sizes and industry expertise to help companies pre-revenue who are just launching off really take off into industry that is historically a lot more nuanced than most.

Jakob Wredstrøm

Okay, but let's start from that. So why do you believe there's an opportunity in those sort of investments?

Collette Tibbetts

That's a great question. Well, you know, I suppose the other way that I answer the question when people ask me what I do is I'm an artist myself, you know. I think the biggest opportunity comes from the passion that I really have for music itself. You know, I've tried doing other things with my life. I can't. I'm a songwriter at my core. And I think the opportunity that I see is music is such a universal concept. We've had it since the dawn of time in all forms, whether it was religious chants, whether it's been battle cries during revolution, whether it's been in love songs or all these mediums in between the current medium, sort of a technology in the 21st century, whatever that means, right? But it's bound to change. The thing is, as industries evolve, ebb and flow, music is consistent and so no matter what form that takes, I think that the human spirit is one of the most reliable things that you can count on. And so taking that very, very high level perspective of it, I see that there's a lot of opportunity in music right now because I think that we're at this nexus of a renaissance in innovation. You know, we have access to all of these technologies that have been in development for the last... 50 to 60 years, some even longer than that, that are finally at a point where they're a lot more accessible, that we can start playing with them and things like it was a blockchain and decentralization a few years ago, now everyone's talking about AI. Before that, in the music industry, was things like streaming. You don't need to have a $20,000 an hour session studio to be able to play around in. Music and so all that to say I think there naturally comes a lot of investment opportunity when you're at the front of a Wild West. But I like to ramble if that answers your question at all.

Jakob Wredstrøm

Well, I think we'll dissect that a lot more during this conversation. I think what's really interesting, this conversation is sort of piggybacking off the last meeting I had today before I had this break here in California, I don't know why, was with one of my mentors, but also one of the investors in the company that I run now. He is an exedit music tech founder and... And we actually talking about music tech as an investment class, basically coming from the premise that Amplitude Ventures that I run, we've seen a lot of growth the last nine months and some of the avid listeners have maybe following like hints here and there, but you know, we close to. 80 people in the company and we really scaled really, really quickly and profitable and started investing in some minor companies as well. And I was basically asking him the question, this was based on lot of previous conversations with him, like, it worth trying to become a part of the music mafia? And the reason why we asked him question is he made a statement that there is opportunity in music tech. If you're part of the mafia. And obviously that's, you know, meant as the actual mafia, but it was a statement of that the opportunities are generally speaking, limited and reserved for the few. And, you know, as an investor, if you come into the industry, that is like one of the advantages you can have when it compares to other opportunities we might have as a company. So that's sort of the angle, like that's the last conversation I had about this. And then we come from this like very much like appreciation of what's happening in music. And I would love to just discuss those different sides of the story and angles. But if you were, maybe I can ask you like a blunt question. What would not be attractive about investing in music tech? Like what's the things that scares you at night as investors? And then we'll slowly go into the things that motivate you a bit more in detail.

Collette Tibbetts

I mean, I think unfortunately that's a pretty easy answer from purely an investing perspective. The return on investment historically in the music industry over the last 20 years has been abysmal for music tech companies. I've got a lot of friends who used to be former film and music investors themselves and they say, well, we can go to big tech companies in Silicon Valley and they've got a hundred times the exit multiple of what you can find in music at half the timeline. And, you know, I think, I think that you have to be objective about it, that a lot of that is true. You know, you can find pure profits in a lot of other places, but, know, I'm really big on behavioral economics. And I think that there's a bit of a, there's a bit of a, two things need to be held true when it comes to music investing. I think that when it comes to music companies, you really need to be in it for the music and not the profits in order to find the profit in that, which from purely an investment perspective makes absolutely no sense. And that's why I think that music can be a very risky investment. Think early stage investing above all is inherently risky, but especially in industry like this. It's, take for instance, music is very regulated. It's highly regulated industry. As you say, there is, you know, historically that mafia that's existed within, you know, a few specific houses and you really have to know who you know to be able to make things happen within that. But when you come at it purely for the passion, it's sort of... It's sort of at the nexus of what I brought up originally. You can't really quantify music in the same way that you can quantify other things, for instance, which is what makes it so hairy to invest in because as an investor, when I'm talking to a company, you're looking for things like...

Collette Tibbetts

Traction and you know, what were your gross revenues during this quarter or you know I used to do stuff in nonprofit can look at the number of donations or a doctor the number of lives that you save in here but and you can do those things in music you can look at streams can look at revenues from touring but you can't quantify and measure the impact that an individual song has on a person that affects them to do something about it, which makes it difficult to invest in. But I think that if you're willing to lean into the unknown of that and take it from the perspective of an artist, I think that creates some of the greatest super fans and ironically, from a market perspective, the greatest profitability. But it can't come from a point of trying to maximize profit. But I'm so curious, you know, your conversation earlier with the music tech founder, because you've got quite a bit of interest in music yourself, what you think the biggest caveats are and the biggest risks.

Jakob Wredstrøm

Yeah.

Jakob Wredstrøm

Well, the biggest risks, thank you for that explanation, by the way. Think I'll return to that very much at this conversation because that's something we need to dissect. The biggest risk that I see first and foremost as, we have invested and we will continue investing and we will also invest in music tech, but I wouldn't yet call me like an investor. Think we're a venture builder and we happen to invest as well. Like, know.

Collette Tibbetts

Yeah.

Jakob Wredstrøm

But again, I do interview a lot of investors and I believe that I have investor mindset. So the biggest risk that I see music first and foremost is the lack of data to base decisions on. That's my biggest thing. Like there's a lot of assumptions of what constitutes statistically a good investment in anything in music that is just not back. By proper research. That's my first thing. Like there is research done, if you want to call it research, at least data gathering and data interpretation of investment tickets and exits and all that kind of stuff. But, you know, I've done my own.

Collette Tibbetts

You

Jakob Wredstrøm

Academic research in this, this area. And we have three full-time music tech researchers on our team. And I can, you know, bluntly state that whatever research is out there is, is not even sufficient to be called, you know, research. And I'm, I'm a bit harsh, but, like, so there, there is really no proper reference to what works and what doesn't work. You know, I've created my own thesis that I believe to hold a lot of truth. But at the of the day, if you don't have research or data, you cannot bring in more investors into due diligence. That means that the amount of investors that are willing to go out on a risk journey into something you don't know is very limited. At the end of the day, if you want investors to invest, you want to have a culture around investing, and that culture is informed by a... Approvable opportunity and then that also opportunity needs to be dissected into what is not and what is an opportunity within that sector So that got a bit nerdy answer But basically people are investing Yeah, people investing in blind and then they also go and Share experiences investing music tech, but without really explaining they've done so in blind

Collette Tibbetts

No, I like it. I'm with it.

Jakob Wredstrøm

So it's kind of like a almost like a running statements when I hear about people. Music tech is not great investing and great. Cool. What, what pieces did he base your decisions on? Like, and, and before you really explain that and dissect that, I can't really take your, experience for, you know, good money, if that makes sense.

Collette Tibbetts

Yeah, I think it's a very different thing when there's money at stake. I you know, I always say, for instance, that founders are just like artists and vice versa. And, you know, take for instance, how do you like, you know, the equivalent of due diligence is, you know, your record exec and it's, you know, 1994 and you're listening to a demo and you're supposed to gauge from just listening to something. If it's catchy and if it's going to be a hit and you don't have any data to go off that because it's just purely vibe, you know, you can't measure vibe. That's a, there's nothing that can be put to that. And so it's hard to, it's hard to go back and say, well, you know, this is the, this is the data that proves it because you just really do need to, as you say, go in blind with things.

Jakob Wredstrøm

Yeah. And I think that's the biggest issue for me. The biggest risk. The second is, sorry, now I'm the one explaining all my opinions, but again, let's just have the conversation. Is the lack of good founders and good startups. And I'll repeat that every single day. I see cases all the time. I am frankly shocked.

Collette Tibbetts

Well, I'm asking about them.

Jakob Wredstrøm

You know, the quality about the quality of startups once in a while. And, know, I can be rude on my own podcast. Like I think it's a joke a lot of times that is this really what we give a platform. Is this really what we look to for creating innovation in industry? And this is this very limited mindset about building a company, what we want to front. And next to data, I totally understand investors in this space being very risk averse because they don't know how to really valid their decisions based on data. And then the people who are presenting the cases pretty much aren't that impressive. And we can discuss why that is so and why obviously that's not true for everyone. But I believe it's true for most cases out there. And if there's very few people interested in the space to be founders for the same reason as investors, it's hard with money. Then it's, you just, you know, get the best founders at the end of the day, statistically speaking.

Collette Tibbetts

I actually think that I probably will double down on that, at least from an investor perspective. Not in saying that there's not a good quality of investors out there, but I think a lot of the reason why I perceive that there is such an aversion is because there's culturally such a lack of understanding between old industry and new industry. Take for instance, you're... It's a... nuanced industry to be in music. There's a lot of technical specific jargon. For instance, your average investor isn't going to know how royalty and licensing splits are or what the difference is between a personal manager, a business manager, and a tour manager or little things like this. To understand all of those components and not go work for you know, a major group or if you're much older because you've already lived that industry to retire on the successes that you've already had, you know, to actively want to go into a field of innovation and unknown with all of that information, you don't quite see a lot of incentive out there for people to go and do that because you can find a lot of money elsewhere in much better opportunities. But I think at the nexus of what I've always felt is that we're in a very interesting purgatory, so to speak, between old industry and new industry. And I say old industry, you know, with a great...

Collette Tibbetts

From know 70s 80s and the 90s.

Jakob Wredstrøm

It's somehow your recording stopped, so you just need to back that up. Is your phone on Do Not Disturb?

Collette Tibbetts

Let me turn it on, do not disturb. I'm so sorry, I thought that it was.

Jakob Wredstrøm

No problem. No problem. I just got a notification that your recording stopped while you got the call.

Jakob Wredstrøm

To it.

Collette Tibbetts

God damn it. You know, I read on the, can you hear me?

Jakob Wredstrøm

Yeah,

Collette Tibbetts

Damn, you know, I read on the thing too. I was like, I'm gonna have my phone turned off. Gonna, you know, I read all the little directions and everything like that. Completely neglected the Do Not Disturb.

Jakob Wredstrøm

But nothing is missed and the program is quite smart. So actually nothing is lost either. So everything is saved. Then the only trick you need to do is try to backtrack your last answer. Like where are you?

Collette Tibbetts

Yep. Can do that. Anyway, should we keep going?

Jakob Wredstrøm

Yeah, well, if you can try to backtrack where you started your last dialogue so we can edit that in.

Collette Tibbetts

Yeah, certainly. So I was talking about old industry versus new industry because, know, when I refer to old industry, I take it with a grain of salt because old industry that I'm referring to is largely from, you know, the 70s and 80s and the 90s and anything pre-internet. But when you go back, you know, that was largely an industry that was dominated by US and UK markets for many, many years and it was based on a model of physical copy sold. And, you know, as that evolved, age of the internet came around, the dot-com boom, piracy changed everything and all of a sudden that model was rendered inert pretty much and streaming came along because a lot of that innovation, I would argue, was pushed out into a diaspora outside of the US and the UK. That technological innovation went into the Asian markets and the rest of the European Union. And sat, developed for many, many years until the time was right and that technology had matured to a point where it could finally hold its own. And now you see that explosion with things like streaming, for instance, TikTok. Spotify, SoundCloud, all of these non-US and UK innovations that are starting to take up that market share. But the thing is, it's not like the 80s and the 90s were that long ago. So it's all of the same relationships and sometimes quite literally the same people that crafted that industry that continue to service that industry. And so you've got this clash going on where there's a wave of technological innovation and people that are running on an outdated business model. I'll go out there and say it that have an understanding of an industry that has been working successfully for many, many years. And so, you know, all that to say, I'm an existential person, I'm deeply.

Collette Tibbetts

Probably a little too philosophical, but I think it really does come down to the communication thing. And I think that there's a lack of communication in the music industry. You know, coming back to the original concept of, you know, quality of founders and ideas out there, I think that the best founders I've seen have been teams that have an awareness of that gap and... not just immediately try to jump to solutions to fix it, but take time to understand what the lay of the land is in its full capacity.

Jakob Wredstrøm

Yeah, and this is again back to the founder conversation. This is where the big unknown is for me when it comes to founders incentive to be there, what they need to struggle with, sort of legacy dynamics they need to navigate. And you know, knowing what I know now, I can honestly say I would not go into music again. And that, but that there's beauty in the Navy, right? Because that also means that I've now done enough mistakes and I have experienced enough hardships to also know where the opportunity lies. It just lies very differently than most founders expect. I think, you know, bluntly speaking, I, this is going to sound very weird, but I'm going to say it. I don't believe there is any potential for founders. Individually in music tech, statistically, like very, very few people will see success. And if they want to compare it to what these typical tech success, then forget about it. This is my very dark interpretation, but, but there is actually, there is actually for investors more so. And the reason for that is that the investor

Collette Tibbetts

I like it.

Jakob Wredstrøm

Has the luxury of portfolio thinking, which basically means you can spread risk, you can be more patient, can be, you know, you're more on the receiving end of requests and obviously you need to be active and that kind of stuff. But you have the luxury of time and you have the luxury of selection that founders don't have, which means founders need to fight for their lives in an environment that is not startup friendly. And investors, if they know how to navigate what is potential, what is not potential, what is the risk, what is not the risk, what is the bureaucracy, what is the mafia, where does it actually fit in, what storytelling is not true, be able to do due diligence. There is a way of cherry picking cases and over a portfolio be successful. And that's basically the thesis that I'm operating at is that I don't recognize the attractiveness on an individual level and I don't, but I do recognize the attractiveness on a portfolio level with lower valuations than other industries and maybe with also lower exit values, but attractive multiples, if that makes sense. I think that's a bit nerdy, but that's basically my perspective. I would rather be an investor than a founder in this space, to be honest.

Collette Tibbetts

That's so interesting you say that because that's a lot of the, it's a very similar line of thinking to the thesis that I've really come to in the last year, know, working on the, so to go all the way back, you know, I'm a songwriter, I'm an artist before anything else. You know, I grew up in that wave of a changing industry and I saw you know, how outdated it was becoming, but how vital it was to understand where the future of that technology was going, whilst paying respect to the industry that does exist. I said, I want to be at the forefront of that innovation and see where it goes. So I want to understand how to think. It started off like a think as an executive, but that slowly graduated to, you know, how to think like an investor in the space. And the biggest thing that I've really understood is that, you know, bigger check sizes too early from an investor perspective, I think can be a lot more harmful than they do good. It's sort of like, you know, take for instance, if you sign, if you signed an artist today who has a great voice, but no traction and you really believe in them, but you haven't seen anything out there. You give them a million dollar, you know, you write them a million dollar recoupable, non-recoupable, it doesn't matter. You write a huge check, takes up a big portion of your budget. You're funneling a lot of, you're putting a lot of pressure on an artist that hasn't quite proven out the successes and doesn't know the lay of the land particularly, and could do a lot of the same with a smaller budget size to vet it out, understand what they're working with, and then, you know, graduate into bigger things. But I think you see the problem with them. I think you see a very similar problem in VC because early stage venture capital, you know, you're reporting, for instance, to, if you're a managing partner, a general partner, you're reporting to limited partners who give you their money and they say,

Collette Tibbetts

I don't care what you do with it. I trust you because I think that you're professional. I just want returns on my portfolio. And going back to this idea that music is inherently a very risky industry that I don't believe has very high return on investment. It's a big risk and it's not necessarily a wise decision always for a VC firm to invest, know, like let's say you're deploying a... Let's say you're deploying, you know, even something like a micro fund, like a $30 million, you're at a 250,000 USD to 500K check. That's, you're going to want to see significant return and you're going to have heavy expectations, probably whilst holding that to a similar standard that you would hold your investments in other industries, like your healthcare investment or maybe your FinTech investment or whatever.

Jakob Wredstrøm

Mm.

Collette Tibbetts

Music is very nuanced. So I don't think that just throwing money necessarily is the best thing. Think that, and this is why, you know, I've taken a lot more interest recently at the angel level. I think that if you're able to give someone access over just blind money at things. I think you open a lot more doors and you help nurture things a lot more properly because the intentions are a lot different. And it's a lot lower risk. Take for instance, if you're an investor that writes a $5,000, $10,000 check, like a micro check into a fund, but you've got access to all of these resources and people that you can connect them to that they couldn't get access to otherwise at a big general firm, that is significantly more valuable. Then a huge check that pays for equipment that they don't know if that's going to pay off in the market.

Jakob Wredstrøm

Hmm.

Jakob Wredstrøm

Mm.

Collette Tibbetts

Is my current working theory anyway.

Jakob Wredstrøm

You've said a lot. You know, I think it's so interesting. I think there's a lot of things to break down from this. One of the things I want to comment on, and this is based on my recent academic research in the field that I've, I believe that I have now also proven based on a lot of different metrics. And that is,

Jakob Wredstrøm

I'll start with just painting a picture. I see a lot of founders sending me decks or people who wants to work with us, the people we do work with that is out raising capital. And they're raising capital as if they were a normal tech company. And maybe they're, you know, a tiny bit exposed to not having enough interest, so they've lowered the valuation. But let's just take a typical... you company that might be raising capital in the US, which is speaking of the valuation, is higher also because there's, you know, statistically higher chance of being a unicorn, which obviously is not going to happen. But anyways, you know, a first round million USD round at a 10 million cap valuation. So again, in typical American tech, that's not honored. You know if it's if it's Silicon Valley it's very low like in most things that's sensible but the reality is even if you do well you're not even gonna self-faten like you know it's so starting out with a 10 valuation even starting out with you know I'm gonna be brutally honest even starting up with a three million valuation in your company is not gonna cut it And you know, that's gonna be like a big pill to swallow and people might disagree me on it here but like try to battle me on this but like You know, I believe the first round for European music tech company should not exceed 2 million euros pre-minimum valuation like it should not exceed it. There is there is no statistical evidence that is justifiable to any degree And that's a harsh truth and I'm gonna back up with Dator in the fall, we're gonna release a lot of research on this topic. But that is my claim. And that is obviously unheard of because okay, well, then I can raise what? 400,000 euros and then I can dilute 17%. That sounds crazy. Like, yep, that's the reality. You're not gonna raise any more capital than that either on your first round. Like again, if we...

Jakob Wredstrøm

Don't buy into the hype the founder might create and the illusion of an opportunity that doesn't exist. I don't get very specific, but that is my observations. That's the max you can justify. Does that make sense? I'm sorry. These are my claims in your interview.

Collette Tibbetts

No, you know that, that... No, that does make a lot of sense. You know, I think that, Not to just, you know, make it sound like I'm blindly agreeing with everything that you say, but I really like that perspective, and I'll actually challenge the way that you frame it. I think that you, I think that you frame it a lot more as a negative, and I don't necessarily know that it is a negative thing to have a lower evaluation. It's sort of like... You know, taking a music example, it's sort of, you know, what is the best solution given the problem at hand and, you know, sort of what do you qualify as? Excellency. You know, like I've been to concerts, as I'm sure that you have, in huge stadiums that, you know, sell out 100,000 people and they're these massive, you know, rock or pop pieces and they're phenomenal and Are the performers there any less than? You know I go to jazz sometimes on Mondays at the you ever seen La Land right and go offline miss Joan That's famous that famous jazz cafe Which fits maybe about it? It's maybe a 80 people maximum they have these jazz players there every Monday and

Jakob Wredstrøm

Yeah, yeah.

Collette Tibbetts

And those guys learned from back in the 60s Miles Davis, Chet Baker, all of these masters of the craft would play there. And what is to make an artist who plays a venue of 80 more or less successful than someone who plays a venue of 100,000 because it wouldn't necessarily make sense to want to go see an intimate jazz set like that in a massive, massive stadium. It's sort of contextually what fits the needs. You know, moreover, if you have, you know, another philosophy that I have always had is if you can impact one person, then if you can truly impact one person with whatever you're creating, you know, just beyond music. I think that is more important than trying to impact every single person in the world because you're never going to impact. Every single person in the world and, you know, the utility maximization is only theoretical, so to speak. So focusing on focusing on a smaller group and fulfilling those needs truly, you'll find that you can fulfill a lot more individual specific needs and that fills out a market. You know, I don't know about Dex that you've seen, but you know, I see a lot of these a lot of these phenomenal companies that come and they say, I'm going to solve the music industry, which first off, don't think that the music industry is something that can be solved. It implies problems and solutions. But the second part of that is it's such a nuanced industry. There are so many different tiny genres within it. There are so many different interpretations of music and facets of the business that you know, trying to go for big catch-all solutions, I also don't think serves it. And you still can find profit in a lot of smaller solutions to things.

Jakob Wredstrøm

Mm. Cherry Who.

Collette Tibbetts

But it's interesting the point that you bring up.

Jakob Wredstrøm

Yeah, yeah. And I think really love the analogy. I would love to sort of play on that. Cherry who at South by Southwest made like a keynote. Was just, I've been listening to it on YouTube. So go check it out. She makes a statement that I very much agree to, which is boring is back in the music industry. But I do believe it's, it's frames drawn from sanity and actually like actually making better decisions. Back to analogy of 100,000 stadium and 80,000 in a jazz club, there is a thing that the music industry and the tech music tech industry really. Don't get right at scale and that is expectation management. So this is across the whole spectrum of people like your investors, your co-founders or early employees, your partners, your children. If you don't know what is to be expected and you don't hold that up against the cost that you, you know, more likely can expect. So the opportunity is much smaller than what you believe. Perhaps the complexity is also higher, the cost is higher than you thought. That always happens. But again, if the opportunity is significantly smaller, you are going to struggle so badly with expectation management of everyone involved. And I think this is where the biggest struggle is for me with music. No matter how bad you as a founder want this to be an amazingly big market that you're going to do 150 million sum of whatever you want to say, like it's just not going to happen. Like again, and even if you become that, if you, you become a company that does 250 million US dollars in revenue, which there's plenty of and, know, SoundCloud is an example. Like it, it doesn't constitute necessarily a good business.

Jakob Wredstrøm

It doesn't constitute necessarily a great return on investment. I'm not going to comment too deeply on the SoundCloud's case because I don't know it too deeply, but again, the whole sentiment of the music tech scene in Berlin is disappointment of certain big companies that investors went in and invested 15, 20 years ago and never saw what they expected. Whether or that's a merited opinion or not is a different conversation, but expectation management is one of the most crucial missing parts of the music industry. And I tend to be sort of a bit harsh and direct and I go to conferences and I say something to that effect, sometimes a bit more rude than I do right now. And people are shocked and offended and like, what can I say? Like, what can I say other than the truth? You are walking into something that is a jazz club and you have the illusion that you're going to play the stadium. Like I cannot entertain that opinion or thought without commenting it in my position as a whatever I am, speaker or something like that. Does that make sense?

Collette Tibbetts

More than you could possibly know. And well, you know, I always, I always think to myself, well, are you really there, you know, sort of going on that analogy? Are you really there to listen to jazz or do you just want to, you know, what, what is your intention of, what is your intention of getting, of getting into it? Because, you know, Donald Passman famously said, all right, he wasn't the first person to say this, but you know, music and business, music business is oil and water. And it always is, but they're always necessary things for each other to have. You know, are you going to a jazz club because you want to say what a big, fantastic jazz club it is and how you turned it into a stadium? Or are you listening to, you know, the acoustics of, you know, I've been around jazz clubs before and I know what makes a good set and I know... what brings out the best in these musicians. I think that above all else, think that you need to have value in what you're understanding and be okay before anything else that it might not make profit, if that makes any sense. Because if you're going purely for the, how can I make profit off this out the gate, then...

Jakob Wredstrøm

Yeah.

Collette Tibbetts

You don't have a basis for, well, why am I doing this? It's kind of like, I've got plenty of friends who write and they say, I have to write this thing and it needs to sound this way for this sync piece and you know, incredible, prolific artists, some of most interesting lyrics. And I think to myself, well, no one's forcing you to write lyrics, you know, of all things that you could do, you know, this isn't a tour. At what point did this become something that you have to do? Which I think that the second you, the second it becomes purely a money thing and purely, you know, the pressure and the expectation, you sort of lose the thesis of what it is. It's kind of like a You know, the stock market crash back in 2007-2008 that led to a big recession in the US was this whole underlying principle that you have collateral that's based on falsely rated bonds that have no underlying structure because everyone is defaulting on their mortgages and if you have no... if the basis and the structure of music is the human spirit, which I argue that's what it is, and you take out the human spirit, you have no basis by which to create something and turn it out. You know, the second you, the second you lack a collateral basis, that's collateralized against nothing. So it's bound to fall apart. It's just funny because that collateral in this case is something very abstract.

Jakob Wredstrøm

Mm-hmm. This is two things I thought about while you were speaking. One is actually I had a small revelation about when you say, and I've heard many people say in the past, and I've even said it in past, is that you need to... Also do it for love of music in order to do music tech and what I just realized sometimes I'm a bit stupid is that what it also can mean which now makes a lot of sense for me is that you need to love music in order to justify the cost if that makes sense like it's not just that he needed it needed to stay motivated and it's an essence of the industry it's supposed to be but in order to justify the opportunity cost and the disparity between opportunity costs you need to love music in order to justify the activity. Does that make sense?

Collette Tibbetts

Yeah, I know exactly what you mean by that. Yeah.

Jakob Wredstrøm

Okay, that's one interesting thought. I want to sort of put some numbers behind it and be a bit honest in the podcast. And I also want you that it will be a very open-ended conversation, so I appreciate your time. We've been doing a few experiments here at Amplitude and We've been in the quite lucky situation that we have sort of cracked the business model and opportunity and time sourcing that's been very generous towards us, which means we've had a lot of wiggle room for creating stuff the last nine months and being profitable doing so and I have on LinkedIn, for example, I've done like three months of like we call it the music tech builder initiative, which is basically we do tech builds from these tech companies and we do like what normally cost 20,000, 25,000 euros and do it in a 5,000 euro package and we really like hands on help out. It's been so underwhelming talking with startups because you cannot price it. Even if you price it at 1000 euros, people wouldn't be able to afford it mentally. Like it's, it is that hard to work with music tech companies. And, and we've now also gone up, you know, that's one thing, but we've also gone up the steps and we've sort of unboarded teams on our side that really does a lot of like music tech introductions. And we meet with a lot of amazing startups. And we can conclude based on like very, you know, back of a napkin math that if we work towards music tech versus, you know, whatever other industry, and by the way, we're specialists in music tech, it takes us three times as many relationships to convert to a client in music tech than just whatever generic other thing. Our last clients are in

Jakob Wredstrøm

Jet engine engineering and water supply wall management that we know nothing about, but that's, that's easier to convert than music tech. So that's one thing. So three times as easy to convert clients. And then the, the revenue associated to the relationships of three to five X outside of music. So if you just want to do back of napkin math based on actually a lot of conversations, a lot of clients, there is a nine to.

Collette Tibbetts

Wow.

Jakob Wredstrøm

12 times more attractive market in the services venture building studio outside of music that there is in music. These are not few data points we have on this. This is five months of intense relationship building and client conversations. So what am I trying to say about that? It's just like the illusion is there. There is not enough money. There is very little appetite. There is very few opportunities. And you need the love for music to justify the continuous presence beyond whatever illusion I might have as a portfolio investment strategy over the next 10 years, if that makes sense. I just want to break those numbers because I think they're important.

Collette Tibbetts

Think those are really important numbers and I'll go on with that to say, think that my bone to pick with investing, especially in the US is I think that there's a lot of this social pressure from the culture of VC that music companies do behave like all of these other industries because even if you take something... like a B2B SaaS company versus a manufacturer or something like that, or agricultural tech or climate tech or whatever. Obviously, those are all nuanced industries. You need to understand things within them. There is sort of a similar concept of there is an output and there's something that can be a lot more tangentially measured. Versus music is a very different thing, but I think we've sort of created a lot of this pressure that music does fall under that same category and so it behaves similarly. And the problem is, you still do need investment in order to build ideas out, but I think that there's been such a framing because people don't really have an understanding on either side of it. And you know, I'll be the first to say a... I don't have a full understanding of how it is. Think anyone who says that they do is lying to themselves and lying to the rest of the world. I don't think anyone really knows what it looks like in this moment, but it is a beast that behaves completely differently. Mean, music at its core is a very, it's a very social thing, know, not to keep coming back to this idea of, you know, it's a... It's based very much on human connections and the feel of something. But I think that when you don't quite pay respect to whatever that indescribable asset class is and treat it as its own proper thing, then you try to rope it in and confuse it with all of these other industries and say, this model can be replicated in music because we've seen enough similarities and it has business in the name because it's music.

Collette Tibbetts

Business or its music technology. But it's a weird, it doesn't behave like any other business, especially when it comes to the investing side of things. And it has just enough similarity to other industries that people always make the argument, well, it is something that can be invested in, in the same way.

Jakob Wredstrøm

Mm.

Jakob Wredstrøm

It's so true. In order to sort of end the conversation on a happy note, because we are both going to California because we believe there is potential in music. And one following the conversation could easily interpret this as like a, it's not great to be there. I think it's definitely not good to be there for reasons that are not.

Collette Tibbetts

Yes.

Jakob Wredstrøm

Financially sound. But there are. There is money to be made obviously for music, a lot of people have made a lot of money from music over time. The same thing does count for music tech. And there are investors that also has made money on music multiple times. What I believe is the next step is two things. One thing is, well three things. One thing is creating an ecosystem of music tech startups and the surrounding ecosystems to help educate, gather, make the navigation easier. That's one thing. Well, Ifornia is doing one of those things. Number two is having more data to prove thesis or statistics to inform decisions, both from founders, investors, or the ecosystem surrounding them. And the third thing is investors repeatedly over time follow and prove healthy thesis and make that model rep. That's the three steps I see from music tech, and most likely in that order. So we're basically into now the time where these ecosystems are fairly developed. We see them spring up everywhere, but I would say it's now coming to a healthy point, even where Africa is now joining the conversation and that's a sign of, okay, we're coming somewhere. And then there's the data, which we're hugely lacking. And that's where I wanna focus a lot of energy on. And then the next step beyond that, which I probably think is like two or three years out from now.

Jakob Wredstrøm

We'll be able to have done enough research, enough proof points, enough conversations that are written down and tested and validated to then creating repeatable investment opportunities for people outside the industry. So what my agenda is in Fort Wella, Fornea, obviously besides talking to you a lot more, is figuring out how to get to that point. If that makes sense. That's my own happy ending, even though it seems like a challenge. Does that make sense?

Collette Tibbetts

No, I really like the perspective that you have on that. Well, I guess it makes sense that I should talk a little bit about my agenda for Wallifornia. Well, you know, meet interesting people, go in unscripted, see what happens. But, you know, I think for me, it's a lot of understanding the philosophy of some context on why the syndicate is called Joker Deck.

Jakob Wredstrøm

in

Collette Tibbetts

I'm a really big fan of card decks. I don't know why. I suck at poker. I'm not a good hand at blackjack, but I really love the history behind card decks, which go back to, you know, paper pressing. You can trace them through, you know, Italian orphanages to, you know, playing a role in revolutions. But the Joker card was introduced through French decks, I believe, for a German game called Juckerspiel, where the Joker is the highest valued card in the game. And it's based on this concept that the Jester in the King's Court is the only person who can speak to anyone in the King's Court on an equal playing field. So simultaneously belongs everywhere and nowhere at once. And it's this idea that, you know, the Joker is a wild card that can assume any form. And I think that philosophy is a really important thing to have when it comes to, you know, a wild west such as what the music tech industry is evolving into. And I think that, I think that breaking a lot of the notions that we have about the role that artists play, founders play and investors play is really important to understanding how those roles can change around and learn a lot of things from each other. Like I was just at a music biz chatting with someone who said that, you know, I always say that VC has a lot to learn. I always say that music has a lot to learn from early stage venture capital and how similar those models are. And someone said back to me, well, you know, venture capital has a lot to learn about how the music industry runs too. And, you know, I think that those roles that we have are outdated things and we need to go back to lot of the basics of re-understanding what exactly are those and can we be comfortable that those things will probably evolve differently. And hopefully that the data points will start to merit that over the next few years and that we can get to a point of really fleshing out those investments.

Jakob Wredstrøm

Hope that. Collette, this was a beautiful conversation. I know I sent over an agenda and we didn't touch many of the points, so I'm sorry about that. Again, I'm very happy that you wanted to.

Collette Tibbetts

It's always a wonderful conversation with you.

Jakob Wredstrøm

Well, I don't know what the date is now, but I think we'll see each other in two weeks' time. And for the people listening, we'll get this out in the next couple of days, so that will be the same. Join us for a little cornea. If you can't make it this year, prioritize it next year. And go ahead, I'll see you there.

Collette Tibbetts

Sounds about right.

Collette Tibbetts

Hehe!

Collette Tibbetts

I will see you there, Jacob. Thank you so much for having me on. It's been such a pleasure.

Jakob Wredstrøm

My pleasure.