Investing in Melody: The A-Note Music Story

The flagship fund, meaning the biggest fund that we were managing, soft fund, was trying to return 2% a year to its investors. 2% a year is basically enough. Then I found, and we spoke with Matteo, to music publishers and recall labels that were telling me, yeah, typically, I mean, I invest in music Catholics, music royalties that tend to perform 10% a year. That was amazing. I said, wow, there's a massive opportunity there. The music industry is what is defined as a cash cow. It's an industry that on an ongoing basis pays billions, tens of billions of dollars on a yearly basis of cash flows.

That's fantastic. A Note Music is a company I have followed for many years. Matteo was a great guest to have on the podcast talking about music as an asset class and how they, as a company, are making this publicly accessible for investors to invest in. They have been consistent and they have educated the investors of what music means to invest in. Hey guys, and welcome back to the Sound Connections podcast. Matteo, you are in the studio. Welcome. Hey guys. Hey Jacob. Thank you very much for the opportunity.

Love to be here. So I have been following your company for quite a while, actually. So I've said this too many times on the podcast, but I had a company called Timbre once back and we were doing something very closely related to A Note Music. So I've been following you for, closely for five years and we met for the first time around one and a half years ago in person. So I'm really excited to speak about your company because it's been one that's sort of been leading the field and been consistently present and growing at the same time. But Matteo, before we go deep into your founder's journey and on A Note, could you explain who you are and what you do?

Definitely, definitely. My name is Matteo, Matteo Scanlon. I am co-founder and CEO of A Note Music since 2018 when we created a company, the first S-R-I-L-S and a simplified company, then grew being A Note Music. What we do is that we provide, we aim to provide and we have been able to provide a liquid market for music royalties as an asset. So our job is to connect investors with owners of music royalties, artists, songwriters, managers, record labels and publishers to truly express the hidden value in music that typically with private transactions doesn't surface.

Amazing. We'll go a lot into sort of how you came about creating the company and where you are now and how the journey has been. But as far as I know, just to go all the way back, you don't come from music, music per se. You come from finance. Is that correctly understood? Indeed. Indeed, yes. I come from the financial sector. Financial sector meaning kind of widespread, let's say, 360 degree approach, both as an investor, let's say, so buy side, what you call buy side. So I worked in investment funds, in a hedge fund in London, as well as on what you call the sell side in finance, which is typically investment banking, risk management, you know, when you sell some more service to the investors.

This enabled me to, let's say, to have kind of an understanding of how to post, how to look at products as assets from a point of view of an investors or what you're looking to, as well as what you do from a point of view of valuation, how do you value an asset? Is the valuation also looking at how the market perceives somehow the value. So this is, let's say, my expertise. And then we used to backport, you know, like to music and to truly build a stock exchange approach for music reality.

Yeah. I think one of the things that me and my team did very wrong five years ago when we were doing something similar to AL Music is we came from music and we came a tiny bit from finance, but we had this love for music. But what you do, even though it is with music assets, has the complexities are in many different areas than just music, I would assume. So before we dive into really the depth of that, could you explain, did you always have like this entrepreneurial aspect to who you are and why did you choose music when you actually started your venture?

Okay. That's an interesting question. I mean, I think yes and no. I mean, regarding the first question, if I always had kind of entrepreneurial aspect, you know, like kind of vibes or whatever you want to call it. Yes, maybe yes. I always tried somehow to, I always told that I wanted to create something, you know, like kind of a startup, an app, you know, when I started university, it was a moment in which everybody was launching apps for doing what you don't know. You launch an app, you had to launch an app. So I've always been looking for the perfect opportunity, you know, like kind of a conjuncture of something that I truly know.

So never launched something that out of, you know, like, let's say jumping in the void. So I really wanted to build something out of my expertise, which is kind of architectural of the financial markets. Um, and then I'm, I'm a great, I mean, I love music, but I know a musician, I'm terrible at singing and I'm not good with music. Let's say production music somehow, but I listened to tons of music really a lot. I'm very romantic on that side. And, uh, I, so we never, you know, when, when I found the opportunity of joining finance and music, I saw kind of perfect junction and, uh, that's how it went.

And specifically how we enter into the music business was speaking with anybody we knew that possibly had a connection with somebody that worked in the music business. Can you present him to us? So we tried to acquire the first year was really acquiring expertise in what we didn't know, which is how the music industry works. Starting from the difference between master rights and publishing rights up to, you know, like the legal details. But what, what is it, what was it about music in particular that, um, made you think this could be something to build a company around?

I mean, the, the concept that I love about music is that people on earth, I keep saying, you know, like we have, we are seven, no, eight billion now, uh, on earth. We eat, sleep, make love and listen to music. It's one of the biggest markets on earth. I mean, uh, throughout, from Australia to Canada to Europe, Africa, Asia. We, I mean, inevitably we end up listening to a song at least once a month, every person on earth. So it's a massive, massive month and democratizing access to the market, to this huge market that somehow, you know, resonates, which all of us as human beings, for me was amazing.

It's really kind of one of the, really the biggest indices on earth, if you think about it. But was there also something in, when you're working within finance, where you saw music as an asset class for something to invest in? Like, what was, what was the aha moment from the number side? The, yeah, okay. Two points. One, the returns. I was working in an investment fund for two years and the flagship fund, the flagship fund meaning the biggest fund that we were managing, sub fund, was trying to return 2% a year to its investors.

2% a year is basically nothing. You know, why? Because it was a problem of moment of low interest rates. And we had complexities with that, right? Achieving 2%. Then I found, and we spoke with Matteo, to music publishers and recall labels that were telling me, yeah, typically, I mean, I invest in music Catholics, music royalties that tend to perform 10% a year. And that was amazing. I said, wow, there's a massive opportunity there. You know, like if all the funds, all the investments of the funds, you know, the one that we're managing, we could actually divert them to music.

It's, it's massive. It's massive gain. So that was the first aha moment. And the second one is that the music industry is what is defined as a cash cow. It's an industry that on an ongoing basis pays billions, tens of billions of dollars on a yearly basis of cash flows. That's fantastic. There is no, there are, there are rarely industries like this. Real estate is another industry like that. You know, like you have your apartment, you rent it and you, but music industry is even better because it's somehow passive. The moment the song is famous, it sticks, it's sticky in the head of people.

So all of this, you know, like kind of the perfect, again, triangle that far from an investment standpoint to make sense. The only question to ask yourself is, A, what is the valuation? At what price am I buying? Like catalog is too high, too low? How can I know? Is the artist going to perform? Typical questions, you know, that somebody done in the music industry don't know how to answer. The second one is, is it liquid? The moment I want to buy, okay, if I want to sell, how can I sell? So these are the answers that we try to answer by the creative, the questions that we try to answer by the creation of, you know, music as a liquid marketplace, stock exchange to answer these questions.

So you've said we a couple of times now. Can you explain the co-founder situation? When did you meet them? Who had the sort of first ideas? What was the dynamic of you as a team? Okay. The first guy called Matteo, we met when I was 11 years old because we were not. Yeah. I mean, we were in high school and stuff before together. So we were, we were kids. And then we separated because we went studying in Texas and did stuff at Harvard and so on. And then somehow it came to Luxembourg.

It ended up in Luxembourg where we are still now. Me as well. I traveled the world, I studied here, dad worked and so on. And then it ended up in Luxembourg. So we joined forces again. Dude, I want to create a startup. I really want to do it here on board. He was, no, you as well, me as well. So at the beginning we tried to, you know, like let together our brains, you know, like what could we create? What could we look into? And back in the days I had looked in the music industry and then we had the ha-ha moment when we were watching Sanremo. That, you know, is, you know, the Italian festival, music festival.

And then we met Greg. Greg is the CTO. He's really the big brain of the, of the trio. Greg is one of the most clever guys and small guys I really know. And he is a tech, super, super good, blockchain, cybersecurity and stuff. And we met him because one of the incubators here in Luxembourg that we were speaking with, that were looking at us, you know, as kind of promising startups and so forth, but we were still at idea generation. We asked them, we miss a CTO. We don't know how to build enough.

And so they introduced us to Greg. Yeah, we know that young guy, seems pretty talented, seems pretty smart. He's also looking for a team. So we joined forces, the three of us, and we started, we explained to Greg, we bought him up speed on financial topics and music industry topics. And then we started developing that. At the beginning, I was also developing. So while I taught him, you know, like finance and music, he taught me to develop, to, you know, code. Mostly on front end, though. I'm not, I'm not good on back end. And that's how, that's how I started. Amazing. And did you, did you just have perfect alignments to start with?

What was the sort of, how did you, let's call it, have the expectations of building this together? How was that the sort of first dynamic between you guys? I think we have been extremely lucky, you know, like, because we, throughout the years, I mean, at the end of the day, so it is six, five, seven, anyway, six years. We have been extremely aligned on basically much all the decisions, all the things, kind of our vision to, I mean, the vision is very easy.

You know, you replicate whatever happens on the NASDAQ or, you know, on the Amster's of exchange or something, and you, you apply to music. Not that much to do, eh? If not just copy pasting the traditional working on the functional markets and replacing the asset class with. So slowly you add pieces until the moment in which you have well-functioning market for the asset. So the vision was clear, no big pivots to do. If not, maybe who to sell it to, the, the color of the brand and so on and so forth. But we are, all the three of us pretty humble.

So it's not a problem if any of the three of us has a good idea, we just stick to that. We don't try to, you know, argue that my view is better than the other one and never do that. Hmm. But, you know, you, you coming from your background and other co-founder from like Harvard and CTO that was extremely talented. I can imagine you guys had opportunities in your life where you could have like a good stable salary performing well. How was the sort of the, the risk side from a financial standpoint on the personal finances?

How did it look for you guys? Did you just go full in or did you have a job on the side? What, what happened there? And then it's a jump in the void. I mean, you need to do it. The moment you do it, I mean, you're falling and then you just need to try to fly one way or the other. The moment you start it, you start. So of course, I mean, you, you try to model in the business planet to present to the first investors a salary, which is not too far away from your salary that you had in the other company before. So somehow you feel you have a good parachute, right?

The problem is growing the salary, right? Because I mean, back in the days we had kind of an entry level salary because I was 36 and seven. Um, so, you know, I, I didn't have that big of a salary that, you know, was a big blow to lose. Um, the problem is growing the salary. Of course, that you need to, you would be able to grow, you know, like decently if the company performs well, so all lean to actually make the company perform well, that's, uh, that's how, that's how it is. Okay. Now, now you need to walk me through, uh, through it.

So you have this idea, you're an incubator, you meet your third co-founder, the CTO. Yep. Um, you don't need to go until today, but, but maybe tell me about the first year or two and, and what happened with the company. Okay. First year of two, okay. How to condense. So the first year or two, it was, it was all about, uh, dude, we need to launch it. We need to have something available for people to click on, register, sign up, buy Catholics. So it was all about organizing the, the marketing, the, the problem was onboarding Catholics.

It's a huge chicken and egg problem. Any B2C company has a massive chicken and egg problem. You need to onboard investors and you onboard them only if you have Catholics something to invest into, but you are able to onboard Catholics only the moment you have investors. So that was a massive problem. Uh, so we started somehow, how do you start to start, you know, like create a little bit of expectations. Hey guys, this new stuff appeared. We didn't know you could invest in royalties, please sign up now. It's a pre-registration of the pre-registration of the pre-registration. We started doing, I remember one of the key moments of this, when we did that, the trading cap.

So basically the app was out. We had launched it in the app on desktop version. We didn't have the app yet. So only from compute, uh, from this, uh, it was working in dev environment, what we call the environment is kind of a demo environment, right? Not with real assets. So we had created a 20 or so fake catalogs. So with fake names of fake songs, fake royalties, fake news, and so on and so forth. So we had to replicate how we saw that it would work with real life capers. And, uh, we invited kind of some of the people that had bread registered, uh, users to actually test it out.

And we said, whoever actually at the end of a two week period has the best performance of his portfolio, we will give you both speakers. Right. Uh, and it actually turned pretty well. I don't remember if it was a hundred or 200 participants, uh, so we had this kind of, you know, like a general proof of concept, uh, and one of the guys, uh, who honestly with that, with us, most of the people actually of the original trading cap five years ago are still with us today, investors with a, with a decently grown portfolio of 50% or more.

And because after four or five years, that's basically the returns on our platform, everybody's happy. So it was one of the key moments. I can't, I actually don't know if I was a part of the first cohort of those testers, but I did sign up for testing on A&O back in the day. So, so I might've been one of those first ones or right after, I don't know how long you continue with that, but I do remember going in and checking it out. Um, so you didn't get the Bose man, right? I did not. I did not. So I don't, I actually don't know why I invited you in the podcast now.

I should have gotten that, but, uh, um, no, but that's, that's really interesting. So you, you try to have these pre-signups and, and create, uh, I guess, educate investors about the potential of music as an asset class. Um, but also educate us, eh? Also educate us about the dynamics because I mean, we didn't know, I mean, we, we didn't know how the app would, platform would perform, whether investors were interested in receiving news about the Catholics, whether the dividend paying, the royalty payment data would actually, what, what happens? Are investors going to sell the Catholic the moment that they receive the royalties or, you know, like so many questions also that slowly we started answering, but yeah, that's.

So, so what, what was the first actual asset that you listed? Uh, the Catholic Irma records. Irma records is an historical record label and publisher and both, uh, from Bologna in, uh, in Italy, uh, Northern Italy. And they had been active for 30 years, if I'm not mistaken, more or less. So a solid Catholic royalties distributed both the same with some publishers as well as royalties from, uh, from CIA, the Italian Piero.

Yeah. Um, and, uh, Massimo, uh, Benini, uh, he was not looking for somehow monetization or funding or selling at, not at all. He had this vision indeed of keep growing. I mean, the Catholic keeps growing in terms of royalties and so on, but he loved the vision. He loved the product. He's usually an innovator himself. He was the first one back in, you know, throughout the years, test new stuff, you know, for music. Music is all about innovation, but inherently. So it was, uh, back in the days already in 2017, when still some publishers were like, is streaming going to stay streaming is paying too low streaming?

I'm not sure. He was really already having the, the playlists of Irma, Spotify that, I mean, are still there and still growing. So through innovator, he said, let's do it guys, but let's do a minimum transaction because otherwise for me, it doesn't make sense. The minimum transaction was 200 K, right? So the minimum, the cathode, first cathode for us to list was 200,000 euros. You know, it's not massive, but it's the first cathode, you know, I mean, it's, it was big.

So the problem for us was, okay, how do we build up in order to make sure that the first auction that we do will not go unfilled? 200,000 euros to raise out of a new product, new stuff, new, I mean, so we, we really worked a lot for basically four or five years. We were already aligned as some investors that started to invest a little bit. Back in the days, Irma was distributing 5% of return, 5% of royalty rate. Again, still moment of negative interest rates. It was a thousand and 20 when we launched them, but we started modeling in 2019.

So it was kind of a good return. And so we were luckily, or I don't know, luckily or for whatever reason, able to close it after one month of an option. Amazing. And what efforts did you, was it basically just a normal private investors or did you do some proactive work or like what, what was the process of getting that catalog closed? Yeah, yeah. So as usual, you know, a little bit of marketing here and there on social media, a little bit of, uh, we, we were lucky also because our, our story was somehow sympathized by the, by the, by the press.

So we also got some, some kind of good articles on some key newspapers, both international ones, as well as Italian ones. Um, again, also we are busy in Laxmo. So one of the key aspects of work for us is an international communication at day zero. So it was one of our lucky points being in Laxmo, which is a very small market internally. It means that the day zero, we were international, we're truly European. So we started seeing investors from, uh, from France, from Germany, from Poland, from Italy, from, from a bit of everywhere, kind of starting to join, maybe chipping in a little bit because they liked the story.

And please remember, I mean, 2019, 2020, there were no such things as NFTs. You know, people were kind of getting, they were just got first, um, how to say burned by the crumbling, the Bitcoin, in crypto, where there was nothing behind. So whenever, when we presented an asset that really had like cash flows behind, uh, with the proper valuation, you know, like people seemed to like it. So it was a lot of the narrative, definitely, that comes to that deal as well. And, uh, for Putholi, I mean, right now it's a very good performing catalog after five years.

And what was the, what was the return on that first catalog for the investors? 5% that was the initial rate. So basically we took the, it was a little bit more complex than, I mean, you cannot use traditional multiples because it was a listing only for 12 years. So Irma listed the royalties only for 12 years. After 12 years, the royalties that they listed, we go back to them, right? So basically we did an NPV valuation and the return was, uh, based to be 5% for the investor.

Um, so far, I don't know. I mean, I don't have in mind right now, the numbers for Irma, how much after these years, after four, five years has returned specifically, but it's been pretty consistent. Uh, I think it's in line with the general market. So between seven and 12%, 30%. I believe it's close. Yeah. Anyway, that it's kind of the, in general, our Catholics, they have returned since, uh, on a yearly basis since start kind of 10%. That's kind of the ballpark number. Yeah. That's really, really good. Yeah. Um, did, did you have any like compliance issues, you know, being a, uh, did you position yourself as an investment advisor?

Like what was your like legal compliance function there? It's a very, very important point. It was the first one, the first one we focused on before starting. We went knocking onto the door of the regulator and we, we worked, we worked with them with legal opinions and so on to understand what was the category of, uh, industry. We were, we were, we were, we were supposed to be categorized in. Um, so basically the, the outcome was that we had to do KYC, follow the rules, uh, rules in Europe, for the movements of money, e-money rules, uh, from a financial product standpoint, we didn't need any license, uh, because we were talking about intellectual property and copyrights and, uh, royalties.

We try not to categorize the financial products in the European framework. So based on this feedback, on this legal opinion, we said, okay, uh, regarding the, the first one, which is the, the KYC, KYC and AML, every investor on our platform was supposed to be KYC and AML. Okay. Tip done. Let's make this in the flow. Uh, money flow. We couldn't, for example, receive money from, from you and give it to Irma, uh, and then receive the rights from CI, pay them to you, where in a wallet, uh, in your bank account.

So we worked with, uh, an external player who's managing the wallets that's, I mean, we still work with amazing that take care of all the transactions so we don't touch the money. So everything is segregated from us, you know, all this. And of course, all of this stuff is something we didn't know. So we, you know, you have to learn by, by doing again, you know, to acquire legal expertise and all of this stuff that I had no idea about at the beginning. Yeah. I think this is, this is where a lot of starters go wrong. Like sort of the, the work that goes into positioning yourself for success on the longterm by doing before you actually launch something.

Uh, I think that's, that's been, that's been one of my weaknesses to, to be totally honest, because I'm, I'm very, um, I do things fast and sometimes I move too fast. You know, the, the diligence to do the logistics to do on what requires to build a business is extremely important. Uh, especially with companies that do what you do, where there's a lot of responsibility. Like it's, you know, it's other people's money that you are building a business around, uh, and there's a responsibility. The responsibility is one of the things which is daunting, but also one of the most, uh, driving, important forces that are driving us really.

Because I, we really feel we have responsibility on two sides. One to the music rate owner who might not be expert of the financial markets or of transactions and he's listing his career himself somehow, his creations for evaluation on our platform. So we owe at most respect and the duty of professionalism in terms of the valuation that he might be getting from listing his catalog on our platform. And at the same time, the investor is mining into an asset, which give or take in some cases is expected or projected to pay royalties for 70 years.

70 years is massive, is a massive length of time. 70 years, consider that typically even companies in the fortune 500, they don't state it. I mean, after five years or 10 years, they're not anymore there or they fail or they get a M&A or whatever, every five, 10 years, you know, Argentina in 20 years went bankrupt, I don't know, four years and it's a state, it's a government. So, you know, like whenever you as a startup, you know, like you launch a product where investors are buying into something for 70 years and you need to make sure that somehow as much as possible, this will happen.

And it's all easy. So you need to enter into a mindset of future responsibility as you yourself are saying. So how do you go around that? Just being a big technical, is that through blockchain and smart contracts? You make sure that is in place or is it still running through you as a company? I mean, the blockchain and smart contracts, somehow they provide rules. And yes, you can theoretically play with blockchain and smart contracts. But as a blockchain and smart contracts, especially when we started, would not always spread. So if I, you know, for the first investors, if I had to convince them as well to create a wallet with MetaMask and then they lose the private keys and whatever, and I was supposed to pay in USDT, something that pays in euros, it was a mess, honestly.

And then also blockchain and smart contracts, I mean, blockchain in general, crypto, at the end of the day, they have pretty specific rules and they change. So it's all that easy also on that side. It doesn't really remove problems. So what we worked on is just over the regulated way for money management and money handling with this third party, which is called Mango Bay, which is external to us. It's regulated, everything is segregated, and that's where the money are paid. Fortunately, we work in an industry, which again is a cash cow.

So at least from a point of view of royalty generation and royalty distribution, I believe we will never have problems. CI, the entity which is paying IRMA, the Italian PRO, has been around for 150 years. Musiciness is solid. Musiciness is solid. Everybody's complaining. Musiciness is solid. Sassam, the French, has been around for 250 years. So somehow, you know, the money flow to the rightful owner and copyright laws are solid. We just need to make sure that our infrastructure, our architecture is solid enough in order to just visit this money industry.

The really interesting thing about music as an asset class is that it's sort of non-correlated uncorrelated to the general equity markets, and it's proven itself at least over and over again to be recession-resistant. Yeah. And you know, you saw sort of during COVID or financial crisis, it has a consistent return, and it doesn't really get affected by these big movements in the market to a big degree, which also sort of substantions your argument about having a somewhat reliable cash flow.

Exactly. So what happened after that 200K investment? You sort of proved your model, proved your business, and then it was on to bigger things. Like, what happened? No. I mean, we had improved. I mean, we had just launched the first catholic. No royalties paid, no trading in the secondary market, and one catholic. I mean, how can you create a product with only one, you know, like, hey, you guys, come on and out, you know, like, what can you do? You can buy one share of Yerma for 20 euros. You can buy two shares of Yerma for 40 euros.

You can buy three for 60. You know, like, that's so exciting. So, of course, the first thing was more catholics. Now, more catholics already, already knowing that our investors have already put a lot, our community has already invested a lot, 200K, you know, start in one big asset, right? And then the problem was, it cannot be another Italian catholic, you know, like, otherwise. So, we were able to use catholics from Poland, you know, and then subsequently from France. And that was the moment in which we said, okay, now we're truly international, not only on the investor side, but also on the catholic side.

That was there, and we finished this point in kind of February, March. The problem with this first... What year? What year? 2021. We launched in the middle of COVID. That was also one of the other challenges. We launched in August. We wanted to launch before, and COVID arrived. So, we launched in August 2020. Um, and by January, sorry, February 2021, if I'm not mistaken, we had listed this catholics from France, Italy and Poland.

Now, the problem is that all our community, everybody was, guys, more catholics, more catholics. We want to see more. We want to invest more. And it was a problem because, of course, you have a discrepancy between the amount of catholics. You can never have this discrepancy, theoretically, you know, because it should be enough investors to list enough catholics. That's the most complex stuff to do. So, you need to make sure that you have enough, you know, again, as I said, demand in order to match a supply. Our problem at the beginning, before we launched the node, was will we be ever able to identify enough artists or, you know, in the beginning, we thought it would be just be artists to list on the platform.

Enough catholics. Oh, honestly, yes. Honestly, yes. Because the moment in which players in MSG, they understood that on our platform, the catholics, their assets were valued a little bit more, and then I will explain why. Then, private transactions is the moment in which we started to be flooded. It's not truly flooded, but really having a lot of opportunities, a lot of catholics, amazing ones. The premise that they were a little bit too big, you know, because some of them started being 1 million, 2 million, 5 million, 10 million. We didn't have the capacity and the investor side to actually close.

So, that has always been kind of the complexity in managing an exchange, a platform, marketplace, matching demand. And what came first then? Like, did you just go very aggressively to investors or what was the next step there? You just need to do what you're doing. Don't feel the pressure. Just, you know, like you grow the investor-based, user-based, with traditional, you test out, you test your ads, new channels, Google, maybe advertisement we were not doing before, a lot. Of course, at the beginning, Facebook, let's open Twitter, let's provide on LinkedIn, let's go here, let's go to the conference.

You do everything. You do everything and you basically start shooting, hoping that somehow, yeah, that's what you do. That's what you do. There's some magic formula or, yeah, that works better. You never know what works, what works better. Should we go blockchain? Should we actually do crypto stuff? You know, there was a moment in which NFT 2021, there was starting to be a thing, right? So, should we transform everything into NFTs? Why? Will it make sense? Will crypto people come on board? So, all these questions somehow, you know, along the way you need to answer.

Yeah. But how was the work pressure for you in this time? Like, was it, was it really tough or? Tough, super tough, super, super tough. No, it's, it's crazy. I mean, the amount of hours that we work is insane, insane. Me, Matteo and Greg. Because there are so many complexities you were mentioning before. It's, you know, like, payment of royalties. The moment that you have one catalogue pays twice a year, fine. Ah, no, actually this catalogue pays four times a year. Okay, four. Then you have Polish catalogue paying as well, four times a year. Then there are three catalogue pay four times a year. So, you start to have really a huge amount of data coming in and you need to pay the royalties and then the platform really fails and then the sign up is perfect. And then investors, they actually want to see that. So it's both huge technical efforts, product efforts, operations efforts, cash flows efforts, finding investors, checking the burn rate, legally speaking, the new catalogs, reviewing the terms and conditions that they need to be updated because they did them two years ago and they're not more relative. So, really, really a lot of things. You never finish the day. Never.

Did you have an opportunity to sort of expand the team outside of you, three co-founders? Yeah. Oh, yes. That was essential. I mean, I haven't spoken about the team we have had and we keep having an amazing team, extremely devoted to the industry, to the business, to the vision, to what we are doing because it works. That's amazing. And actually the team loves it. I think everybody loves it because it really works. You could see that the investors are satisfied, the very high returning rate. And this is what drives, you know, a team to work under the same direction. We started the onboarding dev team. So developers in-house has been always the mantra of Greg. We still have Gigi, he's been one of our first employees. He's with us as one of our key developers. We need columns, you know, of what we are. And the Niels as well, who marketing and communication essential. Because any company in the music industry need to have a very specific vision

to communicate to the public. Because we are B2C, super B2C oriented. So we need always client-facing, you know, one of the big things that we are building outside phase. That's also a complex thing. You know, one thing is building a product, but another thing is building a team that's consistent and sort of motivated. But in order to sort of finance that expansion, you must have been through some of your own investor journeys, like onboarding capital and the actual company to grow the team. How did that look for you guys? Well, fortunately, from the point of view of business plans and business modeling and the presentations and so on and so forth to convince investors, you know, of, you know, we are coming from the industry, so it was pretty good. The problem is that every investor on earth, business angels or BCs, they are not familiar with the music industry. And the music industry to be, I mean, you know, and I mean, we know has not, it was not extremely lucky from the point of view of music tech or, you know, like as kind of an industry in general. The music industry, when we started, was just coming

out of the, one of the widest depressions of any industry on earth. You know, since from 1999, the peak of the industry, just going down, going down, going down, no more revenues, nobody buys more CDs, no more physical sales. What do we do? Where do we generate money? Concerts, everybody going to concerts. So, you know, like for 15, 20 years, the music industry didn't have a generational change at the top management. And it was not really an investable, not asset, but industry. So whenever you go out and you say, I want to create a solid change for this amazing asset class. So people look at you and say, hmm, okay, nice vision, but let me see how you actually perform. So many times we start to like, investors very enthusiastic about what we do, about our vision, but just they wanted to see traction, right? So at the beginning was complexes. And we found those, some amazing Mrs. Angels are still with us. We love them and we're super grateful for them. They believed in us. And they put the chip at the beginning to get it started. First round was $180K. Second one was $320K to get $500K. And then,

based on that slowly, you try to make sure that you have always enough cash in the bank account to pay the salaries for at least six months. And then at the same time, you keep going and you keep going a little bit higher. You show what you have built, track record, people like it, and then they fall in. Yeah. What is it about your communication that did convince investors? Like you have this industry that has a bad track record. Catalogs might be attractive, but the industry is not. Did you do anything in your deck communication that sort of distance yourself from music? Did you rely heavily on sort of the financial aspects? What was your strategy there?

I mean, our strategy changed. Typically, I mean, for different investors, we are preparing different decks for every investor. So it really depends. Really, really depends. You want to maintain true to what you are, to what is your vision, to explaining as much as possible without too much. You don't want to flood the people, the person with info. So it's very delicate, let's say, the preparation of the deck. But at the end of the day, you know, during the call, that's the most important. People that tell me, yeah, I got an investment of one million on the deck.

Yeah, yes and no. I mean, at the end of the day, it's like the call, speaking with person, meeting in person, which is something that happened during COVID. It was complex and that is making it. Mm-hmm. Yeah. So where is Anote today? What have you been doing the last six years? Where are you now? We keep doing what we did straight from the beginning. We keep building, improving the platform, improving the process. Right now we are lucky enough to start to have like kind of some organic growth of people that just like discover us. They come on the platform, they see the track record.

And one of the most important aspects for us right now is we need to show what we have been doing in the past four years. To show that indeed there is, you know, it's here to stay. And this is something I'm very happy to finally have reached a little bit. Of course, we only consider that with time and become more and more important, but that I'm here to stay is one of the most satisfactory things that a startup can actually say and prove it, you know, with data. So, I mean, our goal right now is, of course, to keep growing and not with, you know, like space travels or crazy things, but just doing what we do. Chase paying royalties, new Catholics, growing investor base, improving the product. That's it.

I do a lot of market research at Amplitude. We also have a consultancy arm that helps early stage startups with positioning themselves for investment. And oftentimes I do a lot of market research for own companies or external clients. And I learn auditively. You know, I have a podcast, that makes sense. But so a lot of the AI tools I use, I use a lot of perplexity, it's called, which is sort of a search engine optimizer. It's basically an AI that searches and then delivers to things. I often do conversations with it. So when I've done a lot of market research for clients or myself within music as an asset class, which you can use for communication for many different startups, ANOTE comes up as the most frequent information source, which I think is really interesting. And I think it might be aligned with you guys being B2C focused. So you have like an educational aspect that's really, really important for you. Can you tell me a bit about that mission? Because sort of when I, when I researched this space, I'm flooded with ANOTE press releases and analytics, which is

great. But tell me about the educational perspective that you guys are going for. Okay. Yes, absolutely. I mean, okay. That's, that's a very interesting point with education, because again, we are educating, we are the bridge between two industries. When you are the bridge between two things, you're inevitably bringing one to the other and vice versa, right? So you need to explain music to finance and finance music under the angle of, you know, like the conjunction. So basically, yes, what we do is that we have always been preparing blogs. And then at the beginning, yeah, we started basically with blogs and then press releases, explaining what we do, explaining our vision or being part, you know, like of conferences and also us ourselves also learning, because let's not forget that I didn't know, I knew zero about music until five years ago. So, I mean, six years ago. So, you know, like, but working so much on this, so much, as much as we have done,

I think that somehow has brought us to a level of expertise that we are happy to share. Because at the end of the day, when you as an investor, I tell you, you know, like there's opportunity of investing in very famous songs from a feature, we don't say, ah, you know, you have so many questions to it. I mean, you have an idea where the question started, where they finish. Ah, but it's only new songs. What do you do also do new artists? Or, ah, what happens if, you know, like the, why would the artists sell? Or, you know, like they're assuming. So in order to prevent, in order to explain this, we have tried to be as much open as possible in sharing information about how the industry works of the royalties. How is it possible that if a song is listened to in Japan, somehow a guy in the United States is paid? Who pays? Who? Why? Why when you listen to a song in a club, actually that is royalties are paid to that guy six months afterwards? So it's really the value chain of the industry we try to explain. And I think it's fascinating, by the way, the money flow

that somehow, you know, works. That's what I was saying about the music industry, that somehow works. Yeah. Out of all this complexity. But then all the financial stuff, you know, how do you value a category? How is the, is the genre important? One of the most important is, well, do you focus on a specific genre? And then you need to focus on, to explain the concept of diversification, of meaning, you know, like, which is very important. Dividing into shares, the valuation, how do you value a category, concept of multiples, concept of returns, concept of, even the frequency of royalties to pay out? Do you know that if a category pays more frequently, you know, a parity of royalties compared to a category that pays less frequently, the one that pays more frequently has a higher IRR, higher return, because that's how the mathematical formula is calculated. So all of this stuff we try to share as much as possible. Again, beginning with blogs, then with Q&A sessions on the platform, and then with, we have now Gina, who's amazing. She's been with us for two years, and she is a full-time customer support. Test her out. Send her a message now, and if she will ask, I mean, that's just, that's

essential. Because you are navigating this space that also, at least the last six to 12 months have had some criticism about the returns. Not you guys as a company, but, you know, other privately listed or listed on stock exchanges that are performing under the initial promise or not according to what the expectations were. But at least from what I can understand, you guys have been delivering quite high returns and sort of have been outcomputing other institutions or organizations that are doing the same. Is this understood correctly? Or like, how do you, how do you sort of read that environment?

That's a, that's a very interesting point. And I, I have some considerations on kind of the macro, macro environment, but regarding, I mean, I just want to focus on what you said. We have been delivering high returns. No, we are not on our side, you know, re giving returns. We are a marketplace. And what we have been, or our platform has been delivering is market returns. That's the most important on us. We just list the catalog and we provide to the music right owner, you know, based on what the investors, we know that they're buying, the valuation of your catalog, we believe should be in this range.

Based on what, on our platform, other investors have been buying this devaluation, we believe. And that's the only somehow effect that we have on the market. We know that if you go out with right now, with a catheter, which is yielding three, 4%, 5%, it's not very likely to be filled up in an auction. If you go out with the catheter, which is yielding 12%, it's much more likely to be filled up in an auction. That's it. And this was all true four years ago. Four years ago, 5% was perfect. Indeed, he was filled out at the beginning. The market is the most important, paramount element, guy in the room.

That said, I mean, we had some, I mean, if you think about it, we launched with, there were so many macro trends and macro things that we tried to navigate. The biggest one was COVID. Then we had the NFTs stuff where I was speaking about NFTs, then crypto stuff, tokens, investment funds, huge investment funds, investing in Catholics. And then you need to look into that. Then we started having competitors. Also, so there are so many, you know, like big trends, one of the which will, that somehow affect us. And we have friends or whatever that sometimes, you know, they send me an article of, you know, did you know that PRO actually right now is fighting with Facebook? How is this affecting you? So we feel like this mall, you know, like that is affected by all these major things, which is a very fascinating. And we have been able to somehow survive despite all these major things.

That might have something to do with you. Also, you guys facilitate as a marketing place rather than take ownership of the actual catalogs. Exactly. Yeah. And that might be key because, you know, a lot of the criticism that has gone to other players has been players that's taken ownership and, you know, listed these asset costs with a expected return that maybe didn't happen. But that's a fair model as well. That's a fair model as well. I mean, if you pre-buy, pre-purchase, and then you list whatever, and then you sell the catalog itself or the fund or whatever, that's a fair model as well. It's simply a different model. And at the end of the day, you don't know what the future lies. You know, like maybe there's a Catholic which will go a little bit higher or a little bit lower. In Irma, we call it the corazzata. It's an Italian word which means a very strong ship, you know, because it's been like super solid. Also during COVID, of course, I had a little bit of a dip. That's it. Yes, it's resilient, but a little bit of dips,

of course, during COVID and then we first surfaced again. So, I mean, we are not in the business and nobody can be in the business of promising returns. You know, there's always risks. In the case, the problem is that there was a little bit of bonanza of buying Catholics, very big ones, which is a segment which is extremely competitive. Because if you think about it, a Catholic which is 200K, 200 million more or more in size, you think, okay, nobody will want to buy it because somebody has his money. It's the opposite. The moment that the Catholic becomes so big, it's a moment in which he starts to be in the radars of the three majors that have huge access to capital because they're all of them listed companies or part of a big conglomerate which is listed. Private equity guys that have huge amount of funding and specialized investment funds.

So all of a sudden, you find yourself in a very extremely much more competitive than ours environment in which they're able to chip in big amounts of money. So this is why the big Catholics, actually, they're the ones that went on, you know, like financial times and so on and so forth, hitting the headlines and are the ones that had, unfortunately, the highest valuations or fortune, whatever. And then the moment in which interest really started raising, rising, you know, they were the ones with the highest level of leverage or I bought something in a multiple of 20 or 25. Right now, it's better to put my money in, you know, in the bank account and I get a 5% return.

So that was a big problem. On our platform, fortunately, you can buy and sell in the secondary market. So yeah, we had a little bit of adjustments of some catalogs, a little bit lower price, hence higher returns. But these catalogs are also the ones with higher royalties. So all in all, it's really smart. And I love your approach that is sort of this somewhat neutral facilitator that understands the value of the assets and try to present the best results for returns for consumers.

I want to pick your brain on a topic that I speak to a lot of founders about, but it's really hard to get sort of quality opinions on it. So I'll see if I can wiggle something out of you. And that is the concept of value of music. That means a lot. But one of the things that I hear a lot from founders or their perceptions of what investors say is that the potential music is simply too small for a lot of investors to be interesting. I have a few problems with that statement. And I have my own argumentations, but I'll have your take on it first. If someone were to say that the potential of music is too small for investors to be serious about investments in this space, what would you say?

I would say that there is some truth in it, but there's nothing. But I always say there's nothing which is too small for it to be interesting. You can just say it's niche. Fair enough. Okay. What is the value of music? Music generates, give or take, 40 billion. It's actually more, it's actually 70, 80 billion in yearly revenues. But in this one, you include everything, including concerts and the cat or Spotify or whatever. So let's remove anything which is not royalties. You are left with 40 billion, give or take, of dollars on a yearly basis paid in royalties. Massive publishing, some right or whatever. What's the value of this? You want to apply a multiple over 15, 20, 25? I would go with a multiple of 20, 25, because if you buy the whole music industry, you're also buying the future, and future creation. If you include the future creation for the whole industry, the most diversified by nature

thing in the world is multiple of 25. So let's say it's an industry which is valued 1 trillion. Now, NVIDIA is valued 3 trillion. So you have one company alone, which is valued three times. Apple is valued 3 trillion. Amazon is 2 trillion. So three companies are valued 10 times more than the whole music industry. Is this fair? Is this not fair? That's reality. So let's not go into this. So yes, it's an industry which inherently is a small one. The tech industry, just these three giants is 10 times bigger. And it's not even the tech industry. It's just three companies. Now, I don't know the size of the food industry, but the food industry is massive. I was saying before, people need to sleep. No industry for that. Yeah, maybe accommodation, whatever. People need to have sex. People need to listen to music. So maybe we can compare it to the porn industry. I don't know. Anyway, it's an industry which is more true, but it's an industry which is paying cash flows. So from this point of view, it's very interesting for investors. And we have seen this. Definitely. Yeah.

No, it's interesting. And there's a lot of talks about it. One of the things that I also argue, one thing is through the cash flow aspect, but also that I believe that if you think of investments as multiples, not just in catalogs, but in general, I think it's a more correct understanding of the potential of music. That's also startups. Like, can you have, generally speaking, lower valuations than startups? Because that traditionally happens in music tech with maybe also lower exit values. I also believe the multiples for the investors can be comparable. And I think it's just an important thing. And nevertheless, going into that argument, I think what you're doing is just really important, because I believe one of the biggest issues with startups in this space is conveying the potential of music outside of the general understanding of what music is worth. Because if you only just look at, you know, a subscription to Spotify, it might seem like music is not worth a lot. But if you look at it as an asset class, it suddenly becomes worth a lot of money. And if you look at it as sort of multiples on investment current, according to sort of ticket valuation to exit, then that could also be

Like a high worth. So it's just important to understand that just the 1 trillion valuation that you're speaking about does not necessarily mean what the potential is for individual actions or investments in the industry. So it's just a very important differentiation. Definitely. Totally, totally. That's a very good point as well, yes. What is your ambition for Eno music? Where are you guys going? We are going steady and growing. That's what we're doing. Our goal is to create a global market.

Because we have been creating our global market, but I believe it needs to be the global market. What do I mean? I mean, my goal is to have Catholics, our Catholics and Catholics or others being traded with us, with another player, with another player, maybe on a stock exchange. That's my goal. Truly make it a liquid asset, which is wherever you're based, you have the opportunity of entering into it, really democratizing properly, which is our mission. So that's what we're doing. Now, how do we do this? Also with partnerships, with bigger players, bigger fishes on the investment side, on the music side.

That's really, really interesting for us. Not very, of course, straightforward to put in place because the moment in which you go like with the big leagues, you are really going with the big leagues and you really need to have scaled volumes compared to also what we have right now. So that's where we're going. That's what we're aiming for. And that's what we will bring home, I believe, in the coming and coming periods. So if you go towards those bigger players, are you sort of having an aspect of your business that's more leaning towards investment advisor rather than a marketplace? Or how do you envision that?

It's definitely an important component, probably going into the direction of financial licenses and more. Now, whether it will be us or us in partnership with other players that already have maybe a widespread investor community, we are still working on that. Do you have any investors on board that has an expectation of an exit or what's your sort of that part of your business? I mean, we are always extremely opportunistic one way or the other. I mean, at the end of the day, we're entrepreneurs, right? We're not dreamers. Even if we love somehow what we're doing, we're always open to opportunities and to looking to, again, strategic exits, strategic onboarding of capital, equity raise, and so on and so forth.

So definitely, I mean, all of our investors are looking for exits because that's the definition of investor, you know, and so yes, as well as the opportunity of growing the company and an exit with a higher valuation is probably better. So yes, exit is a very good word for an investor and for the founder as well. So I was looking into that as well as, of course, continue growing M&A or IPOs or whatever. Ideas I'm not a big fan of, honestly, on a personal level, personal experience. Yeah, I did. As far as I've been understanding, that's a beast of its own.

Yeah. We, Matsu, how's your life now? Like, you know, a few years ago, I was working constantly. Is it still that? Or have you found like a balance in everything you do? Balance somehow, yes, we have always been finding, I mean, I like working, I love working, I'm extremely responsive and the first one to, you know, to keep myself if I don't work. I have a say, which is, if you don't worry, you should worry, because you're not worrying, so you're not doing enough. So you shouldn't worry, maybe. If you are worrying, though, don't worry. So it's, you know, That's basically, yeah, I don't know if you got it, but somehow, somehow means that you're never in a peaceful state, right? You can never be in a peaceful state. So, you know, for five years, you know, that whatever it takes you to be there, somehow it tried to, you know, like whatever is falling from sky trying to get it.

So, I mean, you know, the balance, it's a very bad word for an entrepreneur. It's very hard to find. But somehow, yes, I mean, somehow, we have been surviving and I think we continue doing. Yeah, you can be, your body and your mind can find some sort of peace in the intensity and the longevity. I think I use, I always compare being an entrepreneur to a sports person. Like the, you know, the amount of work you do is probably extreme, but it's also aligned with how you see yourself and how you sort of, if you feel comfortable to some degree.

So you need to be comfortable in discomfort and you need to sort of also get energy from being tired. Like there's this whole balance that over time, I believe entrepreneurs that's been in it for a long time tend to find. And you can work hard without emptying yourself. And then also find tricks to sort of distance yourself, you know, your thoughts and work in some environment that you put yourself in and then tap back in.

Definitely. I mean, you got it. Yeah, it's very complex. Somehow, yes, I agree with you. Somehow you find the balance in the balance and somehow the call for it in the discalve. Yes. You need to. Matthew, it's been great talking to you. I love, you know, music. I love how consistent you have been. I think that's one of the biggest compliments I can give to you because that is so incredibly difficult as a startup, especially in a space where you break new ground, where you're first movers and you're working with education.

You guys have addressed so many fronts at once. And I only know a tiny piece of what you do because I've been involved in a startup that tried to do the same. So I only understand it from a theoretical concept, really. But what I do understand for that theoretical concept is it takes so much work to navigate what you're doing. So I really want to applaud you. I want to thank you for the educational aspect that you're doing because I believe, the same way that I'm sure that you believe, music is worth a lot. It is. It is.

And founders need to really have that ingrained in themselves in order to build companies over time that's going to support the infrastructure of this industry so it can be more than one trillion. Because it is important. We need more capital in. We need more interest. We need more investors. We need more founders. I agree. Thank you so much for your kind words. I really appreciate a lot of me so not. And for sure the team will also watch the podcast. But I will tell Matteo and Greg as well. And yeah, I mean, it's what we shout outside of the window for five years.

You know, people are here. They're deaf here because it's best. Stop it. The music industry is a valuable asset. It's extremely valuable. It is by definition. So, yeah. And I'm so happy now that Spotify is increasing from $9.99, $10.99, $11.99. I'm so happy. I'm so happy to pay that euro a little bit more every month. I'm so happy. 10% more for the whole industry every year or whatever. That's good. One of the things we are not sure about is music industry is protecting us from, you know, it's not correlated to the other things.

Paying cash, growing. Is it also protecting you from inflation? That's a question that research papers and universities have not been able to answer. If you take this kind of research paper from the 70s or 80s, they say, no, it's not protecting from inflation. If that is inflation, the royalties are revenues from the industry or not. But I think now we are in a different paradigm. And I think we are. And you can see the concepts of price more and more and more every year, which is bad for the consumer, but it's fortunately good for the artist.

And so from the industry, Spotify is being paid more. So I think it's also inflation is the fourth magic ingredient for music investments. And every player in the music industry should know whenever they get their catalog value, it is also protecting from inflation. And that's my take. Perfect. Well, Matsuo, thank you so much for your time. It's been a pleasure. We'll talk soon. Likewise. Thank you, guys. Looking forward. Thank you for having me. Thank you.