Vested Capital
Vested Capital

Episode 4 · 1 year ago

(EP4): Jeff Ponchick Founder Of Repost Network, Sold To SoundCloud, How The Music Rights Industry Works Online

ABOUT THIS EPISODE

The world of music rights is a lot more confusing than I thought. 

There are many stakeholders who are all supposed to get a share of the revenue from music used online - from labels, publishers, platforms, song writers and of course the artist who created the music.

Jeff Ponchick worked in the world of digital music and knew well all the paper work required to make music rights work. 

He decided to start a company that attempted to digitize the music rights process, and thus make it a lot easier for artists to make money from their work.

Like many startup founders, Jeff first tested his idea with a not-so-scalable, very manual process -- working out all the details by hand, sending emails, making phone calls and filling out forms.

He did this for some test artists, who loved the service because it made it so much easier to get paid for their music no matter where it was being used online.

Jeff then brought on a technical partner, and they went to work to create the more scalable version of their service, to digitize the music rights process.

Thus Repost Network was born.

Jeff's idea proved to be a good one. Artists loved the service and of course loved getting paid for their work.

Musicians began to spread the word and Repost Network became a popular choice to help deal with music rights and negotiate with all the different music distributers - from YouTube, to Spotify and SoundCloud.

SoundCloud Acquires Repost Network

The word 'repost' in the name of Jeff's company refers to the goal of SoundCloud users - to get your tracks reposted so you can reach more people. Jeff maintained a close relationship with the SoundCloud team, which eventually led to an acquisition offer.

Repost Network was acquired for $15 Million in a cash and equity deal by SoundCloud in May of 2019. Jeff joined the SoundCloud team, where he still works at the time of recording this interview.

Jeff was very open during this podcast, sharing all the amazing steps that led to Repost Network growing to the point that SoundCloud was interested in an acquisition, and how the deal got done. 

Enjoy the episode.

Yaro

Podcast: https://www.yaro.blog/pod/
Blog: https://www.yaro.blog/

Hello, hello, this is Yarrow and welcome to vested capital episode number four, featuring my guest Jeff Pawn Chick, the founder of repost network, which was a company that was acquired by Soundcloud just a couple of years ago at the time of this recording, for a total of about fifteen million dollars, US ten million dollars in cash and five million dollars in equity. This was a bit of an eye opening interview for me because I'm not familiar with the music rights industry or music industry in general, and how people make money from the rights. As Jeff explains, there are multiple stakeholders involved with music rights, from the publishers, the Song Writers, the artist themselves, the labels. So there's a lot of slicing up of the Pie of revenue that might be made from using them music for anywhere from advertising to movies, TV series, video series, independent publishing, mainstream commercial publishing and then just where you normally go to consume music, which might be soundcloud or youtube and spotify, Amazon music, apple music and so on. So there's a lot going on behind the scenes. Jeff does a great job of introducing us to how it all works and also why. That led to this opportunity to launch his company, repost network, which is kind of like a rights management tool for music artists. Great Business Idea. He grew it to over one point two million a month in run rate. He talks about how they got their first customers, how they launched a very basic, ghetto version of and when I say ghetto I really mean it was like a not scalable service that intended to be scalable. So they did it by hand to begin with, and you'll hear how he explains how they do that by hand. And then, once it was proven to be desirable from their customer base, artists, he then went and partner with a technical person to create a more technical solution that was scalable. We hear that whole story, the whole repost network story, all the way to the point where they do get acquired by Soundcloud, what the deal was like for Jeff in terms of his personal experience of it. And I also asked you up a little bit about his background before repost. So you had a failed startup in his history. So there's some lessons to be learned from that as well. So great interview from another successful start up founder had a great exit and is still working for soundcloud to so he's moved on from start up to be an executive at a great music company. So I'll press play on that interview in a moment it. First of all, as always, this episode is brought to you by Inbox Donecom, which is my company that helps you manage and reply to your emails, your help dest tickets and your social media, inbox messages. Anywhere you're getting a message and you're find yourself drowning and all these messages each day. We provide a dedicated email specialist, a message communication manager, who will go in there manage the flow of those messages, reply to almost all of them as much as we can take off your plate as possible. Build Systems, build a knowledge base, build some SOP standard operating procedures for how to manage everything to do with your email so you can get back to what matters most in your life and your business. That's inbox donecom. All Right, now here is today's episode with Jeff Punchick. Hi, thanks for joining me today. So I'm here with, look at this right, Jeff Punchick, who's the founder of repost network, and I've been diving into whole bunch of history of Jeff's business. Just recently got acquired by sounds out, not so recently now, a couple years ago got acquired by Soundcloud, if I'm correct, two years as of June, like thirteen, I think. Yeah, okay. Now I ask Jeff before if we're cool to share some numbers, and the ready has they these numbers are online. So it was a fifteen million dollar acquisition. Ten million cash, five million and equity. So you're a proud salad cloud owner now. How as as a working for them, and you were doing about one point two million monthly run rate, according to some numbers. We've found any hackers. So huge success. I feel like it came out of nowhere in terms of you just showing up anny hackers with boom. This is how great this company is. I'd love to know a bit about your own background as well. But the first thing I've got to ask you, because I actually had a bit of trouble, not being a musician myself, understanding what problem that repost network actually solves for people. Like what was the this big idea you came up with? Yeah, absolutely. So it's funny, like there was the initial problem we set out to solve when we started the company and then, you know, once we solve that, we learned, we started getting more deep with the creators and artists that we were working with and started solving more of their problems, to be completely honest, with technology. So I can kind of go through what that initial problem was. Yeah, please. So, yeah, so, I mean basically the reason why I started the company was back in twenty, I think, fourteen, two thousand and fifteen, soundcloud had rolled out monetization for the first time ever. So what that...

...meant is, if you were an artist, a label, podcaster, be much like yourself, you could place an advertisement in front of your music and your channel could generate add revenue similar to how like your Youtube Channel does. And at the time I was working in a company called full screen, which you know, ended up becoming a very large company. was required for hundreds of millions of dollars. But the best way to sort of explain it, it wasn't the time, was a management company, such advertising agency, for like the largest influencers on Youtube, and I was on the music team there. So it is working with a lot of really upandcoming independent youtube creators and having those relationships and kind of starting to see them and try and monetize their audiences on soundcloud. There was a really, really specific problem that emerged, which was in order to get that ad to come up, you had to clear all the rights and music industry, if you you know on a musician, I mean it's very challenging for rights clear and standpoint. There's lots of coops to jump through, and so I looked into it and if you want to to basically monetize your content, monetize the sound recording, you to clear the publishing and that literally involved emails and spreadsheets going back and forth through email and literally actually, in some cases, physical mail. So if you want to monetize the song on sound glad, you would descend mail. So I looked at this and I was like wow, you know, like if you're an artist with a major label who has a workforce and understands this stuff, then great, but if you're independent or you're maybe, you know, a young artist or you're just kind of coming up and you're still learning, it was kind of prohibitively difficult to get access to and so repos honestly just started out as just a way of solving that problem. Sorry interrupt, because I this is where I got a bit lost time. We're trying to understand this. So why is there so much paperwork? Is it because the label I've signed up to a label, I'm a musician, before they will approve me having an add on my own music. They have to go through all that paperwork. Is that because I've signed with the label or is that something else? Yeah, so repost acts as like sort of a right solder, similar to like how a label might have a deal with soundcloud. We have a deal with as a distributor, with soundcloud right and what we're doing is we are representing that artist rights to soundcloud, usually on the sound recording side in the case of a distributor, but in this instance soundcloud wanted to also make sure that the publishing rights are cleared, which is a separate type of right, and so that's not really the way it is done today, but it was just the way it was done back then. Does that make sense? Yeah, it kind of does. I get it's funny because he knows a podcast you just public to show and you can put it out in front of it and I don't ask anyone permission for anything and if I use a third party tool it's just me adding some cold usually to whatever I do. Right, but with music it seems different because of the existing label system that was set up. There was always different like the publisher, there was the position themselves, then this sometimes with another label involved. It seemed to hold these multiple layers. And Yeah, you kind of have two always ask someone for something. Yeah, I mean think about it like if revenues being generated from the content. Basically, if you're a soundcloud or youtube or spotify orherever it's, you're generating ads or subscription revenue. You know you need to make sure that all those stakeholders get paid, right. And how you do that? As you understand, okay, who were the people who wrote the song or the people who are the label or the dependent artists represents the sound recording? Right, there's like a in the music industry. There's just a lot of the right word is like cooks in the kitchen, but you know, a lot of stakeholders, right. So the less that a DSP or music platform like kind of tightens all that up and does its best to make sure that everyone associated is getting paid, the more liability they take on. Right, because if you end up paying out the wrong amount and the wrong person doesn't get paid, you know that could trickle back to the platform. Right, right. Okay, so you came up with the idea of a repost and how did you solve this problem? Yeah, so it would honestly, was just a dashboard product. So we basically launched a site. It was invite only at the time. We actually did it in this way where you actually, if you want to work with us, you'd connect your soundcloud channel the API, we scan through your account and auto except to reject you based on if we thought you can make revenue or not. We've been intentionally, because when we started it wasn't fully automated right, like behind the scenes was like in those first few months, me sending the Physical Mail on the spreadsheets and emails until we automated it right. So we had to find a way to manage make sure we're working with artists actually could generate revenue for a business and also manage our skill. But it's anyway. It's something that's hand scale to test the idea first correct. Yeah, exactly. So we did that. That was sort of our like acquisition funnel and then, yeah, we just built a dashboard were, you know, if your Creator, you connect your soundcloud channel, pulls in all your tracks via API, use like to what you want to Montize, what what you don't. We just built an interface, right, like just a pretty way to input all the rights information for then me to go and manually register it, until my cofounder Joey, came on board and like actually built the tech to allows to take on more skill and do it on on a larger level. And so that was the initial problem we were solving was just how do I get all my friends and all the artists I know who you know we're having trouble monetizing on soundcloud? Just...

...access that a little bit more easily. And you know our mission, and it is our mission before we required and so it's my mission in our mission within soundcloud now is help musicians make a living through their audiences online, right, and so we came to that realization and realize that mission very early on, like the what happened was an artist kind of came back to me and job at starbucks and take music full time because of what you did for me on soundcloud and that was like so addicting and it felt so good that like I kind of this like there's this lightbulb moment and I was like, Oh, I think I found my purpose right and like this is what makes me happy. And so since we had that really clear mission of trying to help musicians make a living through audiences online, it was really easy for us to just say, okay, well, you know, we don't want to build a business on the back of just one of the business we want to do this in any other way we can write. And so we started solving other problems on other platforms like Youtube, spotify, be port, you know, title, you name it, and we ended up kind of slowly pivoting or evolving into a different type of business, which is, you know what, it's called a distributor in Industry today. Okay, so is your solution, at least the first layer, when you solve this paperwork problem? Is that something like a case? You said you had a technical kind of cofounder there. Is it a case of kind of creating sort of the an API for for music rights? Is that kind of like what it is or not? No, no, so, I mean in a lot of ways we just act as a middleman, right, like, I'll just flat out say it. So it's, you know, an artist comes to us, we have a deal with soundcloud, we have a deal with spotify, we would deal with apple. Through our site, we collect your assets, your artwork, your your files, you know, the Metadata, the rights information, what percentage of ownership goes where, and then we transmit that to all of these different music platforms in you know, some of them had, there's some standards some platforms to it pretty unique. It kind of depends and we just basically send that rights and for me, to those platforms and as well as those files and the content earnings get generated, gets passed back to us and then we passed that back to the artist. So it's kind of just and and I think the elegance of our product, or the key of our product, is makes something that is elegant in the sense that it all feels like it's the same flow for all different platforms, right, and it's just really easy, you know, despite each platform being very different. It's actually leads me to questions. So when you say it sends the information, excuse my ignorance here. Is it a case of your system is just sending an email that's saying this person just made this much money, you need to give this much of this stakeholder and this to this stakeholder. Is it more more technical than that? I would see. Eighty or ninety percent of the relationships we have with music platforms is through what's called D de x. So this is like a music industry XML standard as a relate to delivery of Netta data and as content more or less. In some cases, yeah, there's literally emails being triggered for okay, you know, might be a smaller platform, you know, and a weird part of the world or something. Yeah, you just got a sort of hustle. But yeah, I mean I would say eighty ninety percent of it follow that General Standard. Okay, okay, now I appreciate that. Now my head's clear on exactly what you do. You're kind of like that, you said, a middle person, but also you're a technology solution that makes everything feel cleaner, simpler, one place, one solution. So in some ways you're like a modern version of a technology, only like a cloud based label service for an indie artist, if that kind of makes sense a little bit. We don't use the word label. So yeah, like the term is distributor, right, so think of it as like in the old days of the music industry, right, like label or artists would make a CD, it would need to get put on a truck to get sent to tower records and you know all those other places. We're like kind of the truck, so to speak. But yeah, like you know, a huge portion of the people who work with us are actually labels themselves to so all record labels need some form of distribution and accounting infrastructure for their royalties. And then the other thing we haven't even touched on is we also have inhouse marketing. So we have an entire team that helps all the artists and labels that we work with, once those content are in stores, to actually get into big playlists on spotify or get big influencers on ticktock to use your music, right, and that kind of can scale based on, like you know, the business relationship that you know we have with that. Okay, customer artists, so to speak. That's interesting. I'm assuming that would have come later. So maybe I can, yes, take you know this journey from start to finish. So you create that first test version. We're doing it all manually. You bring in your friend and not trade was a cofounder or not. He build some of the technical side of that. With that kind of like an Eximo language for the music industry, like among wherever it needs to be manual, it's manual. That's built. Now, at that point, is it a case of word of mouth is bringing in new musicians and you're just kind of keeping up with demand, or is the the way around? You have to start telling people you exist. Like, how did evolve from that early day? Yeah, totally. So I was fortunate...

...to, via my previous employer, right, to have a lot of relationships with a lot of large influencers, particularly in the electronic dance music and hip hop space, which is, you know, soundclouds, like two of their largest audiences, right. So I was able to tap into some existing relationships. But yes, it was all word of mouth. Like the first year or two years I was a salesperson, right. So when I think of who I am as a founder and my skill set, I'm the very sales focused founder. And Yeah, all I did all day, every day it was just look at channels on soundcloud and reach out to them directly, do phone calls, and then, you know, the first couple hires were more salespeople, to be honest, and engineers, and it was just kind of that was the two Pistons in the engine. was just engineers and salespeople and then of course the marketing and stuff came later. But yeah, it was word of mouth and you know, we invested really heavily in customer support when we were very early to so one thing is we made that made everyone the team do support for probably much longer than we should have. But you know, the one thing I noticed was we get all of our competitors across the industry. was just the most common piece of feedback from people was like for the reason people would leave their distributor label is the support was really bad. And so we built chat support. You know, we try to get back to people quickly have really strong relationships, and so it started to happen and this is changed since we've scaled, but you know, in the very early days was you know, a lot of people were just going to social media saying like the repost guys are really cool, like I really love working with them, and we were. We were actually one of the more expensive distributors in the space. There were some of our competitors were charging half as much as we were, but people were still coming to us because, you know, hopefully it felt like you know, we were your friends and we were helping educate you and helping you get the most out of your career. And so we really focus on like providing care and love to the creators that that we worked with, and so I would say those were sort of the three, three focal points. Okay, so one part of this I guess we haven't touched on, to which I can understand, the demand side with I'm an artist, I'm ready getting a lot of streams on soundcloud or whatever platform I'm probably thinking I wanted monetize, but I've got one platform, like one distribution tool that will turn on ads for me. This another one that might do it. You've got soundcloud. That soundcloud you're not part of yet, so you're an external tool to soundcloud as well. I can see how. Yes, customer service is great, but in the day I'm also thinking how much am I going to make right, and that's a big part of this. So how do you fulfill the money generating side, like do you have a lot of relationships with add media type companies like what's that side of it like? Yeah, so we're unfortunately, in most cases behold into the AD sales teams and subscription businesses at the music platforms that we ultimately deliver the content to. Right. So, you know, we do a lot on youtube, right, we help police rights and help artists make money on youtube, but we can't control the ads that run on Youtube and we don't have an in how it. Sales team or connections in those platforms do that and honestly very few, next to know companies that we compete with do that. You know, one of the benefits, though, with soundcloud is because we are a platform, we have tons of brand relationships, like people who are advertising natively on platform, and so, you know, there are lots of opportunities were, you know, they'll come to us and say, Hey, we're chlorox bleach, we're going to do this ad spend with you. But you know, we want to do something a little bit more influencer focus or something a little bit more since we're taking this music approach to our brand, our bleach brand or whatever. This just pulling a brand out of it. Yeah, out of the hat here, but we do see the benefit from that. And then I think when it comes to growing revenue, you kind of have to look at it from like a segment standpoint, though. So well, you kind of went to add rate. Like what we've actually found really helps people who I would say are like artist starting out or maybe in like the Middle Tier of musician. So you're someone who hasn't your maybe hobbyists to parttime. You're not quite full time yet. It's honestly best practices in a lot of ways, right, like understanding which platforms are working for you. How do you educate an artist or label to understand how to do proper release planning? What are the marketing strategies on the platforms that matter to you? What are the tools out there that exist? And I think we actually take time to do that. You know, you can incrementally build revenue and increase your revenue bit by bit over time, if that makes sense. That that doesn't mean that you know that an artists won't come at around every now and then we work with her. Just blows up out of nowhere, right and then it's like a scramble to like, Oh, we got to make this person more money, we need to show more value, right like that. Like that, that exists too. But I think what's really beautiful about the music space right now, and sorry, I'm totally going on Rant, it's so much more democratize. There's so many ways for artists to monetize. Social media as a thing now, you know, which maybe wasn't a thing twenty years ago. There's this opportunity for the middle class of musician where maybe you're not going to be the next beyonce, but you know you can quit your day job and take music full time, and that's a growing market in our space and I think, yeah, we're very focus on how to grow the...

...our poo, or I call it ARPA, average revenue per artists. We don't like using the word user. You know, growing that ARPA and, you know, helping the impactful and ultimately these artist businesses. Okay, yeah, I can see it's become more fragmented, but that in some ways has opened up a lot more opportunities for monetization from musicians. Is Not just which label you signed to and becoming huge, it's you can make a bit from your instagram channel, you can work with you guys make some more. Yeah, we we might say, looking and concede. They'll write like you can do that through us, right, and that's something that like a lot of older school labels or distributors, it's not even a part of their strategy. Right. And these things been so quick in these platforms changed so quick you need to be Nimble and that's why I'm so excited about the entire music space, especially the music right stace is it's getting easier to enter and people who have good product and tech chops can differentiate themselves albs and build meaningful businesses. And you know not to say the way I did, but you know, I think people will do it even better than the way I did, so to speak. Well, take us for then say diff we can jump back into the the repulset network story. So you said there were some like you solved this initial problem and then you spotted new needs within the artists. That I'm assuming because you has this great customer service, you were getting a lot of feedback from them. You are really in the trenches doing sales calls. You would be getting a lot of direct feedback from people as well. I'm guessing that helped, and correct me if I'm wrong, but this is kind of what led you to provide more advertising connection type solutions and then, like you said as well, the additional support services. So can you kind of take us through the evolution of that, like what was the first thing you start to do beyond just yeah, it's sure. So one of the benefits of investing into support and being really close to our customers early on is, you know, if you get to a point where you have you get to proof of concept with your business and you have good relationships with your customers, I'll tell you what they want next and it stops being your product anymore, right, and your road map just builds itself. Right. So we were really big, like proponents of that, right, like let's actually book at the number of issues that are coming through support, what are the most common issues, and just prioritize building that or feedback, right, and we got really good at that, I think, very quickly. Artists expressed to us that they wanted marketing help if they were going to work for us, especially given our price point, and so you know that what that came later. That was something that, you know, was something like Oh, like this is something that you know, we're going to be taking a percentage of their earnings. You know, for some people just distribution and accounting infrastructure wasn't enough. They wanted like a label services infrastructure, and so we looked into that and tested that and you know, that was a whole thing to figure out which platforms to focus on and how do you stand out from competitors on that standpoint. But I remember there was one point in the business where we kind of you know, soundcloud in the early days. I guess we had platform to dependence, if that makes sense. So there was an issue where we were doing a really good job solving problem for creators on Soundcloud, but we kind of had this moment where we said like, look like you never want to build a business built on the back of just another business. So how do we start solving problems for artists off of soundcloud? And naturally, for me, coming from Youtube, I knew exactly what to build in a would say like an artist product for YouTube. And so, if you're okay with me getting a little technically, you're, the way in which we make artist money on youtube is do something called content id, okay, and what that is is like, let's say you upload a student film with my music in it without my permission. Right, we can take that song, give it to Google, identify every third party usage of that song across their platform, force an advertisement in front of that your student film and take your revenue and give it back to the artist right. And so it's a very like back end relationship. A hundred percent of the revenue like like a hundred percent on fringe. You've infringed on on our clients rights and so none of that revenue should be available to you. It gets very complex and there's this whole back end and we're rights holders fight over things and deals change and it's it can get kind of kind of complex. But you know, that's the very high level of view of it and you know, for us, something that I noticed was that artists who did content id through other labels and other distributors didn't really have much they knew that their music was getting put into all of this content on Youtube and they're getting paid for it, but they didn't really know what the content was right, or anything about where their music was getting used. And so what we did was we actually built a dash word. That was like it was kind of a simple solution. It was just, Hey, we've claimed all these videos for you and here they all are. And we had an artist come to me and say, like, Hey, I actually found out through you guys my music got using a tie water park commercial and it was like on TV and I was able to go after them and like get paid for it, you know what I mean, and like that, like that's great, like it's a very like knowledge is power kind of thing and we're able to make the money and also give people a level of transparency that they otherwise couldn't get anywhere else. Right. So I think it was like for us, as we started tacking on new platforms, really looking...

...at each platform and like talking to creators and understanding what the pain points were and how to give them kind of an edge, and then that ultimately ended up giving our artists and creators what they wanted and differentiating our product, which only helped it kind of create this like really nice fly wheel. Or if, like, you're kind of executing correctly on those types of things and you're giving people what they want and they're getting ahead of their peers who were working with our competitors, then it's like you can grow the business quite nicely. Yeah, I could imagine the word of mouth would really kick in with so many different aspects that because I know I do feel quite naive in this and I'm assuming there's musicians who don't know more than me, but they won't know to the degree that you're talking about here with the rights holding in your ability to go after usage of your music the way you're talking about. That sounds like there's a lot of behind the scenes technology and people connections and so on. We never spent more than, I think, ten grand in total on paid marketing. Wow, it's all word of mouth. It was just it was like super not scaleable, just like hire people to just reach out and talk to artists and then they talk to their friends. And it was that and then calling the company repost. So when I started the company I kind of made this assumption that if you were soundcloud artists or a creator on Soundcloud, which are the type of customers you wanted to get, that you would be trying to figure out how to get more repose posts on Soundcloud, rash, just like a retweet, you know. Yeah, and so I was like, Oh, if we just call it repost and create blog content and dominate the SEO will will rank high and search on Google. And so at the beginning week, like a quarter of our signings would come in from just organic free a CEO. Once that kind of got to it, it kind of steam rolled enough. So it was all yet that enough to get you. So like the the one point two million dollars a month. And just to clarify, when you say one point two million, that's your revenue, which is the share from all the artists. You're taking a cut from that right now. It's a total and then we take a reb share on top of that. Okay, God, that would be are that are like top line revenue of what we're what we're taking in. At the time with that was like what too three years ago something. I thought, yeah, and then you pay out the artist. It's from that that fun. But yeah, we take a percentage. Yep, got it. I haven't really talked much about your own entrepreneurial background, Jeff So, before with repost, you said you were working for full screen. Right it was there every ever an entrepreneurial background. Did you have another business in your past before the current one? I did so, before full screen. I went to film school initially the Young Fellow and was an editor at first and I ended up getting laid off for Disney more or less because Netflix was becoming a thing which for Disney, Disney home entertainment. So anytime that Bambi would get rereleased, I would do like help work on the behind the scene special features, and they thought, Oh, this content won't be a thing anymore because Netflix is here, which is totally wrong. Ended up like laying at and getting laid off, and so I ended up at this company called Juke and media, which is actually pretty big now, which does viral video licensing. So it's bridging the gap between someone gets kicked in the balls on Youtube and it goes viral or whatever. They'll like license it and get paid for that by getting it onto like shows like toush point Oh and ridiculousness and all these viral video things. And so I start out as a video editor there and I was going to be like the fourth or fifth employee. So I kind of got the experience of, you know, not being a founder there, but being kind of on the ground floor of something new. And now it's, you know, hundreds of employees of this as in La And York, London. Still friends with the founder. He's a great entrepreneur. I learned a lot about content, like digital content, Youtube, but I was always editing to and then while I was editing that company, I found this software that would be able to synchronize multiple videos via the audio waveform. So, of like the a three camera shoot and they're all shooting the same audio, it would take a lot of time to like sync them up, but this just scan the audio because they were all recording the same audio, and sync it that. And had this lightful moment and I was like, Oh my God, like everyone's a concerts filming with their cell phone cameras. What if you could like turn the audience into the camera men for the artists using the same technology? And so I was able to get like a small amount of funding through accelerator called start engine just still around. We were one of their first we were their first fund and quit Jukin did that full time. Built of the video processor from scratch. Well, we actually license that part of the tech, but we both a process around it. Yeah, it was small company. It failed. It totally failed. We end up building this really cool tech but there was no business behind it. And Yeah, like hardest thing I've ever had to go through was like admitting that like I'd convinced a couple people to quit their jobs and do this full time and then like it didn't work out. And but it was a huge learning experience, right. It made it's that when I went and did repost, was great. And then, so...

...you know, after about a year, year and a half of that, we ran out of money shut it down. I went to full screen originally as an editor, like kind of tails between my legs, didn't know it was. Next defaults to the thing I knew really well, which is video editing. And I got brought in originally because back in the day, back like two thousand and twelve, you know, if you got a if you were a youtuber and you did a brand deal, let's say sprint, Sprint would say like well, why doesn't this look like a sprint commercial? Right? They didn't understand that. Like you know, now influencers could do things in their own voices, but back then they didn't. So I actually got brought into kind of just like help these influencers make better content when as a related to brands. And then just one of the founders came to me and said like hey, you seem like someone cool you. I know you did this thing in music or starting in music, vertical do you want to move over to that team and I was like yeah, and then just learned a lot through that too. That company I joined pretty early to as maybe like employeed thirty, between thirty and sixty something at that and, you know, ended up becoming a massive company. And so yeah, so I think I've been fortunate personally to be on the ground floor of two companies which have like gone from nothing to something pretty big and have been able to kind of stand back and watch and see what they did right and what they did wrong. I have the benefit of having started something and failed and know what that feels like and learn what to avoid and thankfully, with reposts, that didn't happen again. Be completely on this. I'm very lucky, I think. I think if someone it said you're Aye Jeff, you're starting a music distributor in two thousand and fifteen when the entire music industry was at the bottom of you know, to to like napster in the CD are, I just completely two thousand and fifteen was the bottom and that it was like the dumbest time in history to start like a distributor in music. And it's when streaming popped off, and I just got very lucky to be in the right place at the right time. Yeah, I think that was like the lowest point in terms of revenues being made for our right but yeah, and I just went right into it because I didn't care about the market, I cared about the problem. HMM. Can you think back to because I know you you do you start repost while still working at full screen, or was it a case of I'm just going to go all in and no, no, I left full screen and then, period of time I'm buying and started it. Okay, so then you did kind of do that whole this is has to be it or have to get a job again when repost network starts to work. I don't know how fast that happened in terms of you seeing enough income from it to pay yourself. was that like your one month one? Do you remember that from the early days? Yeah, yeah, so it was the first six months. So leaving full screen is really tough. After that, like had no income blowing through my savings right like I was very lucky to, you know, had a little bit of cushion to get through that period. It took a really long time for me to get a deal with soundcloud, so I remember I said, like, in order for you to for me to monetize things for artists, I need to have a business relationship with soundcloud. I was in nobody, I was a guy on a couch and I had to convince soundcloud how to do a deal with me after they had just done a deal with the universal music and Warner and some of the biggest music companies in the world. Right. That was yeah, totally, yeah, and it was really hard. So you know that in of itself took a really, a really long time. Can I just ask you, how do you do that? Like how do you convince a company like Soundcloud to believe in what Jeff Punch, yes, says it's going to work? Yeah, totally. So I had a friend who had sort of a label of sorts and it was it was kind of a skill is very youtube focus and he had a few hundred artists that he liked directly managed the monetization for on Youtube. And so I basically came to him and said like look, Hey, I've got this vision, I want to solve this problem, I want to start this company, but I can't just go to soundcloud with like nothing. Can I do a deal with you? And basically say, if I get a deal with soundcloud, all monetize all your artists on soundcloud and will split the net earnings and fifty right, or I give him like some great deal, you know. So he might even got more than fifty percent and I got less, but it was just like so then I was able to go walk in the door once I finally got that meeting with Soundcloud, they didn't know who I was, and say yeah, I've got, you know this many hundreds of artists ready to go, and they were like Oh, okay, sure, yeah, and so, yeah, it just, you know, I it was you know, it just just hustled it. Yeah, makes sense. Yeah, and then to your question about like by what point were we profitable? So is that like six? So did that for about six months. Then it was like, I would say a few months of just reaching out to artists on my couch. Joey, my cofounder, had come on board. He was kind of weekend warrioring it and, you know, we set up a marketing site and stuff and it got to the point where we had, I was getting so many inbound people trying to work with us and the whole process I had outlined around how hard it was to monetize music. I literally didn't have enough hours in the day, like I was like I was like ripping my hair out, and so I kind of got to this point where I was like either I raise a little bit of capital or this isn't going to work all right, because it's not going to scale quickly enough. Just a good problem to have, but it's also like a very stressful thing to go through, and so I went out. I actually...

...went to Amplifi La Great, people said, La Venice, beach based accelerator, incubator, and you know, they I saw with them and they're like this is great, like you have a demand curve, like you've no idea how many people come to us. It's just a person with a pitch deck, you know, like you have a business here, and I'm like yeah, totally, I just need a couple hundred thousand bucks to get this engineer full time and, you know, like build this out, and they thankfully did it. And then, yeah, I think with repost we ended up raising in our first year maybe five hundred k something like that total, maybe a little less, and then we always focus. But I think culturally for us, you know, the focus was very much like, you know, we're here to make artists money and if we can't make money ourselves, we shouldn't exist, right. And there's like me, the ton of competitors would just raise like United Masters had raise like seventy million dollars in google standard raised like fifteen million dollars from like beings, every manager in the music industry, and we were just these like little little guys. But we were like no, we don't want to go that route, we don't want to go into a series a, we want to like make money for artists. And so, you know, I would say after year one we were profitable and it was probably maybe a team of like for people full time. And I want to say when I say profitable, I mean like ramen profitable, you know. But yeah, it was. It was a little rough that first like year and a half, to be okay completely honest. Yeah, so, if we wish for it all the way to the point we're actually being acquired by soundcloud more than Ram and profitable at that point. So what made you consider getting acquired, making the sale? And, you know, did you even see that as an endpoint prior to soundcloud? Maybe, I don't know. WHO approached to there. But was your vision actually to take it yourself to a hundreds of millions a year in revenue? Or is the case you're happy because you get to work with a company and then they came along at the right time? Yeah, look, soundcloud was always like a very natural fit right and soundcloud had had a change in leadership. So Carrie trainer and Mike Weisman came in about three, three and a half years ago recapitalize the business. The original founders stepped down. They're very much change management, and so soundcloud was heading in like, from my opinion, like a really good direction, as being like a growing, sustainable, like raw rago go creator Type Company. So to me that was kind of like in the back of my head always the dream. But Yeah, look, the reason to sell? We don't want to sell, we'd like to me and Joey like we loved it, we did it was it. You know, we're changing artist lives. Is incredibly fulfilling. But when ended up happening is, I think in summer of two thousand and eighteen, the distribution space got hot. Our space got hot. So spotify did a big private AC reveal with distro kid apple acquire another one of our competitors, platoon, and so my phone just started ringing off the hook right from people in private equity and music platforms, and name it. Some of the biggest companies in the world own music platforms, by the way. So you know, when Amazon calls you, it's like Whoa you know, and then you know also like major rights soldiers and record labels, and so, you know, we had to make a business decision which was, you know, either we go out and we run a process to raise some capital or cell or we stand the risk of being the last person of the dance without a day and all of our competition is way more as a bigger war chest than us. And the other part two is, you know, we're not we're not stupid or naive. You know, if they're talking to us, they're also talking to our competitors, right, because the space is hot. So we ran a formal process and it was it wasn't initially to sell, but very quickly all the conversations went right to that. And so yeah, so you know, we ran a process to see what we could get, and soundclub came to the table and it wasn't our only option, but you know, we felt that, you know, for the team we built, for what we feel like we need to have to feel fulfilled in our work, that sound club was the best cultural fit because, you know, they are tech company in music, right. I think you go to a major label, you know they might not respect the Techt aves much. But you know, maybe that's not the case. I don't know, but that was my assumption. And you know, if you look at all the music platforms that are out there, maybe excluding youtube, you know it, and Youtube is in very music. POCO use. Music's a big focus for youtube. Excusing, but it's not like the focus. It's kind of like the number one platform for independent creators and our mission of helping artists make a living through their audiences online could really be amplified through the scale and the data and information that exists on the soundclub platform. And so it was kind of just like, once you kind of got to no carry and Mike, we were really impressed with them too as leaders and we felt like also we can learn a lot from them. Personally in the team could learn a lot. It was a good culture fit and it felt like it was a one plus one equals five investment thesis. And so, you know, two years later, I'm very happy with the decision. You know, we're helping more readers in or before and I'm learning a lot and it's interesting. You go from like I want to learn to be a start a pounder.

Then it's like you learned to be an executive at like a bigger company, and you just, you just hear so many of those horror stories of like found ourselves to bigger company and they just they're chained at their desk and they hate it and that's, you know, so far away from the truth here. And so yeah, I'd say, like, very happy with the decision over also us, like what was the sale price? A negotiation, because I was probably the first time you ever did something like that. Right, you're kind of negotiating. Correct me if I'm wrong. The largest part of your net worth at the time probably still is. was that like a you know, a challenge for you, or did it just go so easily because you knew the soundcloud people so well? Hardest thing I've ever done. Okay, yeah, I think it's incredibly stressful. Yeah, it's like a life it's a very life changing thing to go through and to soundclouds. Credit they're good negotiators, right, and I'm this guy who I don't have a lot degree. I've I haven't gone through an MA process before and it was hard to not feel outmatched a little bit. But you also look at it and you're like Oh, like, this is a really good team and it and going through an Ma experience with the other side also gives you a an interesting lesson in like how it will be to work with them to so that was, I think, valuable and yeah, super hard. I mean I think there's this really funny story when we finally announce the deal. Mike, who's now the CEO, was the CEO at the time, flew out to la so we can announce it to the team and we announce it to the team and you know, everyone's stoked and runs happy. We end up going to like the closest part of the office to kind of go celebrate with everyone and I'm sitting at the bar and, you know, it's been like months and months of stress and I start to feel like a fever and kind of sick and my body just completely shut down. It was like it was it was I've never gone through anything like that. It was just like it was like the way of having gotten through the deal. Just it just like fell off me and I just like I was I just went home early and I like crashed for like two days. It was a really interesting lesson and like how to manage stress, I guess, how like that kind of thing can really build up. But yeah, yeah, it's interesting to say that. Some of the other guests I've had on the show who've also sold companies, they talk about the stress of completing a deal. And Yeah, from the lawyer side, from determining the valuation side, is the stress just come from? It's so important to you, but you also are not in control of it ultimately as well, right. So is that kind of what makes it so stressful? Is it simply just you have to go through so much scrutiny and so much looking at numbers and, you know, kind of revealing behind the scenes of your company? Yeah, look, it's probably different for everyone, right, but for me, I mean it's a lot of things right. For me, I think one of the scariest parts is the fear of the unknown. Right, like you, you don't really know if what you're doing is going to work right and you have your team that you have to be that you're responsible for you of all of your clients and customers and art in my case, artists and labels who I love and care about. And, you know, for me the whole time like shit, like it's just going to get fucked up, you know, like this. It's, you know, like is this going to be worse? And like that kind of unknown of what it's going to really be like on the other side was very stressful. The other aspect of it is it's also just a lot of work, right. It's like you have to simultaneously run and grow your business, right while negotiating this steal. And if the business dips right, like, if you think about it, if you're on the buyer side, you're looking for any opportunity you can get the price down, as you should write. It's just kind of like you're running your business, you're negoating this deal, you're going through diligence. It's just an incredible amount of work. And so, yeah, and then there's also the fear of the unknown part. Yeah, and turning another company and doing a new role. So yeah, that's a it's a tough job. Okay, I, Jeff, got to maybe one more question, maybe too, just before we kind of wrap it up here. I know we've got about five minutes left. So you had a big exit, so like ten million in cash, fimillion equity. You know, I'll didn't go to you and it was your cofounder, that was initial investors, and maybe some of the team as well, but I'm assuming, I fail, the big chunk did go to you and that's, as I said before, probably your largest source of capital of the moment. What did you do with that money? Was it a case of just be investing in something else? Did you buy a couple of toys for yourself? What was the what was the usage of all that capital? Yeah, I think, like with anything right, like you, for me, I invested it. Yeah, like you know, I'm not someone who needs to have a very flashy life. You know, just make your money work for you, because you know it, one day you might not have a job or being as enviable as a situation and you want to make sure you know your your cover, I guess. Long term. What was your investment vehicles of choice? So you just hanging it to someone to manage, or did you kind of do it yourself? Or stocks, little bills day? Yeah, say, yeah, you know, I work with a wealth manager on part of it. For the stuff I want to be more aggressive about, I do myself. I like to play in Crypto. I think it's fun, but I definitely have the mantra of don't invest more than you're willing to lose. It's...

...a little especially with recent events right, it can be a little volatile a little bit. So yeah, you know, it's you. You got to you got to spread it, you got to diversify your assets and never put your eggs in one basket and awesome. So and just go with the wrap up question. Now that you're inside with soundcloud and you're still, I'm assuming that the boss of the repolst network, part of soundcloud. What is is case of just doing the same thing, but on a grander scale. So it's two things. So one. The first one is part of our investment thesis when we were required was we had built distribution from the ground out, but we were selective about the artist who were working with. Soundclouds the largest open audio platform in the world, right. So the amount of creators on the platform is, you know, it's millions and millions of creators. So part of it was let's launch a kind of stripped down version of our product for a subscription saspy or basically as a subscription fee, and offer it to all of those artists more kind of in that like, as I was saying earlier, like hobbyists apart time range, right. So just real quick, easy way to just get your content into stores and make money. So we launch that last and then also allow them to monetize their music on soundcloud too. So we launched that about a year ago. It's going very well. It's not a matter of how much skill do we want to take on or how much skill is there, it's a matter of how much do we want to take on. So we are, you know, kind of slowly taking larger bites out of soundcloud and, you know, getting more customers and things like that, and they're ways to kind of point soundclouds funnel into that at scale offering. The second is, yeah, exactly what you said, pouring jet fuel on the fire, so to speak. So using the data on soundcloud as well as the data for our off platform distribution to identify the next global superstars and or just artists we should invest in. And so, you know, I ever see a ten, fifteen million dollar advanced fun and artist marketing team, a team of project and account managers, as well as a sales team, and you know, we're basically just using that. Our sharp edge is understanding what's happening on the soundcloud platform, signing it like a distributor or maybe even a label would early on, and then putting them into an infrastructure where we can help them grow their career in a really meaningful way while also participating in that upside. So yeah, it's doing what we did, but with a lot more people and money and source resources, which is just Super Fun because I think on like the product side of being a founder, it's like you always as someone who I care very deeply about our product, you want as many people using it as possible. So we're achieving that with that scale side and then with the other side of what we're doing, it kind of feels like we got that series a or series B investment and we're just like scaling it up and helping more creators in a really hands on way, and so that's a blast. That's basically what I oversee. Yeah, in fact that you're still out two years later shows that you're still enjoying the work it's not just about the money. It was something you really enjoy doing. It has to be about the work, right, like I'm very grateful and very fortunate to have found a purpose, like I said earlier, like that feeling of just helping someone take music whole time is I'm addicted to that. And Yeah, like, it wasn't about money, it was just about finding the place that would let me do that on a larger scale and let me learn to become a better entrepreneur executive in the process. And Yeah, I think as long as that there, then I'm as happy as a claim. Well, I appreciate you taking a time to enlighten me a little bit. I have to say the the music and industry, for Rights Holding and so on, it's it is a little bit opaque, I guess, in the sense it's all the stuff happening behind the scenes. You don't really know about it. You go to Youtube, listen to a song, you don't really realize how or who is making money from that process. And I still don't really know. But I can see there is actually a lot going on and I can see why your platform worked in the first place with the initial idea. So thanks for sharing any other websites. You want to send people to soundcloudcom. Check it out, listen, listen to music there. I do. The first guest they'll have whos website is soundcloudcom, and that's that's very cool. Yeah, I know, I appreciate the time and thanks, Jeff. Cool. Have a good day. And there you have it, that episode with Jeff Paunchick. I hope you got as much out of it as I did. I was certainly not aware of all that behind the scenes slicing and dicing of revenue with all the different stakeholders, and would never have thought about this as a busy in this opportunity either. You certainly had to be in that world to see that opportunity, which might actually lead to some ideas for you, hopefully as well. You might be thinking there's some ideas, some problems to be solved within an industry that from the outside, no one would see, but because you're on the inside, you can see the problems people have and you can potentially start a business jest, like Jeff did. If this episode was helpful for you, maybe you're thinking about a family member or a friend or a colleague who is in the music industry or is also an entrepreneur, a startup founder, is thinking of starting their own business. Whatever the case, maybe if you think this was a helpful interview, please share it with them. Send them the link to the vested capital Podcast, tell them to go to episode for with Jeff Pon Chick and they can...

...listen to the whole thing for free. As always. They can find this podcast and all the previous episodes by googling vested capital or searching for Yarrow. Why, a Er inside any podcast APP you might have. I said, Google will bring into the website, but the Google podcast player you can also search in there. You can search in the spotify player, the Amazon player, the Apple Player, there's so many players or podcasts. All of them will have vested capital available if you just search for it. And once you do that, hit subscribe so you get all the episodes as I release them, as well as the entire back catalog of interviews I've done with amazing guest just like Jeff. Okay, that's it for me. My name is yarrow and I will talk to you on the next episode. Bye Bye.

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