Ask HN: VC is to startup like a major record label is to an artist?
A comment on Gizmodo's "Record Labels: Change or Die": http://gizmodo.com/5481545/record-labels-change-or-die
"And that is where labels are a major help. Labels can coordinate to have you support a bigger band on tour. They can foot the bill when you are making $150/show while driving yourself around the country. They will pay the record producers that make your songs stand out from the static of 1,000,000 other indie rock bands."
got me thinking, VC is to startup like a major record label is to an artist?
I'm a first time entrepreneur (Penn State Junior). I just recently discovered the hacker news and startup community and have been working on my own startup, http://currenthiphop.com, in my spare time.
3 comments
[ 3.6 ms ] story [ 15.1 ms ] threadA VC is more like a partner that brings money to the table, and possibly contacts and advice and they don't take the largest cut by default.
Your negotiation position with a VC is much stronger than a typical no-name artist that wants to get distribution.
Very few artists have the capability to outmaneuver the system, but plenty of start-ups get to a strong negotiation position without funding.
By the time they do take on capital they're strong enough to get a good deal, whereas in the music industry the vast majority get the short end of the stick, even some surprisingly big name artists.
A typical record costs about $100K to $200K to produce, that's not including snazzy videos or other extras. For that an artist basically gets a loan that they can 'earn back' using the proceeds (if any) from the record company.
The record company controls the distribution, and it is not rare to have extra riders including multiple albums and a cut of the proceeds of merchandising and such added on.
And if your record doesn't earn back the investment it isn't rare that you are now in hock to the record company. There are plenty of 'fast' operators that will sign up new artists to draconian terms, get them a 'demo' grade recording and a few hundred cd's cut then spit them out again, in the hope that they get some play somewhere. Then afterwards they find out that their 'friends' that got them the demo need to be bought out before any major label can touch them.
These are extremely lousy deals (the major label ones less so but still very bad for the artist), but since everybody is doing it there are very few alternatives.
A VC is more like a partner that brings money to the table, and possibly contacts and advice and they don't take the largest cut by default.
You don't think a label brings those kind of perks too? I think an artist would much rather have Rick Rubin produce their album than some schmuck with a sound board.
Your negotiation position with a VC is much stronger than a typical no-name artist that wants to get distribution.
Just like I, a no-name business student, don't expect to be funded by Sequoia anytime soon, nor should a no-name artist expect to be signed to EMI. It takes traction to gain the attention of either.
Like I said though, I do agree with you on several points. Artists getting shafted and the record companies control of distribution are key points of differentiation between VCs and labels.
Recording studios and very talented 'schmucks' are for hire though, but the distribution network is not, and I think that's where the big difference lies.
I know of at least one 'one man, one woman' shop that got a sequoia investment, so even if you don't expect it, it does happen.