Takeaways from AngelList Radio’s Podcast with Tyler Willis and Jason Calacanis

Yesterday I listened to Tyler Willis have Jason Calacanis on the AngelList Radio podcast. Despite the fact that the episode was recorded a couple of months ago, I couldn’t stop listening to it. In fact, I was about halfway through it the second time when it occurred to me that I should take a few notes on it to summarize the incredible amount of information that Tyler and Jason discussed (it is an hour and a half long, after all).

Jason Calacanis; image courtesy of the AngelList Radio podcast

Jason Calacanis; image courtesy of the AngelList Radio podcast

The sheer amount of important information covered makes summarizing all of it challenging, but I’ll give it a try. I should note, though, before delving in, that some of the most poignant things covered were in the form of life stories and philosophies from Jason, a summarized transcription of which does not do them justice. To really soak up the underlying meaning of what’s listed below, you really need to listen to it for yourself. Possibly multiple times.

Moving along though. The points which Tyler and Jason hit can most aptly be placed within a number of areas of thought and consideration.  

These are:

  • People
  • Mentalities
  • Entrepreneurs and Founders
  • (Angel) Investing
  • Democratization

I’ll do my best to tackle each one of these, but keep in mind that these are just a few of the points which struck me as the most powerful. I will discuss some in more depth than others, as a number of them are self-explanatory.

People

Jason’s view of people in my mind basically splits into three main veins: human calculation, relationships, and arguably the most important one, empathy.

Human Calculation

This goes to “Jason’s Law of Angel Investing,” which according to Jason is: “I don’t need to know if the idea’s going to win, I [just] need to know if the person’s a winner.”

Jason looks for and reads the things that other people might miss: body language, personality, and interactive cues. As he mentions, he will talk about the [founder’s] idea through the lens of trying to figure out if [s/he’s] a winner or not. This sort of human calculation sets Jason up for the long game, something which he discusses as being a part of his overall strategy.

Relationships

Jason is extremely bullish on his relationships, wanting to be the first call a founder makes when things are going wrong, when the situation looks dire, or just when founders are having a hard time. He discusses understanding that being a founder is lonely, and sometimes all one needs is an ear to vent to; someone to “shoot the shit” with. Perhaps this goes back to Jason’s major in psychology; certainly his ability to read people and situations benefits from such a thought process. 

Life is relationships, pure and simple. Everything else is secondary, and Jason aspires to (almost obsessively) cultivate his relationships. (That’s a good thing, by the way).

This however, leads into what I consider to be one of the central theses of the discussion: empathy.

Empathy

Startups are hard. Actually, that’s a lie; startups are fucking hard. And sometimes the best thing is when someone will just sit and listen while you vent and fume for a little while. Loneliness kills, and having a friendly ear can make all the difference on those tough nights.

One quote seems to capture what Jason’s mentality would be during those nights on the phone with a founder having a hard time: “When I invested in you, I knew the odds were against you, and I still believed in you.” That pretty much sums up all that needs to be said.

Jason’s philosophy of accomplishing close relationships simply by being a nice human being—“buying [the founder] a cup of coffee, buying them dinner, or just saying ‘I believe in you’”—is exactly how I see the world as well. Cultivating relationships means doing what you can for other people because you can do it, not because you see some reward at the end of the tunnel. In the long run, good relationships do tend to reward people in often unexpected ways, but that should never be the crux of the relationships. Relationships are empathy and positivity. It’s about being magnetic.

Mentalities

Within the context of mentalities, Jason hits on a number of notions, though the one that sticks out to me the most is his focus on the “journalistic mentality.” Clearly a holdover from his time as a journalist, Jason discusses how he looks for people who exhibit great journalistic skills: an inquisitive mind, good communication skills, and being able to read situations well. In many ways, this connects with a lot of his poker metaphors. (There are lots of poker metaphors).

As he points out: “What happens when you interview [people] for a long time is you start to understand when they’re full of shit and you start to tell…who’s full of greatness…” Bluntly put, this is very true. I experienced it a lot during my time as a music journalist, speaking with artists and other industry professionals. Being a journalist is one of the best ways you can get to know the industry you want to be in.

“[A journalist] equals an inquisitive person who can communicate well.”

Entrepreneurs and Founders

Jason spends a lot of time talking about how he identifies great founders and what anyone should be doing and/or thinking about if they want to be an entrepreneur.

Know “Why”

First and foremost, know “why.” Why are you doing this, what is the underlying reason?

For Jason, answers like “the market seems open” or “I wanted to try being a founder” don’t cut it. It speaks to the authenticity if a founder is doing it for a larger reason than just trying to take advantage of a particular market situation. There needs to be a certain inevitability to what they’re doing, and how they see the world (something which Chris Sacca has also touched on).

As Jason sees it, there needs to be a real sense of purpose in the founder(s), a mission: “The world needs to evolve in this way, and we have the solution, and we NEED to implement our solution to change the way the world works.”

Jason: “Really talented people tell you where the world is going, and then you get to be part of it. And then you get to help them launch the rocket.”

Don’t Screw Your Supporters

They need to have the integrity not to screw the people who supported them early on. This is exactly in line with a well-known adage in the music industry which I always quote: “For those who forget us on the way up, we’ll see you on the way down.” Don’t forget the people who made your rise possible.

Be a Punk

Founders need to be punks.

Ok so Jason didn’t actually use this word, but as I explained in my post here, that’s really the type of mentality he is describing when he articulates what he looks for in people.

Additionally founders need:

  • To have an armor; a relentless drive, and be relentlessly resourceful
  • Have maniacal execution skills
  • Unstoppable determination

(Angel) Investing

Jason relayed a lot of information about investing and investment strategy. He discussed a lot of his personal strategy as well as how new investors can get in the game and start to learn the ropes.

For the sake of time (and because a lot of this is fairly self-explanatory), here’s a rundown of what he discussed:

  • Tips (for Angel Investing)
    • Spread your bets
    • Start by making investments slowly over a year
    • Even if you lose money, you’ll learn something
    • Always try to learn before diving in head first
    • Join syndicates
    • Get in the game and start
    • Double and triple down on your best bets
    • Meet with founders as much as you possibly can
    • Play the cars of the best investor at the table if you’re new to investing
    • Do the work, be proactive
    • Play the long game
    • Be patient and learn
    • Financial performance will come; focus on a portfolio strategy
    • Investing is a fight/struggle
    • Don’t ever discount anybody
    • Make a 5-year plan
    • Pro-rata rights
    • You want the “difficult” people; these people “mix it up”
    • Focus on being the most valuable and helpful person to the founder
  • Need to Have
    • A comfort losing a lot of your money (which you invested)
    • A comfort with the “shitshow” realities of investing
  • Don’t Be an Investor If
    • You’re annoying
    • You’re a control freak/obsessive person
    • You can’t remain cool and calm
    • You can’t remain classy in the face of defeat
    • You can’t deal with bad news
    • You can’t be a mensch

As Jason articulated: “I have to be the most valuable [person] to the founders. [I ask myself,] ‘Am I doing the most for that person?’”

How did Jason get to this thought process? When he started investing he made a list of all the things he could do for founders to provide value to them. Then he did them.

Democratization

The last major point which Jason discusses is democratization. In this case, he’s referring to the democratization of knowledge and power, and how dynamics have totally shifted in the last 10 years, allowing for entrance into entrepreneurship for tons of people who previously had very little recourse.

Interestingly enough, as he’s discussing the democratization of knowledge which can be used for growth, development of new skills sets, and other such things, I’m just reminded of an article I wrote a few months ago on the democratization of music. True, Jason is describing a different type of democratization process, but the parallel works. In the same way that scarcity has become an obsolete mentality for music, so too has scarcity of startup and entrepreneurial knowledge become obsolete in the worlds of business and tech.

I said it once and I’ll say it again: scarcity is obsolete; democratization wins.

“[Entrepreneurship is] stumbling around in the dark room, fumbling around, until your hand hits the wall, and flicks on the light switch.” – Jason 

Jason also briefly touched on the differences he sees between his LAUNCH incubator and Y Combinator, but that’s a whole other discussion for another time.

All in all, the podcast was intriguing enough for me to listen to it twice all the way through, and then take notes on it for a post. I give it up to Tyler Willis for conducting a great interview, and look forward to a hopeful follow-up with Jason again.


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Empathy, and Creating Value for Others Before Yourself

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Speaking with Chris Sacca and Erik Torenberg on Product Hunt LIVE

Empathy and Humility Are Disarming

Earlier this weekend, there was a great Medium post on Chris Sacca, and how he asks questions in a particular way. Phrasing it as “people-hacking,” a term which I found as quirky as it was vague, the post described the Q&A session which Sacca held following his most recent appearance on ABC’s Shark Tank, and which was moderated by Matt Mazzeo.

What I found most intriguing about the whole post was the ease with which it captured Sacca’s approach to not only answering questions, but asking them. The post itself seemed modeled on Sacca’s “ask vague, unloaded questions” approach, getting right to the heart of how and why someone in Sacca’s shoes (as a well-known investor) still seems approachable and down to earth. Humility is disarming and positivity is magnetic, whether you’re a founder, VC, employee, or customer.

Empathy—for other founders and everyone around you—seems to be a key trait which Sacca looks for. The focus on empathy falls directly in line with the thesis of Sacca’s earlier posts and Periscopes: karma, and creating value for others before asking for value for yourself. Last summer, I examined this focus on empathy and creating value for others within the greater context of relationships.

Creating Value for Others Before Yourself

I was fortunate enough to be able to speak with Sacca on these concepts a few months ago during a Product Hunt LIVE discussion he did. During the course of our short back-and-forth, he mentioned as an example how Mazzeo appeared on his radar simply because he created value for what Sacca was doing.

It was this initial value-for-nothing that then coalesced into a working relationship between the two (sans any formal interview); an example that underscored (at last for me) how important it is to continue to be a positive force for others even if the benefit for yourself is not yet clear. Good karma begets more good karma.    

Asking intentionally open-ended questions like “What does success look like?” and “How do you envision success with this product?” (from the original post) enable Sacca to do two things:

  1. He is able to maneuver the conversation away from stock answers and see how the founders really relate to their products, and
  2. He allows an element of freedom to flow through the process which eases the pressure and arguably allows him to see how a founder thinks when not completely flustered.

Relationships → Communities → Identities

The real takeaway from both the Medium post and Sacca’s initial Periscopes and articles is a focus on, and underscoring of, people. Understanding how people think, and being able to relate to those thoughts and emotions are what build relationships, which then turn into communities, and then into identities. Great companies cannot be built without these things, no matter how well everything else might work. Life is relationships, and there’s no substitute for knowing how to relate to people in empathetic and positive ways. These emotions in turn inspire trust and loyalty.

As they continue to build great things, I would encourage other founders to take these things to heart. They ring true regardless of whichever industry or walk of life you come from.

Thanks to Chris Sacca for taking time to answer my question, and to Erik Torenberg from Product Hunt for making it possible to do so!

Continuing to Build with Product Hunt

It’s 3:00 AM here on the east coast, and I would normally draft something like this a few times over the course of a week to get it just right. I’d rewrite it over numerous cups of coffee, but tonight it’s just one glass of seltzer water until the job is done. Tonight, it’s less important that it be a perfect piece than that it goes out by dawn.

I’ve written extensively on Product Hunt over the past few months. I’ve discussed why their main sale isn’t tech products at all, but rather community. I’ve discussed how their sophomore effort could be has been arguably their greatest triumph yet. I’ve argued that the team which has assembled under the Product Hunt banner, and the community it’s built around itself, is something special that should be recognized and emulated. Ryan Hoover’s post a few hours ago convinced me of why that’s true.

The Medium article to which Hoover’s first couple of sentences refer becomes almost completely irrelevant because of the way in which he opens his own piece: he’s not aggressive, defensive, or combative. He’s much more approachable than that. His verbal acknowledgment at his (and his team members’ hurt) over the post, and subsequent chin-up response of taking all feedback with a positive hand, might very well go unnoticed as readers try to figure out and/or find the post that stirred up this whole range of emotions. It shouldn’t.

Where so many might jump to a defensive tone, or a dismissive air, Hoover sets himself, his team members, and their company head and shoulders above by opening (and then closing) the piece with a dynamic of measured grace. It’s very easy to be graceful in your writing when you’re responding to praise. It’s very, very hard to do so when you’re responding to criticism, especially when that criticism is critical for criticism’s sake, with no discernable constructive overtures.

It’s been my pleasure to have numerous, daily interactions with numerous members of the Product Hunt team, and so I’m personally not surprised at such an honest, well-written piece. For those who are really paying attention, they know that this is precisely the reason why PH has shot up in popularity and virality. This is the reason why it’s growth and positive reputation seem to be stupidly big and expanding: because the community which they’ve built inspires people like me to come to their aid at 3:00 AM without batting an eye. It’s because they’ve engendered in their users a desire to see the most positive parts of the community grow, and to help work on the parts that need a little elbow-grease.

In the music business, there’s an adage I hear a lot: for those of you who forget us on the way up, we’ll see you on the way down. It means that for those artists who forget their early fans, and their initial community when they “get big,” there’s no guarantee that those same fans/early community members will be there when the lights come on; don’t take people for granted.

In writing this post (among others), the PH team has proved why it doesn’t take anyone for granted, and why they want to build a place where no one feels taken for granted or forgotten. If nothing else, this is why they win. The tech products, the guest chats, the games, the growth metrics…all of these stem from how they’ve constructed their community. It’s the reason why their community will continue to build with them, regardless of whatever critical responses they might receive in the future. If you want to emulate something, emulate that. I know that my team members and I are. Emulate how to build a damn good community with strong ties. Everything else can come after.

Independent Music Is Big. Really, Really Big.

PC Gaming Is Just Like Independent Music

Chris Dixon’s article yesterday discussed the trends that media is experiencing in the digital age. While his article focuses mostly on the gaming industry, it also heavily references the music industry, drawing numerous parallels and comparisons throughout the piece. Since I’m not much of a gamer, the music-related aspects of the post fascinate me because:

  1. They so closely mirror those in the gaming industry, which I find intriguing and even somewhat surprising, and
  2. Because Dixon is exactly on-point in his dissection of them.

Regarding the first point, it’s almost eerie how broad Dixon’s thesis could have been, were one to read the piece out of context. Of particular note are subtitles like “PC games are way bigger than you think[,]” which could easily say “independent music” instead of “PC games.” And it is way bigger. Way, way bigger.

Independent Music Is Way, Way Bigger Than You Think

Independent music, like PC gaming (it seems), is substantially bigger than many people initially realize, particularly if they’re only considering one part of “the music industry.” The “music industry” is a misnomer itself since it lends credence to the thought that there is a singular music industry in which to exist and do business. This is incorrect because there are in fact multiple paradigms that exist within the music universe, all of which operate according to very different rules. Independent music is a whole different world than major label music, and thus the opportunities that lie there do not necessarily mirror the opportunities that lie in the latter.

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Growth of independent music between 2003-2012; image courtesy of Techdirt

The stark reality is that independent music cannot be measured according to the traditional metrics. Unlike major label material, independent music cannot be measured and calculated metrically based on chart success, album copies sold (physical or digital), or video hits. Independent music extends to places major label music never touches: to the garage of the punk band in Chicago, the coffee house performance of the singer in London, the bedroom demo of the multi-instrumentalist in Melbourne, and the piano jazz bar in Amsterdam. As a result, the sheer number of artists that exist (and are popping up every day) is staggering.

The Problem with the “Walled-Garden”

As Dixon pointed out, where gaming wins is in providing endless choices for users, and relying on the dynamic of attention instead of scarcity. This is directly at odds with the current approach in most of the traditional music industry (in streaming especially) where the “walled-garden” approach is used as a means of obtaining exclusive rights to material on one service, and thus making it scarce or unavailable on all the other services. The notion here is that if you can garner enough scarce material, you’ll have something your competitors simply can’t lay their hands on.

The problem with this line of thinking is twofold:

  1. It doesn’t actually work, since material (major label or independent) inevitably finds it way off of solely one system and onto multiple systems; and
  2. It’s against the nature of music. Music is art, and the nature of art is to be seen, shared, engaged with, and shared again.

Music is freedom and expression, and to try and stifle that on one system is simultaneously useless and misguided. It’s misguided precisely because music is inherently social. Unlike movies or books, music has a unique live element which can be leveraged to the benefit of both the artists and their fans (both current and prospective). One of the fastest growing trends in independent music is for artists to alter their perspective of their own music: rather than looking at it solely as an end commodity for sale, now it’s becoming a mechanism for free marketing and advertising. It’s a means to an end, a way to get people to come out to shows, connect on a personal level in the live paradigm, and walk away feeling a direct identification with that artist.

What the major label industry really looks like; The Big Three

What the major label industry really looks like; The Big Three

Unfortunately, major labels have been less enthusiastic about this approach. As Dixon notes, they rely heavily on litigation and have effectively stayed focused on protecting their back catalog, looking backwards at the past with forlorn eyes rather than tasting the future.

Royalties Are the Emperor’s Clothes

The royalty system is a whole other monster, which I’ve tackled a number of times, and which I think is simply a chain to the past and nothing more. It doesn’t help artists the way they need to be helped, doesn’t make fans feel good about how artists are compensated, and just remains a massive headache for any music company, streaming or otherwise.

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Royalty Rates, Minimum Wage, and Reality; image courtesy of informationisbeautiful.net

Simply put, the royalty system is arguably the best example in media of the Emperor’s clothes: everyone keeps saying that we just need to find a way to make it work in the new age, when in reality there is no way to make it work in the new age. Arguably, it didn’t even work in previous decades; but it was the only real, scalable revenue system around, and thus became the industry standard.

In the post, Dixon quoted the post-mortem statement of Turntable.fm, which states that the Turntable team spent tons of cash on lawyers, tons of time trying to secure label deals, and ultimately that they didn’t heed the lessons of so many failed music startups. I’ll go so far as to argue that one of these mistakes (which founders continue to make) is buying into the old royalty-based system, and thus undercutting their own feet before even beginning the race.

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The music pipeline

The diagram above paints this picture, and if you look closely, you see that there are really only two entities who hold any significant amount of consistent power: the major labels and independent artists.

  • The former group essentially controls the lifeblood of dependent streaming services (like Spotify, Apple Music, Tidal, and more recently SoundCloud), the payment to artists from the royalties collected, and the gatekeeping authority over the music to which the mainstream is exposed.
Major Label Percentage Ownerships of (some) Streaming Services

Major Label Percentage Ownerships of (some) Streaming Services; *(Beats has since been purchased and rolled into Apple Music)

  • Independent artists, however, control their own distribution, exposure, and revenues models. Because they’re not beholden to any one paradigm or other entity, they are free to explore a wide range of possibilities, and mix-and-match those that work best for them. In many cases, this is highly individualized; what works well for one artist doesn’t work at all for another, and vice versa.

Community. It’s All About Community.

Dixon nails it home in the latter paragraph on books, when he states:

From a legal perspective, some fanfiction could be seen as copyright or trademark infringement. From a business perspective, the book industry would be smart to learn from the PC gaming business. Instead of fighting over pieces of a shrinking pie, try to grow the pie by getting more people to read and write books.

This is exactly true for the music business too. Instead of looking to block remixes and free distribution models, music companies would be better off learning how to leverage those models for improved community building and engagement, particularly as music is so heavily impacted by live continuous interaction. Build the community around the artists, and fans will follow. From those core fans, new and more flexible revenue models arise. The future of music is democratization and community.

If you look at many of the companies that are winning in media/tech right now—companies like Medium, Twitch, Product Hunt (with Games, Books, and Podcasts), and BuzzFeed—you see that they have invested a substantial amount of time and energy in creating communities around their products and/or services. The Medium community writes about anything and everything, and communities on Product Hunt and Twitch are super sticky. And all of this is to say nothing of the Dixon’s crowdfunding point, which certainly has massive and positive implications for the music business moving forward.

Scarcity Is Obsolete, Democratization Wins

Dixon’s closing statement gives me chills:

The internet renders business models focused on scarcity and litigation obsolete. But as the PC gaming market shows, it also unlocks lucrative new business models, and lets creators connect with consumers in new and exciting ways.

It gives me chills because it’s so on-point with what’s happening in music. Dixon set out to write a post on gaming, but in the process he laid out precisely the dynamic that’s bubbling to the surface in the music universe. I can’t believe this is a coincidence. Art is art, its essence is sharing and engagement. Music and games are forms of art, and draw their life-force from the communal engagement that occurs between the creators and the consumers. It all comes back to community. Every time.

Support Systems Make Long Odds Targets to Hit, Not Walls to Avoid

In another post this week, Hunter Walk wrote that the prospect (and indeed reality) of starting a company is hard. He referenced previous posts by Jason Calacanis and Paul Smith, both of whom wrote good posts on the kind of spine and drive you need to have in order to tough it out in this business. Both pieces were on point; Calacanis’ in particular struck a chord with me as it reminded me of how DIY punk you need to be in to work in the startup world.

Walk, however, brings something different to the table in his new post; he postulates how people from different backgrounds might have read the previous set of posts differently, and how they might have understood the points which Smith and Calacanis were making. Indeed, Walk strikes on this towards the end of his own piece, when he declares that something has been “gnawing” at him:

Starting a company—deciding to absorb that risk—should attract a self-selecting group of founders[,] but I also suspect stressing nothing but the long odds, the sacrifices, creates a barrier to entry for entrepreneurs who don’t have role models or a support system around them.

 

And in an instant, Walk seizes on something that is as palpable as it is subtle: those startup entrepreneurs who have a positive role model and/or support system from which to draw confidence are inherently better prepared for the slog than those who do not. However, it’s worth noting that many successful entrepreneurs didn’t come from families of entrepreneurs. Rather, they had to make the jump themselves—into instability, increasing pressure, constant rejection—in order to see their drive and vision fulfilled.   

I got lucky; the support system I needed was already in place. I wasn’t aware that my road towards the startup world started long before I ever thought to explore such a path. As such, the long odds are almost normal for me, and the DIY punk attitude is something which has always been underscored in my life.

For others, though, Walk makes an astute point: those who come from different backgrounds—the people who might be the first entrepreneurs in their families, or who have had to surmount obstacles that some of us might not have had to contend with (race, gender, economics, etc.)—need to be aware that they may be able to draw upon support systems outside their personal experiences and upbringing. Such an awareness can change their perception of the long odds although the odds themselves do not change. Walk:

How do we help potential entrepreneurs understand the long road ahead of them while letting them know there’s a support system to help them? Frankly…it’s better that 1% too many people start companies than 1% too few because you never know…And maybe that first time doesn’t work but the second time does…

Walk’s point is palpable; the view that success might be only one failure away is something that becomes ingrained in an entrepreneur who has a support system to fall back on. That support system makes one resolute in the face of the long odd; something to be confronted and overcome, circumstances permitting.

Successful entrepreneurs understand that the long odds are just numbers on a screen that tell you all the reasons something isn’t possible. With the right kind of role model(s) and support system, the long odds become less a wall to avoid than a target to aim at. Perception is a powerful thing, and is a key factor in the spine and drive which one needs to embody to forge ahead.    

Cold Emails Are an Opportunity, Not a Chore

Last week, Hunter Walk posted a short piece detailing a few calendar experiments he’d be trying this autumn. Amongst the challenges was a point which stuck out to me: his commitment to replying to any cold email at least once. This started a reflective thought process in my head on the heavy benefits of cold emailing.

I’ve Sent More Cold Emails Than I Could Ever Count

In my time and experiences within the music business, I’ve sent more cold emails than I could ever count; they’re virtually required if you want to start any sort of dialogue. In many industries (tech included), introductions through peers and contacts account for a large percentage of successful business relationships. Cold emails, however, work less often (excluding famous stories which have since become startup lore, like Box’s Aaron Levie cold emailing Mark Cuban and getting an investment). Many times, startup founders are lucky if they gain a response anywhere near Walk’s commitment to answer them at least once.

But in the music world, cold emailing is the norm; you better become very comfortable with it (and very good at it) if you want to get anywhere. You end up cold emailing artists, managers, promoters, bloggers/journalists, DJ’s, venues…the list goes on and on. You learn how to craft just the right sort of message that is equal parts fan and prospective business contact (and if you forget the fan part, you’ve majorly screwed up). Cold emailing becomes such a normal part of the overall flow that if you’re not sending at least a couple per day, you’re losing out.

The Benefits Far Outweigh the Drawbacks

Yet Walk’s piece reminded me of something different. We’re so used to reading posts about cold emailing written by the senders that many times the recipient’s perspective might go unnoticed. I’ve been on that end too.

I’ve had artists email me out of the blue asking for any number of things: a review of their new album, play on my radio show, feedback on their new single, advice about local venues, etc. And this is where Walk’s point hit home for me: it’s so easy to ignore cold emails (especially when there are mountains of them) that sometimes we can forget the opportunities which they can contain. Some of my best and longest lasting business relationships germinated from cold emails. It’s those solid, long-lasting relationships that have led to further opportunities in both the music and entrepreneurial spaces.

(It is of course relevant to note that cold emailing isn’t the only way to broach an initially unsolicited conversation. In my experience, there are any number of indirect methods that work just as well, if not better, than the cold emailing avenue. These, however, I think will provide fodder for a subsequent piece.)

Perhaps cold emailing in the music world is less overwhelming than it can be for tech angels or investors (which is both highly probable and understandable), but experience has taught me that Walk’s approach has benefits which far outweigh the drawbacks, so far as I can see. In opening his mind and palate up to what could be out there, Walk greatly increases his chances of striking upon a beneficial new contact and/or relationship. He does this because cold emails tend to go unnoticed or unanswered by some, and thus provide fertile ground for Walk to mine out new opportunities in an area all his own.

Where Some of the Greatest Opportunities Lie

Time-consuming though it may be, I think Walk’s proposed solution of setting aside 60-minute windows in which to go through these emails is precisely the right course forward. He is upfront about his limits (simply as a human with a life and a job) and does not set out to promise responses within a 24-hour period; everyone has a limited amount of time in the day and that’s just life.

Yet, when the opportunities are literally on your (digital) doorstep, I think the worst thing one can do is simply ignore them. In the music industry at least, one of the first things you learn is to look where no one else is looking. Taking the time to do so usually ends up being the best decision you can make; that’s where some of the greatest opportunities lie. I would be surprised if the same couldn’t be said for at least some level of the tech/investing space as well.  

Why Product Hunt’s Sophomore Effort Could Be Its Greatest Triumph

In an insightful post yesterday, David Berkowitz postulated that Product Hunt might be suffering from startup fatigue as 2015 draws to a close. His presented graphs and statistics are all on point, and the analysis of said metrics is fairly fleshed out, and I’d say quite accurate.

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However, though I agree with Berkowitz on a number of points, I stand apart in questioning whether Product Hunt has fallen victim to ennui and achieved the “Mad Men” effect. While the metrics point to a decrease in overall activity (which you can see in Berkowitz’s original post), I’m not so sure that the postulation of trouble for Product Hunt is exactly right. Let me tell you why.

The Debut Album

Product Hunt debuted halfway through 2014, and I came to it late in that summer, somewhere between July and August. I had just enough time to familiarize myself with the site (and app) before the windfall from the 6+ million a16z-led A round really enabled them to start expanding rapidly on their product and offerings. This summer alone PH has released 3 betas (that I’m aware of), Games, Books, and Podcasts, along with its LIVE feature (which I quite enjoy). I’ve heard murmurs that some people think PH is throwing anything at a wall and seeing what sticks, rather than focusing on one specific vision. Not only is this a fairly correct observation, but it’s exactly the right thing for Product Hunt to do.

As I discussed in this twitter thread, I think that from ~June 2014 till now (~October 2015), we’ve seen Product Hunt’s first act; its debut album as it were. That’s the album that is either overlooked except by the core fans (Nirvana’s 1989 album, Bleach) or gets all the attention (Pearl Jam’s 1991 debut, Ten).

The data implies that Product Hunt is of the latter, and that the coming months will most likely continue to be somewhat challenging for the company. The fact that PH might well be a necessary utility for some (as Berkowitz now identified it as for himself) as opposed to a quirky, fun new thing is arguably irrelevant. The fanaticism that Product Hunt enjoyed over the last year may not last in its current form, but it does signal something greater, I think.

The Sophomore Effort

Continuing the music analogy, Product Hunt now finds itself in the studio after its debut success. The tour’s been completed, and as such, self-avowed PH fans wait for the next release, many hoping to see a redo of the initial popular effort. But PH has outgrown its debut skin, and is looking for something to keep its creative juices fresh. What the metrics really tell us is that PH is going through growing pains, trying to figure out just how many new instruments and styles it wants to try on its new album. Product Hunt’s sophomore effort will do two things: 1) it will likely alienate a demographic of general users who “like the old stuff, but not the new vibe,” and 2) solidify those of us who want to see PH keep growing and cultivating its community.

I discussed Product Hunt’s winning in community earlier this summer, and since then have only furthered my beliefs in such. This signifies one of the main distinctions that I think will come to play out over Product Hunt’s ecosystem: certain users will use it mainly as a necessary utility, while others aren’t exactly sure what to use it as, but are drawn to the intriguing dynamic nonetheless. To be clear, there’s nothing wrong with being either kind of user; different strokes for different folks. But to be equally as clear, Product Hunt continues to succeed brilliantly because it attracts people like me; people who were not (are not) self-avowed die-hard tech product enthusiasts, but find it enticing anyway. I was never as much into new tech products and beta testing until I started using Product Hunt, and that’s exactly why it wins: it turns outsiders into insiders.

Some have begun to criticize PH for its commenting invites, and the exclusivity factor which they arguably perpetuate. But I think the minor exclusivity factor actually distracts from a much bigger inclusive factor. Product Hunt has succeeded in building the backbone of a community that is magnetic; it’s engaged, positive, and exciting for people who are open to new things.

Points of Discussion

In all this, Berkowitz makes a number of statements which I agree with, but analyze differently.

  1. Upvotes may not be the best measure of activity: This may in fact be true, but I’m not sure it matters as much as one might think. I see Product Hunt’s upvotes as proof of concept; people did want to see new products and share their impressions of them. But the upvote (and downvote, additionally) is a fairly one-dimensional interaction, and one I can see becoming less important to Product Hunt in the grand scheme. I don’t necessarily think they’ll get rid of it, but now that the PH team has planted the seeds of a truly interested and engaging community, those seeds are now germinating, and thus simple upvote metrics might not even be enough to truly capture the meaning behind those interactions.
  2. There could be a long tail effect: The prospect that lesser known products are doing better is possibly the best thing that could happen to PH in my opinion. What we could be seeing is the beginning of a democratization in the PH community, one where you don’t necessarily have to know someone influential to get your product some real traction. If I were part of the PH team, I would try to capitalize on this and figure out how to focus this dynamic; keep pushing the democratization without losing the high standard of quality.
  3. Perhaps Product Hunt is too slow in letting new people participate: I can see the validity of this point, and can see how it plays right into the “Product Hunt is about exclusivity” argument. There’s no quick and easy fix here, and I don’t think there should be. PH needs to retain its values and vision, even if that means it remains partially closed to prospective new users for a time.

    Notice, however, that I said partially closed; my best thought would be to let new users trickle in by giving them some access, a little at a time. Give them perhaps 5 comments every month until they gain full access. This could hopefully encourage them to use their comments wisely, and thus dissuade them from posting drivel or offensive material, while simultaneously allowing PH team members the necessary control to guide these new users.   
  4. Product Hunt is expanding into new categories such as games, books, and podcasts: This I don’t think is a problem at all; I think it’s an opportunity. Not every sub-category will be gold, but that doesn’t make it lead either. I quite like Books, and use it way more than Games (I’m not much a gamer). And though I’ve never been huge into podcasts, the new channel is making me rethink that. People will get different things from different channels, and there will be no way to see what’s really a success until a few more months pass.

    I do, however, think that PH has enough new things to keep its hands full (especially with the addition of the LIVE channel as well), and think it should focus on the irons it already has in the fire rather than continuing to add new ones.        

Berkowitz’s focus on the overall trends present in the graphs, though, is just one part of the story I think. Metrics are necessary things, but they can sometimes distract from possibilities on the horizon otherwise overshadowed by more dour trends. I think that’s the case here, where PH’s recent trends forecast a much more problematic stance than is actually there.

Cultivate the Community, Ignore the Noise

In the coming months, I can see Product Hunt becoming one of the popular contemporary examples of a company that arguably lost its “special sauce” after a great first year and successful Series A round. I anticipate articles to follow on TechCrunch, Re/Code, and to pop up all over Medium, as PH gets picked apart over its somewhat plateauing (if not declining) metrics. However, I caution against counting out PH too soon, and not focusing thoroughly on where they have situated themselves over the past year. Observers would do well to remember that PH is much more than metrics and trends; in fact, it’s mostly more than that. It’s community.

Keep throwing things at the wall, and experimenting with new instruments on the next album, and see what works. PH has already succeeded because their core fanbase is coalescing. Now they just need to nurture that base. Cultivate the community that any band or startup would kill for; that’s where the real power rests. When you leverage the power of your fanbase, the trends can go any way you want them to. All the rest is just noise. 

As for the Product Hunt team, my best advice to them were I to be asked would be to keep their heads down and just work. Acknowledge that this is the sophomore effort, and thus may irritate some of its debut supporters. However, this is the nature of the sophomore album, and could signal Product Hunt’s move towards the release of something even bigger than before. Whereas 2014-15 was Bleach, 2016 could be Nevermind. 

You Better Be a Punk

I just finished reading Jason Calacanis’s post “You don’t have what it takes” with regard to starting a company. How hard it is to start a company, and how hard it is to keep a company going. And how it is to keep your team breathing financially, and make your company successful. And not just any company; a startup.

I was pointed to the post when Charles Jo tagged me on Twitter (though I would have read it eventually, as I follow Jason’s blog), and posed a thought process to me: “[S]eems similar to what I imagine musicians go through.”

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I let that postulation play through my head as I read Jason’s article, and tried to see if any of the advice and realities in it applied to new (most times) independent artists too. I reflected on my ~10 years of experiences in the music universeas an artist, a journalist, a DJand of all the artists I know and speak to. And the finding of my thought experiment regarding those realities, is yes, they do. A lot.

Jason talks very bluntly about the pain that startups cause founders, and what kind of spine you need to have to soldier on through it. Startups are a bloodsport, and not nearly as easy, romantic, or chic as people might think after watching an episode of Shark Tank.

So in an effort to not simply reiterate Jason’s already well-made points, I’ll instead pose a different line of thinking. Before deciding that you have the spine to lead a startup company, take a moment and ask yourself a different question: Do I have what it takes to be in a band?

Do You Have What It Takes to Be in a Band?

Bands are fucking hard. And just like startups, they are way less glamorous than people think. Do you have visions of yourself playing Madison Square Garden, or accepting a Grammy as your song rockets up the charts? If so, you probably don’t have what it takes. Do you look forward to touring and watching as packed clubs mouth the words to your songs? You’re living in a dream.

Chances are most all the clubs you’ll play for the first year (or more) will be near dead empty, and no one will know (or care about) your songs. You’re more than super likely not going to have a “hit song,” and you pretty much for damn sure aren’t ever going to get anywhere near Madison Square Garden except when you’re buying tickets to see KISS play live.

You’re going to have a day job for the foreseeable future (forever?) and when you “go on tour,” you’re going to be sleeping in your crappy van, eating overpriced bar food (which you can’t afford), playing to people who mostly don’t care, and trying to raise a Kickstarter campaign for your next EP release, which again, no one cares about. You’re going to have to deal with being stiffed on your pay many nights, and your van will get broken in to and your gear stolen at least once.

This is just the reflection of the tip of the iceberg, and if any of this bothers you, then pack up, go home, and don’t even think about doing it. In fact, if this doesn’t excite you and make you hungry for more, then you don’t have the spine to be in any part of the music business other than as a fan and consumer.

You Need to Be Somewhat Masochistic

I’m convinced that you need to be severely masochistic on some level to want to be an independent artist, the same as if you want to lead (or be part of) a startup company. There are no breaks, and you shouldn’t want any, other than to eat, and call your parents and friends to tell them you still have a pulse. You should want to be thinking about work all the time because your work should excite you that much.

The real independent artists out therethe ones who you will probably go through your whole life never hearing aboutknow you won’t ever hear them, care about them, or help them. They do it anyway. They don’t wait for someone to hand them a great contract to get started, and they for damn sure don’t let hardships slow them down.

You Better Know How to DIY It Like a Punk

Just like being in a startup, how do you know if you have the spine to be in a band?

Here’s how: You know you’re going to do it, no matter what anyone else says, or tries to convince you of. You’re going to be a punk about it; you’ll DIY it the whole way through if you need to, but you’re going to do it. You’ll get down and dirty in the muck of all the things that could and will go wrong, and make your home in the palace of adversity. You’ll relish the challenge and ask for permission from no one to take on that next challenge that gives you chills.  And that’s it.   

Some may say that being too focused on your startup is living too closely to your passion, and can create large blindspots. In general, that can be very true. But you also can’t do a startup without that diehard passion. If you don’t want to tattoo your startup’s logo on your armif you figure you can just pivot to something elseyou don’t have the drive and spine for either a band or a startup.

But if you can honestly think to yourself, “yeah, I’d definitely go on tour in a shitty van (which will break down), play shows to empty rooms, not get paid, and then spend money I don’t have on recording my next album” then maybe you can do the band thing. It doesn’t matter what kind of music you play; bring out your inner punk and see how stupidly masochistic that punk is, and just how badly that punk wants it.

The Continuing Money Troubles of SoundCloud

Back in July, it was reported that German music streaming company SoundCloud was “running dangerously low on cash.” While this made barely a ripple in the mainstream news cycle, those in the tech and music industries were certainly paying attention, postulating how it was going to turn out. With ~$125M in cumulative funding, SoundCloud, which would be on its Series E for its next round, seriously can’t afford to be running low on cash; not now.

SoundCloud logo

SoundCloud logo

While ~$125M in funding is nothing to scoff at, one needs to examine the dynamics of where that funding is arguably going given SoundCloud’s precarious position at the moment. In the best of situations, the funding would be going towards furthering Soundcloud’s standing amongst its competitors, which now include Apple Music and Tidal in addition to Rdio and Spotify. And yet, the money is more likely getting sucked up by legal fees as the service braces for a round of massive copyright infringement lawsuits from major labels Universal and Sony. Anyone who knows anything about litigation knows that these cases will most likely take years to resolve, all the while drawing larger attorneys’ fees (not to mention time and effort) from the music service.

What the major label industry really looks like; The Big Three

What the major label industry really looks like; The Big Three

Warner is conspicuously absent from the intended lawsuits, no doubt because it’s the only one of the Big Three major labels to have struck a licensing deal with SoundCloud already (never mind the fact that Warner also owns 5% of SoundCloud..). While this may sound good for the streaming service on the front end, it actually complicates things even further, as it throws SoundCloud into the middle of two completely different paradigms with completely different dynamics. The reality of the situation is that SoundCloud has found itself alienating the very independent artists who were its biggest supporters since it signed the deal with Warner and began moving towards a more major label-style content service, akin to Spotify and Rdio. While this doesn’t mean that it’s dead in the water by any means, it does point to a larger issue which SoundCloud needs to figure out for itself moving forward.

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All of this puts in perspective the fact that SoundCloud can’t afford to be “running low on cash” right now. Now that they’ve entered the major label universe, they need a ton of cash just to continue playing the game, as they need to pay for licensing from Warner (and the other labels eventually), pay out royalties, and keep innovating ahead of their competition. That, in conjunction with their impending legal problems, makes this arguably the worst time to be running low on capital (as if there’s ever a good time!). The lawsuits by Universal and Sony aren’t going to go away overnight, and all those legal hours add up; that’s money that could be spent obtaining licensing rights and paying royalties that is now essentially being sucked out of SoundCloud’s system just so it can survive.

I don’t know what SoundCloud’s next step is going to be, but it needs to figure out a way to take the cumulative ~$125M it has in the bank (or whatever’s left) and figure out its legal quagmire before it does anything else. Otherwise, the legalities are just going to suck the life out of it while its competitors move ahead. That may be easier said than done, though, as it needs deals with the very people suing it in order to survive and be competitive. Could anything be more ironic?

Spotify’s Sony Contract: What It Means for Everyone

With the leak of Spotify’s contract with Sony last week, there’s a lot of attention on the streaming service right now. I’ll be taking a closer look at that contract over the next week, but for now I’ll focus on the fallout over the last week. In particular there seems to be a lot of renewed interest on the music space, more so than I’ve seen in a while. I think, though, that this has to do with a lot more than simply one contract between two companies; for the first time perhaps, the general public (including music producers, artists, and general music listeners) is aware of the kind of deals being struck behind the scenes.

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Even as Spotify soars in newer valuations that have the company somewhere in the $8B range, yesterday’s leak shows that such a valuation may in fact be misleading—Spotify has to cough up around $43M just for licensing from Sony alone. How much do you think they need to cough up for the other two majors, Warner and Universal? Even if we snip off the extra $3-4M, and assume an upfront licensing fee of $40M from Sony—and then simply assume similar prices for Warner and Universal—then Spotify has already spent $120M of investor money. And that’s just for the privilege of having access to the major labels’ stable of artists.

Also, don’t forget that’s before royalties and any other metrics that Spotify has to hit. Therefore it’s more like $43M upfront for the privilege to pay more later on; it’s not a one-and-done purchase. And most unfortunate for Spotify, this latter number is also predicated on how an artist performs in popularity, something they have essentially no control over.

I’m not going to rewrite Micah Singleton‘s article, but I will draw on a number of points he highlighted and what they mean in reality. There are numerous points of importance, but these are the ones I think the general public really needs to be apprised of. Though the contract has since been removed, we got the basic gist:

  1. Written by Sony—First let’s just take a moment to note that the contract was written by Sony. Of course this is their prerogative, but when considering the fact that Sony holds the rights to much of the content that Spotify wants to license, it clearly illustrates who is subject to whom. Frankly, since Sony holds the content rights, they (and the other major labels) essentially hold Spotify’s lifeblood in their hands—that’s not an opinion, it’s a fact. Realistically Spotify is not built around an independent and free model, so they need to play ball with Sony and the other labels, or they won’t play at all. Period.Screen Shot 2015-05-21 at 8.01.23 AM
  2. Advances—Spotify paid Sony $42.5M just for the right to license the music. That’s an upfront fee just to get in the door. This means that anyone looking to compete head to head with Spotify or Rdio needs to magically have about $130M lying around or in funding before they even get their feet wet (projecting the combined upfront licensing fees of the Big Three major labels). One of the reasons that Spotify has to raise such massive funding rounds is because these advances are somewhat annual, and thus need to be renegotiated all the time. And as the major labels continue to get squeezed in their wallets, these numbers are only going to rise for services looking to use major label content.
  3. Screen Shot 2015-05-21 at 2.36.33 PMDivided How and Among Whom?—As Singleton points out, Sony can essentially do whatever they want with that money; there’s no stipulation that it has to be divided in any particular way, or that any of it has to go to artists or songwriters. According to multiple sources, that money usually stays with the label and is generally not shared with artists. This particular point has raised such criticism that its prompted both a response from the EU, which is now looking into Spotify’s contracts, and virtually obliged Sony to come out with a public statement on the matter. Screen Shot 2015-05-21 at 2.36.56 PM
  4. Most Favored Nation Clause—Essentially a clause that guarantees that Spotify’s balls remain in Sony’s vicegrip. The clause guarantees Sony the right to amend  any portion of the contract if it perceives that any other label has a better deal than it does. This means that Sony is essentially never bound to Spotify in any way; it can decide—based on its own perception—that another label has a better deal (which it may or may not) and rework the entire deal for its own benefit. And Spotify has to swallow everything.
    Screen Shot 2015-05-21 at 2.41.24 PMScreen Shot 2015-05-21 at 2.42.20 PMWhere this really kills Spotify is when used in conjunction with the clause dictating payment based on market share. Thus, if another label has a better deal in that regard—perhaps double what Sony is getting monetarily—then Spotify has to cough up and pay Sony the difference.
  5. Spotify’s 15%—Basically exactly what it sounds like. Spotify takes 15% of the revenues from third-party advertising right off the top. What they do with this money is unknown, though it’s quite plausible that they’re not redistributing it to the artists, and are probably giving third-party advertisers a raw-ish deal. Next time Spotify releases a statement saying that they don’t have the funds to pay the artists more money, let’s all remember this little financial tidbit.Screen Shot 2015-05-21 at 2.47.16 PM Screen Shot 2015-05-21 at 2.48.28 PM
  6. Sony’s Ad Spots—This one’s pretty easy to understand: essentially Spotify is obligated to give Sony a certain amount of free ad space on its service. The ad space—which is clearly worth a fair amount of money—is given to Sony at a massive discount.Screen Shot 2015-05-21 at 2.53.33 PMScreen Shot 2015-05-21 at 2.54.09 PMBut that’s not all; Sony retains the right to sell the credited ad space to whomever they want, whenever they want. Again, Spotify gets squeezed.Screen Shot 2015-05-21 at 2.54.41 PM
  7. User Metrics—Spotify essentially has goals it needs to hit in terms of its user metrics (on both payment tiers), and if it misses those, it could be penalized. Conversely, if it exceeds expectations in either of the tier metrics, it recalculates that number so that Sony gets paid more. In English, what this means is that the better Spotify does, the more money Sony is entitled to, but doesn’t necessarily mean that it all works out for the streaming service.Screen Shot 2015-05-21 at 3.07.40 PM Screen Shot 2015-05-21 at 3.07.51 PMIt’s important to remember that Sony isn’t in the business of making sure that it backs up Spotify. It—like the other major labels—is licensing its music to numerous services, so its only real loyalty is to its bottom line. How that affects Spotify is essentially irrelevant to the major label.
  8. The Royalty Distribution (Forget About the Artists)—Without going too deeply into it (Singleton’s initial analysis and infographics are worth consulting), it basically boils down to this: the royalties per stream are so miniscule that you need to be getting millions of streams in order to make any real money (and by real, I mean anything more than $10.00). We all know that independent artists are never going to get to that level trying to compete on an unfair playing field, so let’s just put that point to bed right now. One thing that is worth noting now, though, is that not even every artist has a contract entitling them to royalties. So for all the bluster about royalty payments, many of the artists signed to major labels aren’t even entitled to fair cuts from the streaming.Screen Shot 2015-05-28 at 6.33.02 PMBut even more so, the way in which streaming royalties are calculated is so incredibly convoluted you almost need a degree in economics just to understand it. That’s not how it should be. For independent artists—and even mainstream artists who simply want to understand the financial dynamics—this is yet another way of keeping them in the dark. No one in any other industry would accept some sort of voodoo economics principle when it came to calculating their earnings, so why should music artists—mainstream or independent—have to settle for that? That’s the point, they shouldn’t.

There are numerous other points worth discussing, but these are some of the major ones that discussions of the music industry revolve around. Though arguably a major embarrassment for Sony and Spotify, the leaking of the contract between the two really shines a bright light on what goes on behind the scenes. It clarifies that what happens behind the curtain affects every type of artist, and underscores why more transparency and reform is needed in the music industry. And it highlights something else: the music industry is not dead and foregone. We’re now right on the precipice of a whole new type of music industry that’s taking shape every day. Those who accept and embrace the new dynamics will be the ones who benefit most from them when they inevitably come.

 

Thanks to Shelley Marx for reading early drafts of this.