Fans as financial investors in artists’ careers is a trend that’s come in several phases, from the early excitement around companies like Kickstarter and Indiegogo to 2022’s crop of startups helping artists to sell NFTs with royalty shares built in.
BaseNote may be a new fan-investment startup, but it’s bucking the latter trend. It’s launching a platform where fans can invest in artists and earn a share of their streaming royalties in return, but it’s opted against using blockchain technology.
Instead, it’s using recently-adopted ‘Regulation Crowdfund’ legislation in the US as the basis for selling securities (which is what we’re talking about here) to ‘non-accredited’ investors – fans.
BaseNote will allow artists to raise between $20k and $5m, although how much individuals can raise will be dictated by their historical earnings; what percentage of their royalties they’re offering; and ‘investor demand’ estimated by the company.
The company also sees its consumer-friendly app as a key selling point: pitched as “Robinhood for Music” (a reference to the popular, if controversial startup that opened up stock trading), the app will double as a music and video player to discover the artists on its platform.
At launch, those artists will include Bill Grippin’, Chrishan, Conor Matthews, Estella Dawn, Guordan Banks, John Molinaro and Marty Grimes, so it’s towards the emerging end of the spectrum – although a couple of those have several hundred thousand listeners on Spotify already.
“We spoke with many music lovers, and learned about the shortcomings of existing options. There are only so many shows you can attend and T-shirts you can buy,” CEO Mick Wollman told Music Ally in an interview ahead of the launch.
“While donation-based models like Kickstarter and Patreon exist, many fans we spoke to said that they don’t feel good about the relationship it creates with the artist. Once we introduced the investing angle, people’s eyes just lit up with interest.”
So, BaseNote’s pitch is that it is both an alternative to those existing crowdfunding platforms, and to traditional label deals. The company also sees the current legislative climate as favourable to its model, reducing the legal headaches around selling royalties as an investment.
“Some artists were able to make this work, most famously, David Bowie’s ‘Bowie Bonds’, but by and large the restrictions and legal overhead prevented mainstream adoption,” said Wollman.
From cryptocurrency trading to Robinhood, one thing that’s become clear in recent times is that any company making it easy for non-investors to invest has a responsibility around education too: ensuring they have enough information (but also, that they know how to parse that information) to make their decisions.
BaseNote’s moves on that front include an educational section on its website, and an in-app ‘returns calculator’ feature that lays out how much of a return a fan will get from various scenarios: ‘If you invest $X and the music generates $Y of royalties over the next four years you’ll receive $Z’.
This aims to address an issue that Music Ally identified when we looked at Nas’s royalty-NFTs drop early this year, when we calculated just how many streams (and it was many) would be required for investors to earn their money back.
Profit isn’t necessarily the motivator for fans investing in artists: it can be more about knowing you’re funding their ability to continue writing, recording and releasing. But any measure to avoid misleading fan-investors into thinking they’re guaranteed to get rich is welcome.
Why has BaseNote opted to swerve NFTs and blockchain technology altogether? The company says it’s not an immovable principle, but rather a practical launch strategy.
“The short answer is ease of use for investors. Most of our target audience is not involved in crypto: asking them to maintain a wallet and perform transactions through OpenSea is just not a great user experience. With BaseNote, you can login with Apple or Google, link your bank account with Plaid, and you’re ready to start investing,” said Wollman.
“We have nothing against blockchain as a technology, and wouldn’t hesitate to introduce crypto to BaseNote if it fulfils needs for our investors or artists. As of today, we’ve been fully able to execute on our product vision without crypto. And we’re not about to just add NFTs for the sake of NFTs.”
He also suggested that the regulations part of Regulation Crowdfunding is a benefit both for BaseNote and the fans it hopes to attract.
“We observe strict requirements on how we handle money, secure our software, communicate with investors, advertise, etc,” he said. “We welcome these regulations that help protect investors, and we hope for a future where crypto has similar guard rails in place.”
Even as a non-blockchain fan-investment platform, BaseNote has competition. Royalty Exchange, Corite, ANote Music and others are all targeting this market, and of course then there is the burgeoning class of startups who are working with NFTs/crypto.
Competition is good, with artists able to compare the different platforms to see which might suit them best. It’s still far too early to predict the winners and losers, but we’ll follow BaseNote’s progress with interest, as well as its established rivals.
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