Last month we wrote about the short-term challenges that the collapse of Silicon Valley Bank would cause for startups, including some in the music-tech sector.
However, a longer-lasting, more existential threat may be a squeeze on funding sparked by wider economic headwinds. This weekend, Gimme Radio was hit by the chilly breeze.
The company, which launched in 2017 with a radio-like streaming app for metal music before later adding a second country-focused station, is shutting down.
“Even though the music fans, artists, and much of the music industry love Gimme, and even though we proved that engaged communities could generate real money at a higher average revenue per user than other music platforms, we unfortunately find ourselves in an economic climate where we have been unable to raise the financing needed to support the streaming services and grow Gimme to reach all music fans across all genres,” announced CEO Tyler Lenane.
His blog post revealed that Gimme Radio had been looking to raise $5m, in the hopes of tripling its revenue within the next 12 months while expanding to cover 15 genres.
“We thought that by hitting a $1M, 12 month run rate, achieving enviable fan engagement metrics, and by proving we could build real community, we would be in a much better position to raise the kind of capital required to scale this business to unbelievable profitability,” wrote Lenane. “On that we were wrong. We found product / market fit, but we never cracked product / investor fit.”
The full post is worth a read: it includes some of the lessons learned in Gimme Radio’s six-year run – during which it raised $7m of funding – as well as some stats on how it paid off for artists.
(For example: “We’ve since had artists that have less than 150K followers on Spotify earn $40,000 in a year from a fanbase of just 1,500 users on Gimme. That artist will never make $40,000 in a year from all the legacy digital music services combined.”)
Some of these lessons will hopefully live on: what Gimme Radio did with tips, vinyl sales and community features will surely be a precursor to the next big leap for the bigger music services, if they are serious about helping more artists sustain themselves with revenues beyond just streaming royalties.
Unfortunately, we’re equally sure that Gimme Radio won’t be the last music-tech victim of a funding crunch in 2023. Last week, CrunchBase News reported that global VC funding more than halved from $162bn in the first quarter of 2022 to $76bn in Q1 2023.
Strip out two enormous outlier rounds – $10bn for OpenAI and $6.5bn for Stripe – and the decline is even steeper. This is funding for all kinds of tech startups, and music-tech is a relatively small slice of the total. But the challenges for music startups are real as part of this.
This should be a concern for music-industry companies, but perhaps it’s also an opportunity for them – or perhaps a challenge to rise to meet. Are there startups out there who have (or are on the path to) product / market fit, but may suddenly be struggling with product / investor fit? What is our industry’s response to help those firms survive?
There’s a healthy startups circle of life of shutdowns and births, and we note that the Gods of Heavy Metal Narrative have decreed that the week of Gimme Radio’s closure announcement was also the week of launch for Thunderflix: a metal-focused video-streaming service that costs – wait for it – £6.66 a month.
Music startups can still raise funding: witness Enote’s €10m round reported on further down this bulletin, or Music Ally’s archive of recent funding stories. A last-minute buyer may swoop for Gimme Radio, and if not, its team and the lessons they learned will play a role in the next innovation loop for digital music.
Even so, if funding runways are coming to a sharp end for some startups who need a bit more time to take off… well, perhaps the music industry can further expand its operations as a tarmac supplier.
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