When the news of concert-finding service Songkick’s $10 million round of investment from Sequoia broke on Thursday, it was a significant moment for the London-based concert database in more ways than one. Not only was the five-year-old Y Combinator alum getting backing from one of Silicon Valley’s blueblood venture firms, but it was the first investment by Sequoia in a British-based startup.
But the move also meant something else: it suddenly brought a great pressure to bear on the company. The business has so far made most of its money through affiliate deals, partnering with ticket sales companies and taking a small slice of the price. But with a total of $17 million raised, the question of how Songkick lives up to that price tag quickly became a talking point.
Over at Digital Music News, Paul Resnikoff made some strong points about what the money could mean to Songkick. The chances are that it’s now probably too big to buy, he argued — at least at a price that will make investors happy.
Songkick could easily join the class of overvalued, hard-to-sell startups in music right now. Startups like Next Big Sound and Topspin, for example, both of whom are sizzling on the sexiness scale, but difficult to properly monetize, scale, and sell at the kinds of multiples that investors demand.
In addition, he made the point that Songkick’s bigger concern may be that the company’s most important partner and its most obvious acquirer, ticketing giant Live Nation, has been experimenting with its own Labs team. Their experimental work appears to be aimed, in part, at providing some direct competition to Songkick — something that could be extremely dangerous.
“You don’t sign your name at the bottom of the funding documents without thinking that through,” he says. “We weren’t raising money… we weren’t close to running out of money or needing to raise more.”
Instead, he says, there was a meeting of minds when he had a casual meeting with Sequoia’s Greg McAdoo and Mike Moritz. If Songkick would eventually want to raise more money (which it did) it made sense to do it with a partner that felt enthusiastic about the opportunity. And, says Hogarth, they saw huge potential in the company because its concert-finding products are just the first part of a long-term strategy to become one of the biggest music services on the web.
So what does that strategy entail? Will it be focused on growth before revenue, like Twitter or Instagram? Or will it need to find a major revenue strategy to make the business highly profitable?
“They’re one and the same thing,” he tells me. “It’s really important to focus on the bottom line, because that’s a great test of how you’re really doing in the market — but you have to do it right, and that involves growth. We’ve had the chance to plaster the site with ads… but that doesn’t put any money in the pockets of artists and venues.”
He alludes to Live Nation’s recent work and admits that the vested interests inside the music business can make it hard, but that the company is betting that there’s more to be done than simply taking a cut of ticket sales.
“The sales affiliate model is a good scoreboard,” he says. “But the challenge is finding out how the relationship with transaction providers evolves. Some ticketing services have launched things that look a lot like Songkick, but our intention is to be a great neutral platform for everyone — whether you’re a small artist hitting the road for the first time, or a giant ticketing company.”
Although he skirts around precisely what that “neutral platform” will entail, it sounds like he sees Songkick as something far broader than just a database of gigs.
In fact, it could be something much more like a communication service for musicians — something that connects artists and fans, lets them interact, buy and sell music and merchandise, and helps them share not only the experience of going to gigs but also the memories of having been. That may sound a little familiar — MySpace, of course, built its public image on the relationship between musicians and their fans — but Hogarth says there is much more to be done.
So is the target to make Songkick big enough and healthy enough that it can’t easily be ignored, or circumvented?
“Yeah, but I don’t really think about it like that,” he says.
His gamble is that the reward for becoming the major online player in concerts could be significant. After all, the live music industry was worth around $23.5 billion last year — up from $16 billion in 2006.
“The way I think about it, there’s a public company in live music, Ticketmaster, and their primary partners are venues,” he says. “There should be a public company that represents fans. We want to build that company, and really that’s the end goal that we’re driving towards.”