Sellaband, the “crowdfunding” site for musicians, is bankrupt, according to one of its co-founders and a minority investor in the company, Pim Betist. He told a Dutch newspaper that the service, which allowed members to invest in artists by buying shares in future recordings, “made some bad choices” and is now out of money. Betist, who left Sellaband to start a new venture called AfricaUnlimited, said that too much money was spent on the production and shipping of compact discs for the artists represented by the service. Betist also told the newspaper that Sellaband had no quality control on the artists it allowed to raise money through the service.
A Dutch court has apparently approved the company’s bankruptcy filing, according to a report by The Next Web. Members of the site have been discussing the bankruptcy and its implications on a number of message boards, including one maintained by Sellaband itself on the Get Satisfaction support site. While an artist was raising funds to pay for recording a CD, the service kept those funds in an escrow account and retained the interest on the donations. It’s not clear what will happen to those funds now.
Sellaband was founded in 2006 and in 2008 raised $5 million from Prime Technology Ventures. It also did a sales and marketing deal with Amazon (s amzn) in 2007 to give its artists additional profile. The site (which currently says it’s “down for maintenance”) pitched itself as an alternative to the major record labels, by allowing any artist to appeal to members for funding. Once an artist had raised $50,000 through the sale of “parts” or shares, the service would help find a recording studio, producer, etc. to help with the production of the CD. Members who donated would get a copy of the CD and other benefits.
A similar crowdfunding site called Kickstarter launched last year, backed in part by Andy Baio of Waxy.org, founder of the event-planning site Upcoming (which was sold to Yahoo (s yhoo) in 2005). Unlike Sellaband, however, Kickstarter is designed to allow artists and entrepreneurs of all kinds to raise money for a variety of projects or businesses, Baio explained in a blog post after the launch.