

Ask HN: VC is to startup like a major record label is to an artist? - Fahim

A comment on Gizmodo's "Record Labels: Change or Die": http://gizmodo.com/5481545/record-labels-change-or-die<p>"And that is where labels are a major help. Labels can coordinate to have you support a bigger band on tour. They can foot the bill when you are making $150/show while driving yourself around the country. They will pay the record producers that make your songs stand out from the static of 1,000,000 other indie rock bands."<p>got me thinking, VC is to startup like a major record label is to an artist?<p>I'm a first time entrepreneur (Penn State Junior). I just recently discovered the hacker news and startup community and have been working on my own startup, http://currenthiphop.com, in my spare time.
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jacquesm
I don't think so. A record label is more like a specialized bank with a
distribution network grafted on.

A VC is more like a partner that brings money to the table, and possibly
contacts and advice and they don't take the largest cut by default.

Your negotiation position with a VC is much stronger than a typical no-name
artist that wants to get distribution.

Very few artists have the capability to outmaneuver the system, but plenty of
start-ups get to a strong negotiation position without funding.

By the time they do take on capital they're strong enough to get a good deal,
whereas in the music industry the vast majority get the short end of the
stick, even some surprisingly big name artists.

A typical record costs about $100K to $200K to produce, that's not including
snazzy videos or other extras. For that an artist basically gets a loan that
they can 'earn back' using the proceeds (if any) from the record company.

The record company controls the distribution, and it is not rare to have extra
riders including multiple albums and a cut of the proceeds of merchandising
and such added on.

And if your record doesn't earn back the investment it isn't rare that you are
now in hock to the record company. There are plenty of 'fast' operators that
will sign up new artists to draconian terms, get them a 'demo' grade recording
and a few hundred cd's cut then spit them out again, in the hope that they get
some play somewhere. Then afterwards they find out that their 'friends' that
got them the demo need to be bought out before any major label can touch them.

These are extremely lousy deals (the major label ones less so but still very
bad for the artist), but since everybody is doing it there are very few
alternatives.

~~~
ABrandt
I have to disagree. Although I acknowledge there are distinctions between the
two, I can't help but see the parallels.

 _A VC is more like a partner that brings money to the table, and possibly
contacts and advice and they don't take the largest cut by default._

You don't think a label brings those kind of perks too? I think an artist
would much rather have Rick Rubin produce their album than some schmuck with a
sound board.

 _Your negotiation position with a VC is much stronger than a typical no-name
artist that wants to get distribution._

Just like I, a no-name business student, don't expect to be funded by Sequoia
anytime soon, nor should a no-name artist expect to be signed to EMI. It takes
traction to gain the attention of either.

Like I said though, I do agree with you on several points. Artists getting
shafted and the record companies control of distribution are key points of
differentiation between VCs and labels.

~~~
jacquesm
Fair enough, so, yes, there are parallels.

Recording studios and very talented 'schmucks' are for hire though, but the
distribution network is not, and I think that's where the big difference lies.

I know of at least one 'one man, one woman' shop that got a sequoia
investment, so even if you don't expect it, it does happen.

