Trapital - investing $200m in music

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investing $200m in music

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Hey! Last night I went to the Kendrick Lamar concert in Oakland (thanks to some good friends who had the hook up). The Big Steppers Tour was legit. It was great to see both K.Dot and Baby Keem together on stage. I’m excited for the fans in LA and Europe who get to see the show soon.

Today’s memo is all about music investing. On the Trapital Podcast, I spoke to Matt Pincus, the founder of MUSIC—a $200 million holding company that invests in music tech and music adjacent companies.

Matt said this was “one of the most compelling conversations he has had in a while.” You can listen here or read the highlights below!

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the best investment opportunities in music

Five years ago, Matt sold SONGS—a music publishing company—for $160 million. That company worked because he focused on an area of the industry that was overlooked at the time, which led to early deals with Lorde, Diplo, and The Weeknd. I knew that he saw a similar opportunity that led to launching MUSIC.

Matt doesn’t see MUSIC as an investment fund, but rather a holding company. That’s because he takes an operator-centric role in the companies he funds and makes sizable ~$25 million investments in them.

In particular, Matt sees big opportunities in the technology sector, web3, and even record labels and publishing. We dove deep into a wide-range of topics in our conversation. Here are a few highlights:

MUSIC’s investment thesis

How Matt evaluates investment opportunities hinges on the industry. In tech, he’s looking to fund companies — not products. Companies should own their tech stack, operate in a large addressable market, and “own where they live.” They should have a defensible business model that can’t easily be copied by Facebook or Google with a quick software update.

When Matt looks at music investments though, he’s investing in people.

But what about assets, cashflows, securitization and other traditional financial metrics? To Matt, those are “happy accidents.” Music has been and still is about people more than anything else.

the music industry’s structural problem

The playing field has been leveled across the music industry. Labels have access to the same business metrics and visibility into the latest TikTok audio trend. It’s led to a “moneyball” approach to talent development — and detrimentally so, says Matt.

Matt believes the cause of the issue is two-fold. One, it’s a time-intensive skill to pick up — not just to develop a product and story around it, but also form relationships within the music business. And two, there’s little formal training structure inside the industry for new workers and executives alike.

the cyclical nature of music syncs

Music synchronization has re-entered the spotlight, supercharged by Stranger Things’ catchy use of Kate Bush and Metallica. Matt told me, from what he heard, clearing the use of Bush’s “Running Up That Hill” took forever — and it highlights an issue he was all too familiar with while running SONGS.

Matt said syncs hit the industry in cycles. From 2006 to 2009, he remembers syncs being the biggest part of any pitch. That dissipated before being revived by genre-less playlists and now movies and TV shows. While SONGS helped Lorde and The Weeknd land syncs with big-ticket movies — The Hunger Games and 50 Shades of Grey, respectively — he wishes the process was a lot easier than it is.

music consumption premium on the rise

Former Spotify chief economist Will Page told me earlier this year that streaming services were reaching peak-level subscriptions. Spotify’s recent stock price hints that many investors believe the same. While Matt does think on-demand streaming will mature, he’s not ready to say when or if that’s already happened.

Even then, a matured streaming market doesn’t necessarily mean overall music consumption also plateaus. If anything, it’s on the rise thanks to web3 tokenization and the explosion of digital tipping to artists as seen in Asian markets.

Listen to my full conversation with Matt on the Trapital Podcast here:

money moves

• Drake, LeBron James, and New York Yankees make minority investment in A.C. Milan soccer team
• SeatGeek raises $238M Series E after terminating its SPAC
• Utopia raises €300M at $2.5B valuation​
• A breakdown on Juvenile, Wiz Khalifa, Curren$y and other rappers’ non-music income streams​
• NFL’s new head of music on why the league doesn’t pay Super Bowl Halftime Show performers

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