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investing in artists

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Hey! I've been thinking about Meek Mill's recent tweets about his earnings. Meek says he got paid just $11 million in 10 years from his music. I’m not surprised, but it’s still a shame. He's referring to his time signed to Maybach Music Group and Warner Records. His ongoing legal battles didn't help.

Looking back, 2011's "Ima Boss" was less of a self-reflection and more of a future goal that he spoke into existence. Meek says he now makes $1 million on a bad month. I hope he does a deep dive interview soon to break it all down.

On a similar note, today’s memo is about investing in artists so they can maintain creative control and earn more from their music. There are more options than ever for artists who want to bypass the traditional record label model. One of those options is Coop Records, a new $10 million music fund that will invest in music tech startups, artists in the early stage of their careers, and NFTs. On this week's Trapital Podcast, I talked to Coop Records founder and general partner, Cooper Turley AKA Coopahtroopa. Let’s dive in.

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the future for web3 in music

I wanted to talk to Coop because he’s bullish on web3 in music but doesn’t overlook its challenges. He has a more balanced perspective that can be hard to find in the NFT echo chambers.

Coop Records’ $10 million fund will be distributed in three buckets:

1. Pre-seed and seed-stage web3 music tech startups (85%)
2. Artist seed rounds (10%)
3. Music NFTs (5%)

Let’s break each of those down:

early-stage startups that bring web3 and web2 together

For web3 music companies, Coopah is looking for composability. He wants to invest in companies that can plug into other platforms like digital streaming providers. He believes that collaboration between web2 and web3 music companies is essential.

helping artists raise “seed rounds”

Investing in artists isn’t as clear-cut as investing in a startup, but the first step is for artists to create a holding company. That company will have subsidiaries representing various business lines, like masters and publishing, live touring and merchandise, web3 tokens, and NFTs.

From here, investors can gain up to 5% or 10% equity in the artist’s holding company and get exposure to its underlying assets.

It’s structurally similar to 360 deals, but the investor’s ownership stake is much, much lower. Historically, 360 deals could have up to 50% to 80% ownership and seize creative control from the artists. At Coop Records, it’s more in line with dilution at the seed stage. The artist-founder would still have 90% ownership and maintain creative control.

NFTs as venture-backed assets

The last investment area for Coop Records is NFTs. This is Coop’s wheelhouse. He’s one of the largest music NFTs collectors out there. He compares owning early music NFTs to sports rookie cards.

A fund like this has a unique structure regarding its expected outcomes. The music tech startup bets may pay off if the companies get acquired or go public, but what does an “exit” look like for an artist’s holding company?

Coop Records is still exploring that outcome, but I expect that a successful artist holding company would be an attractive asset for an investment firm like RedBird Capital, which invested in LeBron James’ SpringHill Company.

The hybrid approach of both music and music tech companies is similar to MUSIC, Matt Pincus’ $200 million music holdings company that cuts eight-figure checks in music and music-adjacent companies.

improving incentives for artists

An artist’s holding company needs a CEO. Some artists will embrace that role themselves, but many other artists prefer to focus on the art while their manager or business partner is the CEO.

In either case, the CEO would get equity in the artist’s company through Coop Records’ holding structure. In turn, incentives between managers and their artists could be better aligned for long-term outcomes.

The music industry is full of managers who helped build artists from the ground up to a successful career, only to get dropped for a bigger-name manager. The old manager will likely never see another dime from the work they put in. If the early-stage manager had equity, as Coop Records intends to make possible, then they manager would still have a stake that's in line with the initial risk they took on.

Listen to the episode here:

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money moves

• is Taylor Swift the anti-hero of the Ticketmaster debacle?
• Burna Boy becomes the first African artist to go stadium status in the UK​
• a breakdown on the tension between TikTok and record labels​

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coming soon from Trapital

Podcast: Rich Homie Quan. RHQ came through to talk about life as an independent rapper, his partnership with Venice Music, and other goals. He did the whole podcast while getting his hair braided, which is a feat in itself. Drops next Thursday!

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