On Why I Left Wall Street And Founded A Music Rights Startup
Hello! Who are you and what are you working on?
Hi. My name is Ken Umezaki and I'm the CEO and co-founder of Verifi Media. We are a modern music rights management services company that leverages 21st-century technology tools, including blockchain, machine learning, audio watermarking and other cloud-based technologies. We believe that enabling all rights holders and music creators to ensure that their rights data moves at the “speed of digital” is a necessary and compelling value proposition, and long overdue.
We've been in business for about 3 years, and our main clients are large B2B music recorded music industry clients. We are one of the few companies in the space that have managed to deploy a blockchain-based rights management solution for music assets. We are currently working with over 10 large music industry clients, including a global major label and a global major publisher. We are still an “early stage” startup, especially given we are incorporating new and modern technology tools to address a long-standing issue of modernizing rights data management for the music industry. We are just getting to the stage of bringing our solutions to the market. A key upcoming milestone for us is the expected launch of our first live production service, with one of our strategic clients FUGA, a major global digital distributor based in Amsterdam.
What's your backstory and how did you get into entrepreneurship?
So, I'm really old :)) I have a 25-year previous career as a trader and manager of large trading businesses on Wall Street. About 10 years ago I decided to “switch trains” and focus on being an entrepreneur in the music business. I became extremely intrigued by the digital transformation that was happening in the media space, and specifically how the digital world was affecting the lives of creators. I also really wanted a more entrepreneurial experience, after working at large corporations for many years.
Music has always been an important part of my life. I grew up playing the saxophone, ran our college jazz ensemble, was a radio DJ in both high school and college, I started playing bass in a rock band in New York City over 30 years ago for fun, and I still play in a rock band today. So it seemed like a very natural transition to integrate my experiences in the financial world and apply it to an entrepreneurial setting in the music business.
During my time on Wall Street I was able to develop and build a number of key businesses for the company I was working for, including starting a derivatives trading business in Asia, and also developing the credit derivatives business in the 90s. I feel I learned a lot about the entrepreneurial experience in building these businesses, as well as other experiences I had and working with growing products within the trading business context, primarily around complicated model-driven products and risk management.
It’s always surprising to me that a large majority of startups will say “we don’t have any competitors”. There are always competitors and the more you can explain who they are and why you are different in that context, the more credible you will be.
At one point, as part of my role as the senior business strategist for the largest division of my firm, I was the business sponsor and manager for ~1,000 technology and analytics professionals. Eventually, I was actually given an opportunity to retire from my financial firm (I told you I was old), and it seemed very natural to marry my passion for music with my business experience.
As a small-time entrepreneur in the “new music economy” I became fascinated with “the riddle” as I call it: how do we make a digital world friendlier for media creators? I often tell people it’s an amazing time to be a creator, but a horrible time to get paid as a creator.
“Digital” has clearly benefited creators immensely from a more collaborative and inexpensive creative environment, as well as easy access to global distribution and fanbases, but it has made it very difficult for all but a few of the largest artists to make a sustainable living, primarily due to the advent of streaming and micro-penny level payments associated with the way music is consumed today. I felt it would be really cool to help in my own small way in solving this riddle, with a primary focus on how do we create a more sustainable business backdrop that allows the amazing creativity to thrive, specifically in music artists and songwriters.
I thought this “ethos” would be fun and challenging, and I would enjoy looking back on the journey when I’m “really” retired and in my rocking chair, where I could say “wow, I had a small part to play in that transformation!”
Take us through your entrepreneurial journey. How did you go from day 1 to today?
Although I had a lot of experience in finance, I had virtually no experience in the music business, nor any significant industry connections when I first started down this path 10 years ago. After taking a few music business courses to get a feel for what was happening in the industry, I decided that a great way to learn about the “new stuff” in the music industry would be to invest directly in promising music technology startups as an individual investor. So I set up a company, Digital Daruma, and got started! I have probably looked at over 600 company business plans in the last decade or so, and I have invested in ~10 companies at that time.
Although it may seem like an “expensive” way to be educated on the music business, participating in the experiences and life cycle of the startups as they navigated changes that were occurring in the industry was extremely informative. Almost all of the companies I invested in had something to do with trying to make the artist lives better in this “digital jungle”, as this was obviously my focus.
The last decade has been a very important decade for the music business, as it fully transformed itself from a product business (CDs if you will) to a data access business (Spotify, Apple Music, etc.) which had immense ripple effects to all, including artists. The companies I invested in gave me a “front-row seat” on how this transformation affected their business, their clients, etc.
I also decided to invest directly in a highly select number of emerging songwriters and music artists, in a similar way to how I invested in startups (“venture investing” if you will), to test out whether or not alternative capital (relative to traditional label deals, for example) would be helpful to artists. I'm currently invested in one band, The Stone Foxes, based in the Bay Area, and also currently working with a songwriter/performer named STOLAR based in New York and LA. The artist investing has certainly given me a first-hand look at the life of a creator in today's digital music world, and I'd like to think I've been helpful and moving their orbit to a different level in their music careers.
As a CEO/founder, you should expect to spend consistently a lot of time on fundraising
Artist investing an independent investing in music tech startups was a relative niche activity, and as a result, I was often asked to speak about my experiences at industry conferences, to investors who are interested in music, students, as well as artists and managers of all levels. This enabled me to increase my network within the music and media worlds over time.
“Verifi” as we call it is the third company that I co-founded, together with four other people. Here’s an introductory video regarding our company, and what we are up to. The genesis for starting the company was a conversation I had with my original co-founder, where we were discussing how having a much better way to manage ownership information in a world where creators can create new media with simple tools almost immediately would be a compelling value proposition. We were originally called “Dot Blockchain Media,” and we recently renamed our company “Verifi Media,” which we felt better describes our corporate value propositions.
When we were forming our company, we asked ourselves 3 questions: 1) Is it the right time to build something like this? 2) what modern technologies make sense to use (such as blockchain and machine learning)? and 3) would anyone in the industry care? Obviously we answered yes, and off we went.
My original role was to focus on business aspects of Verifi, but as our clients and product development pipeline grew (which now include a major label, a major publisher, and a major digital distributor) it made sense for me to step up as the CEO of the company given my management experience, including leading large complicated technology projects in my past. I've been CEO of the company for about a year now, and it is very exciting to see the progress we are making in modernizing in addressing a fundamental need to make sure the right people get paid at the speed of digital.
How are you doing today and what does the future look like?
So running a small start-up is a full-time job, obviously, so I am solely focused on my activities associated with Verifi today. I would characterize our company’s current state as “pre-beta” as of the summer of 2019. We are expecting to have our initial full-stack solution available in the market by the end of this year, which is a truly significant milestone. We believe, to date, we are the only modern rights data management service that leverages enterprise blockchain technology that has real clients, with real data, really being used by music businesses and artists. So it is truly an exciting time for our company. We’ve learned a lot over the 3 years: we spent the first year really thinking through the rights management complexity, to derive a thoughtful approach towards a modernized framework for rights data in media. We then were fortunate to have an opportunity to start working with a number of large music companies, all of who were interested as “early enablers” of a different approach to managing rights data. Our “ethos” is to work with clients to work on problems and issues they feel are important to resolve, so it’s been great to have the opportunity to work with clients to solve problems together.
Our client acquisition plan is a deliberately unusual one for a startup. We decided to partner with the largest B2B global music organizations as our primary path to adoption. Given that our products address both the data sharing needs of multiple parties, as well as using a new technology base to manage that data and communicate that data, we felt the best way to introduce this approach would be by working with the largest organizations in the industry.
This approach generally takes longer (as opposed to “build a beta and they will come” approach), but thankfully we have made significant progress on this front over the last 12 months, which will allow us to broaden our services to a much larger universe of businesses and creators, hopefully over the next year to 18 months. Thankfully, our co-founders, board members, and staff were selected in part to having the connections and credibility with these large B2B organizations within the music industry. It’s very clear to me that, especially with new technology based solutions, that without a deep “Roladex” of relevant people targeting larger organizations is an extremely difficult hurdle for startups, which we hope we thought through from the beginning of our company.
Through starting the business, have you learned anything particularly helpful or advantageous?
To be “captain obvious” building a startup business is very difficult, and the odds of a successful outcome are extraordinarily small. Not only do you need to properly execute a real value proposition within a chosen market, but you need to do it with severe bandwidth and resource limitations, certainly in the early days. As others have said: “it takes twice as long and twice as much money” relative to what you're thinking to get anything significant done.
I also feel strongly that starting a company should not be taken lightly, specifically as it relates to the problem and or opportunity you're trying to address: “solve a really large problem” if you will. I personally feel Verifi exemplifies both the struggles of a resource-limited startup and the large opportunity set that is available in the music space today. It’s exciting for me to balance these elements as we grow our business.
My other learning, which relates to both my Wall Street and music industry experiences, is to surround yourself with a great, dedicated team that shares the company’s vision. First and foremost, in my view, success at a startup is a team sport. In rare instances, you have strong founders that have multiple skill sets that lead to great startup success, but more often than not a great team can drive the desired outcome far more effectively. In Verifi’s case, you may feel that 5 co-founders are a lot, but we felt it was extremely important to bring multiple disciplines and multiple backgrounds that can connect and build the company in the right way.
What have been the most influential books, podcasts, or other resources?
A few of my favorite references for entrepreneurship include:
- Innovator’s Dilemma: Clayton Christensen
- Crossing The Chasm: Geoffrey Moore
- The Long Tail and Free: Chris Anderson
The first 2 books have guided me on how to frame the complicated decision-making process a startup entrepreneur is faced with and provide case studies and context to help you think through issues you may have.
Chris Anderson’s books and writings helped me understand how democratized content, thanks to the internet (relevant for music as well as other business areas), affects business models and pricing.
For blogs, I frequently find Seth Godin’s blog, very informative.
And as it relates to keeping up with music industry news, I find Music Business Worldwide very comprehensive, and Midia Research does a great job on topic-based deeper dives.
Advice for other entrepreneurs who want to get started or are just starting out?
Besides the “solve a big problem” and “build a great team” suggestions, another thing I see new entrepreneurs struggle with often is describing their “place in the universe”: This manifests in 3 ways:
- An evangelical belief that you are the only person/company that has the solution to a problem. Actually there is a really good chance that others have attempted, if not succeeded at tackling your business proposition.
- Not knowing who your competitors are. With my investment evaluation hat, I always ask “who are your competitors” and it is always surprising to me that a large majority of startups will say “we don’t have any.” Or try to explain how their company is so unique that any other company that others may view as competitors are not really “in their space.” I have found that this rationalization is false most of the time. There are always competitors and the more you can explain who they are and why you are different in that context, the more credible you will be.
- Lack of or incomplete analysis of the market that you are in. Not everyone is a financial modeler, I get it, but a majority of serious potential investors in a startup will demand accountability for delivery. Part of that is being thorough about your analysis of the size of the opportunity you are pursuing in client, product and financial terms.
Lastly, the investment landscape for startups is very complicated and time-consuming. As a CEO/founder, you should expect to spend consistently a lot of time on fundraising. One factoid to keep in mind is that only 0.5% of companies that pitch to venture capital firms get funded. “Threading the needle” is an understatement.
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