Artist financing platform beatBread closes $100m fund to ’empower independent artists and labels’

Music funding platform beatBread has been making a lot of head-turning headlines this year.

In February, for example, the firm raised $34 million in a seed round led by Fintech-focused venture capital firm, Deciens Capital.

Over the summer, beatBread struck what it said was a “seven-figure artist financing deal” with singer-songwriter Elley Duhé – its biggest deal yet.

Today (November 22), MBW can reveal that beatBread has big plans to accelerate its growth in the artist funding space, and it’s just closed a $100 million institutional fund with asset manager Variant Investments to do so.

Launched in November 2020, the company has made over 500 advances to artists and labels, ranging from $1,000 to as much as $2 million per artist for a limited share of revenues on catalog, and, if the artist chooses, on new unreleased music. These advances are repaid from a share of an artist’s streaming and airplay revenues, over a period of the artist’s choosing.

beatBread’s rapid rise in the artist financing space coincides with the growth of the independent artist sector. This newly-closed $100 million fund, says beatBread, will allow it to offer advances not only to emerging independent acts, but also “to some of the world’s biggest artists”.

The company’s proprietary chordCashAI engine evaluates artists’ streaming and social and other data to generate advance offers. The startup has struck over 20 white-label deals with distribution companies, including UnitedMasters and Symphonic Distribution, to use its ‘chordCashAI’ tech to offer advances to their own artists.

beatBread co-founder and CEO Peter Sinclair tells MBW that the idea for the platform came about after he left a prior start-up to join Universal Music Group due to a health issue with one of his children.

In 2015, Sinclair joined Universal to oversee the major’s “superfan business” as SVP Consumer & eCommerce. There, he saw that “many artists didn’t need all the services that were part of the label deal – they had their own teams set up to do that already”.

“Artists were still paying for [those services], because that was what the agreement said– the artists just had another way they wanted to go,” he adds.

“This added a ton of unnecessary cost and friction. It wasn’t that major label marketing, merch or promotional services were bad, and in fact, the teams were often great. It’s just that each artist had their own teams, designed to fit their own circumstances. No major team could ever possibly offer the best fit services to each artist on the roster every time.”

He continues: “There had to be a better way. As an outsider with fresh eyes, it was very clear to me that force-feeding service with finance was just a bad idea. Artists would be better served if finance and services decisions were separated, so that artists could choose the services that were the best fit for them.”

Enter beatBread, described by Sinclair as a financing platform that’s “unbundled from distribution, promotion, or any other services”.

“We believe that artists should be able to access capital without giving away the farm,” he argues. “Our algorithms are able to very accurately calculate what kind of advance an artist can reasonably receive from their streaming revenues, based on terms that they decide.

“Everything else – live music, merchandise, publishing, sync, endorsements etc – belongs to the artist.”

beatBread’s co-founders include John Haller, who leads the startup’s data science and artificial intelligence strategy. An engineer by training, Haller’s career includes building predictive models in areas as diverse as retail electronics, auto insurance and energy trading.

Matthew Tilley leads on industry engagement and relationship development at the firm, having spent his career at a number of major music and entertainment companies including Universal Music Group and EMI Music, working with artists including Katy Perry, Billie Eilish and The Weeknd.

On the industry engagement front, beatBread has been making a fair amount of noise this year. In March, the company launched an Artists Advocacy Council featuring the likes of Mike Caren (Artist Partner Group), Ray Daniels, former A&R at Atlantic and Interscope, and Dave Dederer (label owner and founding member of The Presidents of the United States of America) as founding members.

Just last month, beatBread also launched what it calls an “exclusive investor network” that adds funding from music companies and professionals, distributors and “high net worth individuals” to its existing pool of institutional capital to enable artists to get what it says are even better terms when qualitative factors, like high profile future touring dates, star collaborators or a particularly successful marketing or production partner are joining the next release.

The network allows music professionals, distributors to invest in fractions of a deal without having to fully fund each artist project on their own. Investments through the network can be as small as $1,000 “or as much as several million” with a focus on artists “in the early and mid stages of their career”.

Having bulked up its available pot of institutional capital, Sinclair is bullish about beatBread’s long-term prospects in the independent artist funding space.

“Our initial artist fund powered more than 500 advances to artists and independent labels,” he says. “Now we can fund the next 1,000 deals, and be truly competitive for deals with the vast majority of artists in the world.”

Here, Peter Sinclair tells MBW about beatBread’s new $100 million fund, how it wants to challenge the traditional label model, and his predictions for the music funding space…

What differentiates beatBread from other players in the market?

For smaller artists, we offer unparalleled access to funding, not only on catalog, but on new releases too. It’s fast, flexible and transparent, and because we can fund artists with as little as $80 per month in revenue, there are literally hundreds of thousands of artists globally that qualify for our funding.

But we go much bigger too, funding artists who are entertaining 7 and 8-figure label deals. For all artists, regardless of size, we offer ownership, control and choice. Artists funded by beatBread not only can choose their own deal terms, they aren’t tied to service providers who offer only a “pretty good fit” just to get a check.

“Artists funded by beatBread not only can choose their own deal terms, they aren’t tied to service providers who offer only a “pretty good fit” just to get a check.”

There are plenty of world-class digital marketing, radio and promotion professionals that work outside of labels, and artists increasingly want to select their own teams rather than be told who to work with Using beatBread, artists can choose the best services that fit their unique needs, and the best check without having to trade off one for the other.

You’ve just finalized a new $100 million institutional fund. What does the company’s ability to close such a fund tell us about its positioning in the market and reputation amongst institutional investors?

The completion of this new fund shows that our product is resonating with artists, and is doing so in a sustainable way that makes investors comfortable in turbulent times. The excitement in the investment community is a validation our our track record. At a time when the cost of capital is getting more expensive for most, ours is becoming less so – and that’s an indication of the belief that investors have in what we are doing.

Does beatBread see itself as a major label challenger?

If giving artists a meaningful alternative to signing to a major makes us a challenger, then I guess you could call us a challenger, but in the long run, we believe that major labels are more likely to be partners than competitors, so long as it is the artist deciding who will partner with who and what combination of partners will serve them best. We already partner with distributors and independent labels, who often provide fantastic artist services.

“If giving artists a meaningful alternative to signing for a major makes us a challenger, then I guess you could call us a challenger, but in the long run, we believe that major labels are more likely to be partners than competitors, so long as it is the artist deciding who partners with who.”

I don’t think major labels are going away, I just think they have to change, morphing from funders and gatekeepers to true service companies. I can definitely see a future where some artists choose beatBread funding and major label services, if those services are the right fit for the artist at that particular moment in their career.

And, in the near term, there will always be certain artists who want to sign for a label, because they are willing to sacrifice creative control or ownership in return for a big check and the legacy prestige of “getting signed”. We just hope that more artists know that that tradeoff isn’t the only choice out there.

beatBread pays advances via its chordCashAI algorithmic technology. Tell us about how this technology works, who developed it, and how it underpins your operations?

We have an incredible artificial intelligence team, led by my co-founder, John Haller. We have built sophisticated algorithms that help us predict future revenues of not just music that has already been released, but also tracks and albums that have yet to hit the market.

Our model is fed by monthly revenue, social, streaming and other proprietary data from more than 10 million tracks, and thousands of variables from more than 200,000 artists. With close to five years data now being plugged into our technology, we have a predictive view of the marketplace that not only perform very well in the lab, but in the real world as well.

beatBread also offers chordCash as a white label service to distributors to enable them to offer advances to their artists. Who are some of the companies you work and why did you decide to offer it as a white-label tool?

We regard it as our mission to empower artists while maintaining creative control and ownership of their music. That means making our platform as widely available as possible – both directly and through white-label partnerships. There are many companies that provide top flight services to artists who have a mission that complements ours. These companies who want to be to offer their artists the ability to secure funding, but need to do it efficiently and accurately. Our white-label service enables them to use either their own capital or beatBread’s capital to do exactly that.

So far we have signed more than 20 white label agreements, with companies including United Masters, Symphonic Distribution, Horus Music, SyncVault, Too Lost Records, M.A.D. Solutions, Orin Fund, Vital Music and The Music Federation, to name a few. We expect to sign many more deals over the course of the next six months. There is a vibrant ecosystem of companies serving independent artists, who genuinely want to advance the cause of artist empowerment.

You recently launched an exclusive investor network. Could you give us an update on the response to the network since it launched?

We’ve seen a really strong interest and very significant activity on the first deals that have been put to the network. Music is an attractive asset class for investors because its uncorrelated with financial markets which, if you haven’t noticed, are pretty turbulent right now. Our platform gives investors access to artists in the early and mid stages of their career, rather than just iconic superstars, whose music is tremendous, but may not have a lot more upside in their careers. It’s a much bigger universe of opportunity than the legacy artist buyouts that dominate the headlines these days.

The network won’t accept funding from fans, with it being aimed at high-net-worth individuals, companies and music professionals. What are your predictions for the fan/crowdfunding space in years to come?

There has been a lot of misplaced enthusiasm for music crowdfunding of late, particularly around NFTs and crypto. Whether it’s dressed up in crypto or not, we believe that investors will finally realize that fan-centered funding is a terrible idea for most artists– it corrodes the artist-to-fan relationship. Most music professionals worth their salt have known this all along. High-profile start-ups in the crowdfunding area will pivot away from finance and become platforms that provide superfan content, whether the broader crypto market recovers from its post bubble slump or not.

The superfan use case for is super interesting and adds value, and I actually think blockchain has an exciting role to play there. But crowdfunding, whether it’s dressed up in NFT hype or not, doesn’t actually solve a problem for many artists, and poses profound problems for an even greater number.

Discussing your long-term predictions for the artist funding space at the time, you told MBW that “Ownership will increasingly be retained by more artists, in greater shares than ever before.” Could you elaborate on this point and the role that platforms such as beatBread will play in the future?

Platforms like beatBread, as well as more traditional labels, will be increasingly doing deals that leave most, or all of the ownership with the artist, because that’s where the power is shifting. Part of this power shift is just the inherent structure of the industry. Labels can – and do – add value, but are no longer “indispensible” marketing and distribution partners/gate keepers. Another part of what is driving this is the proliferation of specialist firms, in finance, promotion and production that are unbundling the traditional music value chain. We’re merely part of that broader trend.

beatBread pays advances based on streaming revenue. What if an artist’s music doesn’t generate enough revenue to pay back their advance?

Most artists will repay their bB advance right when the term ends, or a few months before. That’s how our data science team models the deals we offer, and they are amazingly accurate at it. But if an artist’s music doesn’t generate enough income to repay the advance during the term, we’ll collect until the deal has been recouped, and no longer. We do not add any balance to an advance if an artist is ‘late’, and we don’t charge any interest or penalties.

What are your ambitions for beatBread in years to come, in terms of positioning in the market, funding targets etc?

Our aspiration is to be the largest funding source for working artists in the industry, and to get there by providing artists with the most compelling and transparent options. We want to achieve massive growth by having the best product, rather than the best marketing. The traditional music industry approach relies on sizzle and buzz. We’re not entirely above that, but you won’t see us taking out 10 pages in Billboard, paying hundreds of thousands of dollars on furniture and Feng Shui consultants to create “wow office space” or throwing a multi-million dollar Grammy party. In the long run, particularly in transitioning industries, the best product wins. We’re focused on making our product better and better every day, and we’re just getting started.Music Business Worldwide