“What the hell is Raised In Space?”
That was the question leaving the lips of the music industry in February last year, when then-BMG US boss Zach Katz announced that he was exiting the music company to launch a new venture dedicated to “forging proactive collaboration between music and technology”.
This language was, quite deliberately, vague – and details were, quite deliberately, scarce. Possibly because Katz and Raised In Space partner Scooter Braun are smart at this kind of thing, and knew that if they’d just come out and said, “Yeah, we’re on the hunt for the next Spotify“, industry scrutiny would have exploded.
As it happens, over the past 12 months, Raised In Space – run by Katz alongside company President and co-partner, Shara Senderoff – has quietly progressed in its mission to find, and invest in, companies with the potential to lead the music industry into the future.
What we did learn from that February 2019 announcement: Raised In Space, backed by Ripple’s developer initiative Xpring, is able to make investments in the range of $500k to $5 million apiece. And that Senderoff, a former Forbes 30 Under 30 finalist and a successful entrepreneur (and artist manager) in her own right, would play a key role in highlighting which new tech companies to target and transform.
What we didn’t learn, which is no less true: Raised In Space aims to fill the gap between the music industry and new technology ventures by helping the former understand and participate in the growth of the latter. The goal is to elevate both sides – and drive Raised In Space’s mission to raise the value of music.
That mission became a little clearer towards the end of last year, when Raised In Space was named as the lead investor in a $6.7m financing round for “2.0 data management platform”, Audigent.
This announcement aside, Katz and Senderoff have chosen to stay tight-lipped, publicly, on what they’ve been up to. But MBW recently visited their Los Angeles offices – located within the same building as Braun’s SB Projects – to discover more about Raised In Space’s plans, and the companies they’ve already chosen to back…
Easy question to start: You’re one year into this company. What’s been going on?
Katz: The origin of Raised In Space stemmed from a finding that Shara and I arrived at together, which is that the music industry’s relationship with tech, has, in the past, been much, much less than optimal. We found ourselves aligned in our desire to immediately improve that.
Senderoff: The music industry has, frankly, been reluctant to self-disrupt, to actively embrace the technology solutions needed to tackle its challenges. And, because of that, the music industry has put itself on the wrong side of history when it comes to technology.
“The major social media and streaming platforms today have largely been built on the music industry’s artists… and yet the music industry doesn’t have keys to those houses.”
Shara Senderoff, Raised in Space
The major social media and streaming platforms today have largely been built on the music industry’s artists, on its copyrights, on its audiences and fans, and yet the music industry doesn’t have keys to those houses.
Katz: We’re locked out, knocking on the door at midnight asking, ‘Excuse me: can we have permission to come in and make ourselves a sandwich?’
When you spoke to Scooter Braun and the idea for this company formulated, what problems did you immediately want to solve?
Katz: Shara and I saw countless tech founders with no real idea of what the music industry is about, why we do what we do, and how we do it. They were getting very little guidance from the music industry – they were essentially orphans who were raising themselves.
We also saw VCs who didn’t have the resources or connections in music to strategically help potential investments in music break through or succeed in securing licenses, partnerships, market adoption, etc.
Plus, we saw another big problem, which is that, aside from some smart investments from Scooter and other big managers, nobody was taking a detail-orientated approach to investments in music/tech, saying, ‘Let’s look across the entire value chain and study every vertical. Let’s look at 100 companies coming up in that space and analyze their business models, understand what they’re trying to solve and guide them on a daily basis on their approach.’
“aside from some smart investments from Scooter and other big managers, nobody was taking a detail-orientated approach to investments in music/tech.”
Zach Katz, Raised In Space
Senderoff: In music, we look to managers to educate artists, to guide their careers, to strategize a plan based on the environment of the industry, their relationships and perspective.
Yet on the tech side, founders pound the pavement with little to no guidance whatsoever from the music industry – startup advisory boards are often for show, for the big name. But, the big name is busy building the careers of the next Bruno Mars, Post Malone, Lady Gaga… so their time and availability to guide a startup in the same manner is impractical.
Until we started Raised In Space, nobody in music was taking responsibility for finding the next Spotify, the next Musical.ly [the company sold to ByteDance for $800m that was merged into TikTok] etc., but almost more importantly, diagnosing and focusing the key players on the tangible needs and solutions that could actionably solve our industry’s challenges.
In many ways we believe that the hybrid industry of “Music/Tech” does not yet exist. Its true birth will come from the first company that brings together the music business with a technology product on day one – not after a platform has scaled and the two are forced to dance – in a mutually beneficial structure.
This is interesting: Raised In Space is a joint venture with blockchain technology company, Ripple/Xpring…
Katz: Yes, in the same way we aim to be the most strategically valuable investor to our portfolio companies, we ourselves wanted to collaborate with a partner who would make a meaningful contribution to our business and mission.
In seeking the right partners, we always look for alignment in ambition as well as tangible collaboration opportunities.
Ripple’s ambition is to lead the modernization and reinvention of cross-border payments and they are clearly succeeding. We are looking to lead the reinvention of the music space. That’s where our ambitions clearly align.
Senderoff: The other common denominator is their commitment to blockchain, which they authentically and powerfully use in their offering.
Believing that blockchain would become a prominent technology in modernizing the pipes, frameworks and capabilities of the music industry, when the time is right, we saw them as a partner whose ambition in technology would help power our mission and the businesses we build.
They are fantastic partners. Together we aim to be at the forefront of how blockchain and digital assets like XRP impact the music industry.
Speaking of blockchain, are your thoughts on that tech?
Katz: In our opinion, blockchain was given an unfair introduction.
Its first public unveiling was largely through cryptocurrency, which initially was directly tied to a number of questionable fundraising ICOs led by bad actors. Then, the term blockchain was splattered on countless pitch decks for startups which had no authentic connection or use for the technology. They were exploiting the term blockchain as a way of making their offering appear to be more advanced and valuable.
We believe in blockchain and its ability to modernize the needs of this new generation of creators, music companies and fans. Blockchain and digital assets like XRP have the potential, in time, to help set our industry on the rails of much greater connectivity and transparency.
“We’ve seen 30+ companies of this nature [blockchain startups looking to solve rights management issues] and the reality is it’s incredibly unlikely that any of the current approaches survive.”
Senderoff: Many in the music business associate blockchain instantly with rights management, and an ability to solve problems relating to decentralized management of royalty payments.
They’re not wrong as it relates to the potential for blockchain to impact here – the problem is the timing. Technology alone can’t solve that problem today. There are 100 complexities and intricacies that the industry needs to solve from within before a technology solution can be applied to assist [with the issue].
We’ve seen 30+ companies of this nature [blockchain startups looking to solve rights management issues] and the reality is it’s incredibly unlikely that any of the current approaches survive – not because they’re not run by brilliant founders, and not because this isn’t a problem that needs solving, but because too many things have to happen within our industry as it relates to the process and flow of rights management before someone can apply a tech-based solution.
The funding these startups have – the ones we’ve seen, at least – will likely run dry before a solution gains enough traction to sustain a revenue model.
So Raised In Space isn’t going after that problem… yet. We will. When the timing is right.
Katz: Shara’s point demonstrates an important reality of music-tech. The lack of innovation in the music industry more often than not rests on the misalignment of incentives for the industry gatekeepers and lack of education on the part of artists, than it does from a lack of technology.
Technology can offer a lot but it can’t magically transform the way our industry views its priorities, goals and limitations.
What does the industry need right now?
Katz: The music industry is thriving again, and when that happens, people are not thinking about cost savings. That’s natural: when you and your wife are doing great financially, nobody’s coming home saying, ‘Which cable channel should we cut from this bill?’
That’s exactly what the music industry is experiencing: we’re not focused right now on improving efficiencies; we’re not paying attention to cutting out middlemen who simply don’t serve anybody because the incentive to do so does not exist.
“The music industry is thriving again, and when that happens, people are not thinking about cost savings. when you and your wife are doing great financially, nobody’s coming home saying, ‘Which cable channel should we cut from this bill?'”
Because of that, unfortunately, if anybody gets the short end of the stick, it’s artists: artists don’t get a paycheck every two weeks like music executives do. Do we believe that the music industry is intentionally trying to screw artists? Absolutely not. The business is just so focused on macro growth that implementing efficiencies is not at the top of the agenda.
The holes that we see, that the music industry has resoundingly confirmed, are about reaching audiences with true precision and ROI, something we as an industry have never done, as well as figuring out new revenue streams and new ways to monetize fandom.
How many companies have you invested in since being founded?
Senderoff: We’ve looked at over 700 companies over the last eleven months, and we’ve invested into five.
We’re on speed dial with our portfolio founders, often speaking to them or their team members everyday. We spend the other half of our days inside of music companies, sitting with the heads of records, publishing, innovation, corporate dev, business dev and marketing and then outside as well with managers, lawyers and artists and producers themselves, etc.
Katz: We’ve become an outside advisory resource for music companies and top managers – we like to call ourselves “a bank of intelligence.”
A lot of times people think of a bank as somebody who can cut a check. Yes, we have a fund, yes we cut checks. But our biggest value is information, knowledge and opportunities we maintain and pass on, and knowing this environment frankly more thoroughly than anyone else.
Tell us about some of the startups you’ve backed so far.
Senderoff: Our first investment was into a company called Audigent, an “Intelligent Audience” Platform. Audigent is an all-in-one solution tackling the biggest challenge in entertainment… let me put this simply… reaching audiences and not throwing our digital spend into the trash with zero expectation of results.
Katz: We spoke earlier of the industry’s handcuffs when it comes to accessing the audiences and data that live on the major social platforms. The industry has traditionally spent digital advertising dollars through the silo’d channels of Facebook, Instagram, YouTube, Twitter and the DSPs, renting audiences, time and time again, from the massive tech companies. The slap in the face is that these platforms have accumulated and locked up our audiences – the ones we’ve invested time, energy, blood, sweat, tears and money into building.
“50% to 60% percent of the audiences [the music industry] targets through digital advertising campaigns are fake – they are comprised of bots, duplicates, autoloaders, crawlers, etc.”
Senderoff: The silo’ed nature of these platforms prevent us from aggregating our audiences in one place, thus limiting our ability to maximize, utilize and scale them. Until we have a single, interconnected bird’s-eye view of how we’re scaling audiences, we’ll struggle to pinpoint a true ROI. This is what Audigent solves.
The DMP (data management platform) component of Audigent allows us to bank our audiences in one place for the first time, eliminating our current behavior of ‘renting’ the fans we’ve already acquired. Above the DMP layer in the tech stack, Audigent addresses another major challenge to our industry: 50% to 60% percent of the audiences [the industry] targets through digital advertising campaigns are fake – they are comprised of bots, duplicates, autoloaders, crawlers, etc. With no exaggeration, we throw half of our marketing budgets in the trash.
Audigent stops this at the start, by authenticating audiences and verifying that all banked customer IDs are real people. We know where they come from, when and how they’ve engaged with an artist and can predict the ways they’re willing to engage in the future. This is how “data science” comes into music.
What other areas have you already invested into?
Katz: After addressing how to find, target and scale our audiences via Audigent. We turned to monetizing fandom and creating new experiences for fans to engage with their favorite artists.
The industry has historically been a three lane highway, allowing fans to buy music, buy a ticket to a show or buy an artist’s merch. That has to change, we have to build more lanes.
We have to utilize technology to expand our artists brands, allowing opportunities for fans to interact with music in news ways that unlock new revenue streams for artists.
“Imagine an avatar of your favorite artist, that looks photo-real, popping up in your living room, that shoots the shit with you.”
Senderoff: To this effect, we’ve made an investment into a next-gen game platform called Artie. Artie’s tech can be used to bring interactive characters to life so that a fan can have a one-to-one conversational experience interacting with their favorite music artists, celebrities and IP.
Imagine an avatar of your favorite artist, that looks photo-real, popping up in your living room, that shoots the shit with you. The platform can allow you to play games, learn more about the artist, preview new music and interact with their mascot or brand extension in a manner far more immersive than a music video.
Katz: Artie can then integrate with Audigent to match the data of fans who engage with the character to create premium audiences segments of hyper-engaged fans to retarget in digital ad campaigns.
Senderoff: Think of Raised in Space as a solar system. Our portfolio companies all live in an interconnected universe that exists to create and grow powerful weapons for the industry.
The aim is to optimize a fan’s willingness to pay for music, and all the things associated with artists?
Senderoff: Correct. If you look at Gen Z and even the next generation, the Alphas, it’s all about the experience, ‘What am I consuming and how am I consuming it? Am I hit emotionally?’
We’re returning to the roots of the music industry, we’re returning to emotion, experience and feeling. Because these generations recognize manufactured content, sounds, etc. They want authenticity. They want a deeper experience. They want their favorite artists to stand out and connect with them in new ways.
Over 40,000 songs are released a day. To build a sustainable artist business, we need multiple ways to reach and interact with consumers to have a chance at breaking through the clutter and building a brand.
So where do you believe blockchain can help?
Senderoff: Audigent [discussed earlier] utilizes blockchain after the verification of customer IDs when they publish a full audit of their authentication to four ledgers, adding a much needed transparency layer to an ad-tech ecosystem which historically has not been so transparent.
Separately blockchain will play a role as we begin to play with digital collectibles, virtual goods… gamification of fandom as a whole, as will cryptocurrency.
“Blockchain is simply unworthy of having become a buzzword.”
We are big believers in Interledger – a protocol for connecting blockchains and ledgers, as well as the future of micro-transactions as it relates to new ways of generating revenue in music. We plan to be at the forefront with Raised In Space. But, timing in everything. And it’s critical to not try to fit a square peg into a round hole.
Blockchain is simply unworthy of having become a buzzword. Blockchain is not something that should be visible or apparent to consumers. I don’t tell you I’m going to send you an email “on the internet”, therefore, we need to let go of the terminology “on the blockchain.” We have to make it functional… and invisible.
What difference does it make having the relationship with Ithaca and SB Projects via Scooter Braun?
Katz: Having Ithaca and Scooter as a partner obviously gives us a ton of visibility into what artists are doing.
In our view Scooter is one of the most forward-thinking managers and music executives out there, and his complete openness to try new things with the technologies that we’re investing into is very valuable.
Scooter’s great because, yes, he’s got some of the biggest artists in the world, but he’s also very actively looking for who the next big artist is going to be, and how they are going to break. That’s an incredible playground for us to have at our fingertips.
“In our view Scooter is one of the most forward-thinking managers and music executives out there.”
Senderoff: It’s very important to make a distinction on where we sit in the wider music industry ecosystem. Raised In Space is not tied to any one music company. We have to sit agnostically within the industry to be transformational to everyone.
Again, we view ourselves as an intelligence bank more than an investment bank. We have considerable knowledge given our expansive view of what’s come and what’s coming; that’s not because we’re better or smarter – but because we listen and are committed wholeheartedly to raising the value of music through innovation and technology.
Katz: Also, it’s really important for everyone to know that our allegiance is to the music industry.
We love tech, we love tech companies, but at the end of the day we’re doing all of this for one simple reason: to raise the value of music.Music Business Worldwide