Our Investment in Next Big Sound

by Foundry

We are very happy to announce our investment in Next Big Sound, Inc. (“NBS”). NBS is an online music analytics and insights company located in Boulder, Colorado. They measure the growth and popularity of bands across major web properties and sell actionable insights around those data to band managers and other industry professionals. NBS has developed a scalable architecture that can quickly add new sources of information and aims to be the definitive source of quantifiable fan data surrounding the music ecosystem.

This investment fits into our Glue theme and even touches upon our Protocol theme in that users (bands) can draw conclusions and correlations from the vast amount of data on the Web about their activities.

Normally, we don’t invest in companies that focus on vertical markets, but this is our second company focused on the music industry, along with Topspin. We’ve believed for a while that Music Business 2.0 is a reality whose time is upon us. The old days of making records, lobbying for spins on radio stations and letting the record companies own the relationship with fans are nearly over. We believe the future of the business lies in direct-to-fan relationships and Internet marketing.

As part of this future there will be new opportunities created to service these new direct-to-fan and Internet marketing models. We believe a key opportunity involves data. Currently, the industry-norm data report is from SoundScan. For thousands of dollars per month, industry professionals are able to see how many CDs and digital downloads have been purchased along with how many plays have occurred on terrestrial radio. We believe that this report is already mostly irrelevant. Consumers are more often spending their listening hours on the Internet and spending their dollars on merchandise and tickets, as opposed to traditional music offerings. The explosion of social media, including YouTube, Facebook, MySpace and the blogosphere have shifted the listening audience to other venues and current information sources for the industry do not cover these properties.

In our conversations with record companies and band managers and our ongoing involvement with Topspin, it has become apparent to us that the industry is craving data, metrics and reports that take into account the next generation of music consumers. The industry is in a state of flux with many differing opinions about what “works” but no one has quantifiable and usable data to defend their theses.

NBS has created a scalable web platform that already is tracking approximately 500,000 bands and over a quarter billion points of data points across web properties such as Facebook, MySpace, Last.fm, iLike, Twitter and IMEEM. One of the most compelling features of the NBS platform is that it automatically creates the list of artists to follow, instead of expecting artists to register and make themselves known. This is critical for giving artists a great experience the first time they use the data with historical trends already in place, as well as the instantaneous ability to compare themselves with other relevant artists.

Furthermore, the type of information and analytics the company is creating is the first of its kind on the web. While we believe there will be others trying to do the same in the future, the company’s blend of industry-specific knowledge, technical capabilities, compelling interface design and first-mover advantage creates a huge opportunity.

NBS will derive revenue from industry professionals who will rely on this data to make decisions regarding their artists. Today, they are used to paying $4,000 a month for reports which track CD and digital download sales. While this information is important, it only explains what happened and provides no data as to why certain events may have occurred. NBS data will provide greater insights into the information that they are seeking and will allow the industry professional to make better decisions.

NBS is a 2009 graduate of TechStars and we were fortunate to get to work with the team over the summer. We are honored to continue to be their partner with their first round of financing, as they had no shortage of funding options after a very successful summer.