Some Real NOTE-Worthy Assets

This is The Startup Breakdown, the newsletter where we breakDOWN startUPs (just had to make sure you appreciated the word play). By joining this growing community of hundreds of curious individuals, you're getting firsthand access to my observations and opinions on the current state of the startups and venture scene. If you'd like to receive these newsletters directly in your inbox once a week, go ahead and subscribe to never miss an email!

Happy Monday, folks.

The click click click of the rollercoaster as it slowly makes its ascent to the peak at the start of the ride might have finally stopped. Hopefully that means we’re about to drop and feel the rush of the ride?

That might be a slightly overly optimistic (what can I say… i’m a positive guy 😃) depiction of the Fed’s latest rate hike, but there’s a reason for the cautious hope.

Inflation finally fell below 5% YoY, providing confidence to the Fed that their firehose to the inflation fire has been working. J-Pow felt sure enough to stop suggesting another future increase. Well, either that or he got too caught up shooting this next year’s fireman calendar to write more.

Not only does this mean that we should soon be able to afford eggs again (break an egg to make an omelette? in this economy?), but at least in the world of startups, it might mean that we’re one Fed meeting closer to the light at the end of the tunnel, as investors will be much more inclined to start deploying capital again.

There's optimism that we might even see rate cuts by the end of the year, which would only further excite hopeful founders and investors yearning for the good ol’ days when pumps like $PEPE’s were an everyweek occurrence.

While it will likely be a very, very long time until we see another market like that of 2021, a return to positive momentum would be a welcome environment for most. Here’s to hopin’ that this past week’s announcement was that final click before we can all just sit back, scream, and smell the turkey legs.

One of the most common interview responses among successful people when asked about their journey is “I bet on myself.”

While this is more respectable than the Bama baseball approach of betting against yourself, there’s certainly one company really taking the recommendation to heart.

Helion Energy, the startup attempting to create energy through nuclear fusion, signed its first commercial agreement with Microsoft. You might have seen this novel approach to energy creation in headlines a few times recently because there have been a few successful tests towards making it viable by scientists under the Alps, with a little help from the Abominable Snowman, of course.

While the more familiar process involved in nuclear energy is fission where atoms are split apart, fusion is an even more challenging process whereby atomic nuclei are heated up and forced together at insanely fast speeds. You know. Fusion.

What makes this agreement so… bold is that the company has yet to actually produce any energy via fusion. Nobody has. I’m all for the self-confidence, and I am a biiiig nuclear energy guy (would absolutely rock an I ❤️ Nuclear shirt), but this seems a wee bit premature, lads.

As part of the agreement, Helion is committing to producing at least 50 megawatts of energy per year by 2028 or pay financial penalties. I have no idea how much energy that is. Frankly, it doesn’t matter that much. Considering the developmental timeline of many of these frontier technologies, five years is insane.

Quick side note, all parties involved in the deal much have binged Game of Thrones before signing; the whole agreement reeks of incest.

Microsoft and OpenAI/ChatGPT have become synonymous. Microsoft is the largest shareholder in the private company, and the startup’s tech is fueling Microsoft’s recent renaissance tour.

Well, OpenAI CEO Sam Altman is also a massive investor in Helion, making headlines recently by investing $375 million in the company. And now, Microsoft seems to be scratching his back by signing this big deal with the company Sam is heavily invested in… talk about a circle j- Coming, Mom!

By now, you are probably beginning to get very tired. Maybe, you’re wondering to yourself “what is the use of a newsletter without pictures?” Heck, I won’t even judge you if you’re talking to giant purple cats or coked out old men with top hats on.

You may or may not be named Alice, but I know of at least one rabbithole you should go down. Get even more insight and analysis on the state of the early-stage market and check out Startup Rabbithole!

Game-worn sneakers. Water from Splash Mountain. A bathroom tile from Elvis’ room at the Coco Palms Hotel. Everybody is selling a little bit of nostalgia these days.

However, none of these artifacts have garnered the attention in headlines over the last year that selling music rights has. Justin Bieber is the latest musician to make headlines, selling his entire 290-song back catalogue (all music released prior to 2021) to Hipgnosis for $200 million. Never Say Never, kids 🤪 

Legend Bob Dylan holds the record for biggest payday, selling his to Universal for $300-$400M and then also selling the master recordings (original recordings of individual songs) to Sony for an additional $200M. That should be enough to afford some Shelter from the Storm 🤪 

His record might not last for long as recent rumors suggest that the MJ estate is looking to sell 50% of its interests for $800-$900 million… That’s like 900 million SVBs. Talk about a Thriller 🤪 

Taking the big payday makes sense from the artists’s POV. Make a quick hundred million and immediately 1000x it by putting it all on $PEPE? Sign me up.

However, from the perspective of seasoned execs at companies like Universal, Sony, and Hipgnosis, music rights are a long-term alternative asset that grant them access to decades of royalties from licensing the IP to movies, TV, and music producers, and it gives them the ability to milk out more value through reproduction and other special releases. As Papa once said, “grab me a beer.” Oh, and “that’s mailbox money!”

These royalties can be very valuable, and while there are really no disclosed figures, there are rumors that artists like Mariah Carey might bring in as much as $12.5 million every single year, $13M for “All I Want for Christmas” and a $500K claim paid out to victims that had to listen to any of her other songs.

What might be clear from the Hollywood Walk of Fame list that I used to present the market is that most of these deals have been reserved for the very well-known artists who might have bibles worth of valuable and recognizable songs but probably didn’t need the additional check anyways. Not every artist is so lucky, and for every Post Malone, there are about 1000 Gotye’s. Who? Exactly.

There are many artists who pumped out a hit and were never quite able to follow it up. I still blast “Call Me Maybe” every day in the shower, but what else has CRJ done? What if there were a way for these artists to monetize their still-popular work even if the rest of their catalogue lacks investment value?

In case it weren’t just obnoxiously clear, today’s startup is doing that.

Duetti is a unique music startup founded by industry veterans Lior Tibon, former Tidal COO, and Christopher Nolte, an Apple Music BD and Music Acquisitions Executive. The company's mission is to breathe new life into older songs from independent artists, democratizing access to IP monetization.

The company acquires the rights to these older, trending tracks and promotes them through strategic placement on playlists and collaborations with influencers.

The artist gets to choose which masters he or she retains, and they can keep up to 50% of the rights to each melodious asset. After accepting an offer, in addition to getting to respond “yeah that’s me” to people asking if they were the singer of x song, the artist gets a dashboard to see the results of the promotion campaign in real time.

The company’s marketing efforts benefit both the artist and the company, aligning interests to capitalize on the staying power of individual tracks. The potential to do so has never been more apparent, and there are now dozens of success stories of renewed interest in older songs surpassing even their previous peaks after trending on platforms like TikTok and Netflix, with some songs seeing up to 12,000% post-trend streaming surges.

Duetti works with independent artists whose music is at least two years old (does that count as ~retro~ now?) with half a million streams over the last year. So far, they’ve done the ol’ spit shake with more than 60 artists like Madison Rose, Croosh, and CVBZ to acquire 100 songs. Deals have gone up to $400K.

The company had a couple of big announcements over the last few weeks, first that it had raised another $32 million from investors like Viola Ventures, Roc Nation, Untitled and Presight Capital to go with the $7 million in stealth seed funding from when it formed last year.

More importantly, it also announced its public launch which happened last Wednesday. With the new funding and announcement, expect the company to quickly connect with plenty of new artists. I wonder what Marky Mark is up to?

As you can likely tell by the number of people with Airpods in walking down the street, the global music industry is a massive market. Don’t waste your breath telling them that, though. They can’t hear you.

Streaming services take the crown (🫡 🏴󠁧󠁢󠁥󠁮󠁧󠁿) as the primary driver of growth. This market alone is valued at over $23 billion, with a projected CAGR of 17.8% through 2028. Duetti's unique approach in leveraging social media and playlists offers an opportunity to tap into this lucrative market, catering to both day one fans and new listeners who are 100% likely to hit you with a “yo check out this underground artist I’ve been listening to.”

Even looking just at the companies acquiring rights, there are some massive players like Round Hill and Hipgnosis which specialize in investing in music IP. Some companies take a more hands-on approach, working with the artists to better monetize these rights and create more content to maximize earnings, while others just look at the business as one of buying Grammy-winning value stocks with a catchy% dividend.

Duetti is carving a niche for itself in the competitive music industry landscape. As alluded to, most of the competition is in the space surrounding the biggest names in the game. The company works in a proven yet underserved market, and its value-add approach makes it more likely that artists will go to them to monetize their catalogues because of the aligned incentives.

There are very few companies with the founder-market fit of Duetti. As mentioned, Lior Tibon and Christopher Nolte have held prominent positions at Tidal and Apple Music, respectively, gaining valuable insights into the dynamics of the music streaming market. This expertise in music promotion, streaming technology, and artist relations positions Duetti as a force to reckon with in the music industry.

As can be said with most of the entertainment industry, 99% of business is about who you know, and the value of the networks and connections that each of the founders brings to the team cannot be overstated. With a dedicated and passionate team behind the wheel, Duetti is poised to make a lasting impact on the way we bump our 2007 pop playlists.

I’d be curious to hear which artists you guys think would be a Cinderella slipper of a fit. Go ahead and leave a comment. As for me, it’s about time that Jesse McCartney gets the breakout he deserves 😤 

TLDR: Duetti is a music startup that acquires and promotes popular older songs from independent artists. The company then profits from royalties, leveraging playlist and influencers placement to boost song popularity. With a unique approach and a seasoned team, the company is promoting rediscovery for fans while providing new opportunities for artists to benefit from their hard work.

Cheers to another day,

Trey