Music network startup OurStage tunes in $3M funding
If you had a wager on which startups could put together venture cash right now, you probably wouldn’t pick an online social community for pop bands and their fans.
In the case of OurStage Inc., you’d lose that bet. The Chelmsford-based startup, launched in 2006, has raised $3 million of a $6 million new round of financing, bringing its total financing up to $20 million, company officials report.
In March 2008, OurStage raised $17 million from a syndicate of over 100 individual angel investors, assembled through Signature Capital LLC, an investment firm with operations in Florida and Portland, Maine.
Last December, the company went back to angels looking for additional funds.
“In the November-December-January time frame everything was dark for everybody,” said CEO and founder Ben Campbell. “We were in a phase where we needed to raise money and no one was opening their pocketbooks.”
But in early 2009, the company won sponsorship deals with MTV, Citadel Radio and RadioOne. Since then, it has closed five or six deals with household-name companies, which it plans to announce later this year, Campbell said. Add that to the fact that since its early days, it has slashed its burn rate neary by two thirds – to about $700,000 per quarter, and the company was able to get enough volume of small players to see it through, he said.
The site is on track to reach profitability by the middle of 2010, he said.
Such sponsorships net OurStage costs per thousand impressions (CPMs) in the range of $10, while standard ad serving yields $3.50 to $4, Campbell said.
A secondary source reaps subscription fees from booking agents, who use the site like a professional job search tool, tracking band rankings in various geographies to scout acts for their venues.
That’s similar to what a company called Sonicbids Inc. has been doing for some time, said Stephanie Kellar, an assistant professor of music business management at Berklee College of Music.
“Sonicbids were the first folks ever to come up with the electronic press kit. Their whole deal is to connect bands with venues,” Kellar said. “OurStage takes that a step farther adding the social media.”
A third revenue stream, now in beta mode, would allow paid subscribers to test the popularity of certain songs in specific demographics. Labels could do this before signing a band to a recording contract — and advertisers could use the service before committing to a song for a commercial, Campbell said.
That’s a compelling case for labels, who not only suffer from poor CD sales but have seen their hit rates drop dramatically, he said.
Kellar said major labels have been slow to embrace customer-centric marketing – and that’s been to the advantage of smaller, more nimble independent music producers.
“Some people are really reticent about change,” Kellar said. “If you’re not ready to push that envelope, then your competitors will start chomping at your market share. And that’s what happened to the major labels.”