ANote Music: Where Music Industry Meets Fintech

Almost three years ago ANote Music’s founding team had a brilliant idea for an ambitious project. It was so ambitious that many doubted its realization. However, the Technoport team trusted the determined Team, challenged them to refine the concept, and connected them with experts.

Photo: ANote Music’s objective is to reach the first milestone of 1 million euros commitment in catalogues by the investors on the platform / Credits © ANote Music

“Technoport is not afraid to support innovation. They were the first to believe in our idea and provided structure crucial to begin our journey. Technoport became ANote Music’s first home, allowing us to grow fast,” said Matteo Cernuschi, ANote Music‘s co-founder and COO.

The company has recently left the incubator, and we want to celebrate their journey from an ambitious startup to an innovative business.

We had a talk with Niels Hoorelbeke, Marketing & Business Developer Strategist at ANote Music, who told us about the challenges and successes of this innovative startup that touches the fields of fintech, music industry, and blockchain technology.

What is ANote Music about?

ANote Music is the first real marketplace for investing in music royalties, where music owners auction a portion of their music rights to investors and music enthusiasts, who can in turn invest directly into music catalogues.

Raising music projects to become well-known successes is a capital-intensive effort and many players within the traditional music industry struggle to get easy access to funding. Left without many options, creatives turned to major industry players, where most negotiations happened under strict terms and behind closed doors. For this reason, we aimed to bring a new funding model to the market, allowing more transparency and openness to all parties and making sure that music owners keep control on the rights they are listing. While at the same time allowing investors and music enthusiasts the opportunity to diversify the portfolio with assets that are uncorrelated to the traditional financial markets. Also, music investments enable an emotional connection since individuals can support their favourite artists.

You are bridging the gap between the music industry and financial markets. How difficult was it to combine these two markets?

In principle it is quite easy to find similarities between these two markets. We can compare the payout in dividends from buying companies’ shares with the payout in music royalties from buying music catalogues’ shares. On the business development side, we ran into the complexity of bridging this gap because the market required a lot of education. When things have always been done in a certain way, innovation may wrongly be perceived as disruption. Thanks to sharing expertise and engaging in productive discussions, we quickly gained the trust from important industry players.

At the same time, music investments had never really been opened up to the financial markets and retail investors. Without being a music business insider with the right background and experience on the topic, it was nearly impossible to invest. We understood that an important part of our job would have been to raise awareness and create this knowledge. With investing becoming more popular than ever before partially triggered through the crypto craze, more investors went looking for alternative assets to diversify their portfolios with. This, together with some huge music catalogue transactions making international press, gave some visibility of the music investments to the financial markets and showed that the model can work. At that point, when we started opening the market in Europe, investors realized there was a good investment opportunity and they trusted us faster.

How did you manage to attract sellers and buyers in parallel?

The first people we contacted are music industry moguls that worked for big corporations and have a lot of insider knowledge and connections. They helped us to expand the network and connect with the first publishers; some of them later became our investors. The Italian publisher IRMA Records was the first to see the opportunity and to believe in the concept. With over 30 years of experience, IRMA Records can be considered as part of the old generation, yet they had the open mind to embrace innovation and agreed to offer 10% of their catalogue for auction on our platform. Thanks to their trust, our marketing effort and product development, we proved the concept and started generating some buzz.

Attracting both sellers and buyers required a lot of intensive business development efforts. In order to reach out to other rights owners we continuously work on targeted outreach, while at the same time we release many different marketing campaigns to attract investors. The onboarded investors have been very satisfied with investing on the ANote Music platform and are asking for more opportunities to invest in.

Can you tell us about ANote’s revenue model?

Our business model is straightforward. We earn money by charging two kinds of fees that are only applied when the transaction is completed, so there is no fee to pay just to be on the platform.

The original rights owners are charged with a listing fee on the amount raised once their auction has successfully been completed. On the buyer side, we apply a distribution fee when royalty payouts are distributed to the investor’s account. This fee is either 4 or 8% depending if the shares are acquired on the primary market or if they have been traded in the secondary market.

We decided to split the fees to keep them low for both parties and treat everyone equally.

What is your competitive advantage?

There are few companies in the world doing a similar business.

ANote’s main competitor is based in the US, but it addresses a different market segment. It is focused on selling music catalogues of several 10 or 100 thousands dollars to single buyers and applies a minimum entry fee of 500 dollars on top of the purchase price. By applying fractional ownership into music catalogues, ANote Music provides a lower entry barrier to retail investors and music enthusiasts alike.

Our in-house built trading platform brings a very smooth and intuitive investment experience to the investors and provides solid financial information. While at the same time, our integrated blockchain technology gives investors extra security and transparency on their transactions. Towards sellers, ANote Music can offer a lot of flexibility and adapt selling conditions according to the original rights owners’ needs.

We decided to initially focus on Europe, as this market is still a blue ocean for this kind of business. We communicate a lot to raise awareness and to develop the market.

ANote Music’s platform integrates the blockchain. What is your consideration on this technology?

We developed our private blockchain in house, backed on the Ethereum main-chain regularly. Our platform operates similarly to the standard stock exchanges that do not use blockchain. Therefore, it was not mandatory to bring this technology in, but we did it because it brings more transparency and trust to our platform. In this way, the users can exchange contracts securely and track the ownership chain.

Moreover, the blockchain offers us many opportunities for future developments as the market is constantly evolving and starting to adopt the technology more widely. As a growing startup, we want to be flexible, proactive, and ready to surf the wave of innovation.

What were the main milestones of your company development? And now looking back at your journey, what advice would you give to early-stage startups to avoid major mistakes?

All started in 2018 when our co-founders Marzio Schena and Matteo Cernuschi had the first business idea while watching the Italian music festival Sanremo and feeling frustrated finding out that there was no way to invest in music royalties as private individuals.

At the beginning the team was very focused on financials. Later they met with Grégoire Mathonet who joined as third co-founder and CTO to develop a unique product with the blockchain technology included. The company was incorporated in 2018 and the first developers and marketing collaborators joined the team to create the product and go to market in the run of 2019. The platform was fully ready and officially launched in July 2020.

ANote co-founders’ mindset is to only hire people who are better than them in the necessary field and can bring additional competences to the team. Now we are a growing team of nine, still small in numbers, but capable of accomplishing big things.

My advice for young startups is that flexibility is key, be able to adapt the initial idea and find new solutions. The biggest mistake is going too fast from idea to product without looking out at your customer to validate the concept.

Have support schemes of the local ecosystem been crucial for your development?

Luxembourg is a unique special place for startup development in Europe. The support that entrepreneurs get in this country is massive and even more impressive is the collaborative effort of the ecosystem without competitive moves that could slow down the given help. We can state that the Luxembourg slogan “Let’s make it happen” is concretely happening.

All was possible thanks to support schemes like the Technoport incubator, Luxinnovation, the Ministry of Economy and the LHoFT. They were essential to bring us quickly in contact with the right people and provide us with business and financial support. All these efforts are massive forms of support in growing a business from scratch and speed up the development process for companies like ours.

What were your key factors to survive and success during this year of crisis?

Financially speaking, we closed the year 2019 with our first investment round (505K€) and so we started 2020 pretty well.

On a strategic point of view, the product was ready to go to market by March 2020 but looking at the pandemic outbreak and activities’ shut down, it was logical to wait. We were smart to postpone the launch for a couple of months and exploit the lockdown period to continue the development and fine-tune the platform. We reduced the employees’ amount of work to take due time to verify that everything was fine to go out on the market.

The break situation in the music industry has worked to our advantage. The artists at home had more time to look for sources of funding. Also, while live events were suspended, live streaming gained the upper hand on social media platforms and streaming services like Spotify or Deezer were more often consumed. That was good because streaming is one of the biggest royalty payouts nowadays. At the same time, the investors started to look for diversified assets not correlated to fluctuations in standard financial markets. People were stuck at home and not being able to travel, freed up some extra money for investments. At the end, the crisis turned into an opportunity for us.

In the summer, with the launch of the platform, we focused on onboarding the first catalogues and investors and we had a concrete proof of concept. We closed the year with 5 completed auctions, raising over €380.000 in commitment by investors. In return, ANote Music distributed over €29.000 in royalty payouts to investors and saw the platform grow to a community of over 5.000 registered accounts.

This made it possible to start preparing for a new investment round to secure the company’s runway and extend its business operations. With the technology fully in place, we can now shift from a pure-tech company to a marketing company to push the catalogues, raise awareness, and onboard more investors. We are now planning several partnerships for this year with some interesting opportunities coming up.

What are the next milestones for ANote?

Our next big milestone is growing the platform, listing a wide range of new catalogues, and closing the next investment round. So far, we focused on Poland and Italy. Now we aim to extend the concept internationally starting with France, Germany, UK, Spain and Japan. Our objective is to reach the first milestone of 1 million euros commitment in catalogues by the investors on our platform in the near future.

This article is brought to you by Technoport and reflects only the opinion of the author.

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