Podcast Summary
A Pegasus company in music education: Musician, a profitable startup, grew from a mission to make music education accessible and effective, employing over 100 people and generating $20M+ yearly revenue, allowing continuous innovation and growth.
Profitable startups, or Pegasus companies, are highly coveted in Silicon Valley due to their ability to generate significant revenue and self-fund growth. Musician, a Pegasus company and the topic of this episode, is an online service that teaches people how to play musical instruments using any real instrument and a device microphone for feedback. Founded in 2014, it has grown to employ over 100 people and generate over $20 million in revenue per year. Chris Tur, the CEO and co-founder, shared how they funded the company in the early days by focusing on their mission to make musicality as common as literacy and providing an accessible, effective learning platform. With the revenue generated, they've been able to invest in growth and expand to five available instruments. This profitable business model allows them to continue innovating and providing value to their customers, creating a virtuous cycle of growth and profitability.
From game to music education service: A Finnish startup pivoted from a kids' game app to a successful music education service, providing access to learn singing, guitar, piano, ukulele, and bass for $120 a year
A Finnish startup called "Musician" offers an affordable yearly subscription of $120 for access to learn singing, guitar, piano, ukulele, and bass. The founders, who met at the university, were inspired by their own struggles to learn instruments and the popularity of guitar hero. The service initially started as a kids' app called Wild Courts in 2011, but it didn't gain significant revenue due to the App Store's 79 cent pricing model. However, when the App Store started supporting subscriptions, the company shifted its focus from a game to a music education service, which led to its success. The founders, who faced challenges in their own musical journeys, aimed to make learning music more accessible and engaging for everyone. Despite initially starting with a modest goal, they have now grown their business to employ over 100 people and serve hundreds of thousands of subscribers.
Gamification and Subscriptions Boosted User Engagement: The use of gamification and a subscription model increased user engagement and motivation, providing instant feedback, a sense of progression, and ongoing access to the music education software.
The use of gamification and subscriptions were key factors in the success of the music education software. The gamification aspect provided instant feedback and a sense of progression, allowing users to unlock new levels and compete against others on a leaderboard. This helped keep users engaged and motivated to continue practicing. The subscription model also proved effective, as it allowed users to access the service on an ongoing basis for a reasonable monthly fee. This model shifted the perception of the value of the product from a one-time purchase to a long-term investment, making it easier for people to commit to the service. Additionally, the software's ability to accurately detect and provide feedback on users' playing, even with just a microphone, was a significant achievement that added to its appeal. Overall, the combination of these features helped make the music education software a popular and effective tool for those looking to learn an instrument.
AirTable: An All-in-One Collaboration Platform for Founders and Startups: AirTable, a cost-effective and time-saving collaboration platform, offers templates, integrations, and is used by major companies. Its subscription model aligns with user retention priorities and is ideal for price-sensitive and time-poor founders.
AirTable, an all-in-one collaboration platform, is a cost-effective and time-saving solution for founders and startups. The marketing and product teams of companies align on the importance of user retention, making a subscription model an attractive option. AirTable offers templates for various use cases, integrates with other apps, and is used by major companies like Slack, Google, and Shopify. Chris Tuh, the CEO and co-founder of Musician, shares his success story with the subscription app, which raised investment money in 2012 and has since grown to tens of millions of dollars in revenue. The flexibility and convenience of the subscription model, combined with the functionality and integration of AirTable, make it an ideal choice for price-sensitive and time-poor founders.
Maintaining a Healthy Cap Table and Avoiding Constant Fundraising: Focus on building a solid product and demonstrating its potential to investors, rather than solely relying on fundraising to achieve growth.
Persistence and a clear vision are key to maintaining a healthy cap table and avoiding the addiction to constant fundraising. The founder in this discussion faced multiple rejections while trying to secure funding but eventually caught the attention of an investor after launching a successful product. True Ventures, their investor, continued to support them even through pivots and remained satisfied with the progress made without requiring additional funding. The company, Fretello, went on to become profitable and create a new category in digital music education, all with less than $4 million in total funding. For founders, it's essential to focus on building a solid product and demonstrating its potential to investors, rather than solely relying on fundraising to achieve growth.
Finland's Unique Cultural Passion for Music Fuels Tech Industry Success: Finland's affordable cost of living attracts top-tier engineers passionate about music, leading to a highly skilled, low turnover workforce in the tech industry
The unique cultural background and passion for music, specifically heavy metal, in Finland has contributed significantly to the success of their tech industry, particularly in attracting and retaining top engineering talent. The lower cost of living allows for more affordable salaries, enabling the hiring of top-tier engineers who are also passionate about music. This passion leads to a strong workforce with a high retention rate, making Finland an asset in the tech industry despite being outside the Silicon Valley bubble. The founders' mission and enthusiasm for music education also play a crucial role in the success of their companies.
Maintaining Control and Profitability in a Startup: Entrepreneurs should prioritize profitability before seeking external investment, as it shifts power dynamics and may lead to better deals. Be wary of investors using tactics to appear interested but not genuinely committed.
Passion and profitability are key factors in managing a successful startup, even when faced with substantial investment offers. Musician, a company making eight figures in revenue with minimal investment, has turned down numerous late-stage offers to maintain control and profitability. CEO Chris Terres advises entrepreneurs to aim for profitability before raising funds, as it shifts the power dynamic in negotiations with investors. Investors, in turn, may use tactics like traveling to the entrepreneur's location to appear interested, but ultimately, they may not be genuinely committed to the investment. It's essential for entrepreneurs to understand these dynamics and weigh the benefits of maintaining control versus accepting external investment. Additionally, having a strong legal team with experienced lawyers, like those at Walker Corporate Law, can provide valuable guidance throughout the startup journey.
Rewarding employees and investors through secondary market transactions and paid speaking engagements: Secondary market transactions and paid speaking engagements can provide financial rewards for employees and investors, while also keeping them engaged for the long-term. Investor relationships are built on the founder's enthusiasm and belief in the company's mission.
For some entrepreneurs, particularly those in less expensive countries, the pressure to take money off the table may not be as great as it is in other places. However, secondary market transactions, such as a $50 million offering, can be a way to reward employees and keep them engaged for the long-term. Paid speaking engagements can also be profitable, but may not be feasible for every organization, especially nonprofits. Investors often build long-term relationships with companies and are interested in the future growth of the business. The enthusiasm of the founder and the belief in the company's mission are important factors in attracting and retaining both employees and investors.
The Connection Between Playing an Instrument and Creativity: Companies in Scandinavia prioritize long-term employees over quick financial gains. Employees are motivated by meaningful work and positive work environments, not just equity.
Playing an instrument and creativity go hand in hand, and this transferable skill is essential in the education system. Regarding business matters, companies should prioritize long-term employees who align with their mission over those seeking quick financial gains. The startup ecosystem in Scandinavian countries, particularly Finland, is not as focused on extreme wealth as in other places. While equity is a nice bonus, the primary motivators for employees are meaningful work and a positive work environment. The reserved nature of Scandinavian societies means that unicorn exits and the wealth of founders are not viewed as the be-all and end-all. Instead, humility and community contribution are valued. Additionally, in Finland, speeding tickets are proportional to income, reflecting the belief that wealthier individuals should not be unfairly punished.
Europe's Culture of Bicycle Transportation: Europe's historical city layouts, convenience, safety, and availability of bike lanes, showers at workplaces, and morning exercise routines make bicycles a popular and cost-effective primary mode of transportation. Extreme examples include hefty speeding tickets in Finland, and the growing trend towards electric bikes.
Europe, particularly the Scandinavian countries and Germany, have created a culture that empowers people to use bicycles as their primary form of transportation. This is due to a combination of factors including historically city layouts, seasonality, convenience, and safety. The availability of bike lanes, showers at workplaces, and the popularity of cycling as a morning exercise routine further encourage this mode of transportation. An extreme example of the financial benefits of this lifestyle was seen when an NHL player received a 120,000 euro speeding ticket in Finland, an amount likely more than the cost of his car. The trend towards electric bikes, especially those with throttles or pedal assist, is expected to make cycling even more accessible and convenient for people.
Brex vs Finnish Bike Security: Different Approaches to Risk: Brex offers US startups a corporate card solution without personal guarantees or putting founders' assets at risk, while Finland requires bike owners to secure their bikes due to crime.
In Finland, while people do lock up their bikes due to some crime, in contrast, in the US, particularly for venture-backed startups, Brex offers a corporate card solution that doesn't require a personal guarantee or put founders' assets and credit history at risk. Brex also provides higher card limits and automatic receipt matching, along with impressive rewards. To get card fees waived for life and a $250 bonus by spending $1,000, sign up for Brex by November 30th using the code "twist" at brex.com. Meanwhile, on a lighter note, Chris Tur played a ukulele demo of "Banana Boats" on this week's episode of "This Week in Startups."
Journey to Product-Market Fit: Persistence Pays Off: Unwavering commitment to refining a product and not giving up, along with the right board members and high-profile evangelists, can lead to product-market fit and a successful startup.
Passion and persistence are key to achieving product-market fit and building a successful startup. The discussion highlights the journey of Chris, who went through two failed versions of his products before finding success with his third product. Despite not considering himself a natural founder, Chris's unwavering commitment to refining his product and not giving up paid off. The importance of having the right board members and high-profile evangelists was also emphasized to help take the show on the road and reach a wider audience. The discussion underscores the importance of believing in one's product and having a clear vision for its impact on people's lives, even if the path to success is not always a straight one.
The future of subscription-based services: Apple and Google, with their large user bases, are poised to lead the trend of providing enriched experiences through subscription-based services. Gamification can encourage positive behaviors and reach a global audience through localized content and affordable pricing. The potential impact on education and access to culture is exciting.
The future of subscription-based services lies in providing enriched experiences that bring joy and meaning to people's lives. The speakers believe that companies like Apple and Google, with their large user bases, are poised to lead this trend. They also discussed the potential of gamification to encourage positive behaviors, such as meditation or fitness, and the potential for these services to reach a global audience by localizing content and offering affordable pricing. The speakers expressed excitement about the potential impact of these services on education and access to culture, and even suggested the possibility of creating partnerships with instrument manufacturers to enhance the user experience. Overall, the conversation highlighted the potential for technology to make a significant positive impact on people's lives.
Trying, Learning, and Financing a Musical Instrument: Customers can try, learn, and finance a musical instrument for a more appealing and accessible buying experience, making it a great holiday gift
The process of buying a musical instrument and learning to play it can be an intimidating experience due to the many choices and questions that come with it. However, offering a solution where customers can try out the instrument, learn with it, and even finance it through a monthly plan could make the process more appealing and accessible. This approach not only removes the risk but also makes for an excellent Christmas or holiday gift. The gift of music and the joy of learning to play an instrument can be priceless. Furthermore, discussing food and various cuisines seemed to be a common thread in the conversation, with a shared appreciation for herring with mustard sauce and open-faced sandwiches.
Considering the ethical and environmental implications of reindeer meat: Reindeer meat can be sustainably sourced through open herding practices, preserving animal welfare and natural habitats, broaden culinary horizons, make informed food decisions.
Reindeer, though not commonly found in restaurants, can be sustainably sourced through open herding practices in areas where their population is abundant. This discussion emphasizes the importance of considering the ethical and environmental implications of our food choices, even when it comes to less conventional options like reindeer meat. While it may not be a staple in many restaurants, the availability and sustainability of this meat should not be overlooked. The open herding practices ensure the welfare of the animals and the preservation of their natural habitats. This conversation serves as a reminder to broaden our culinary horizons and make informed decisions about the food we consume.
