The post was originally published in Russian on Startup of the Day. Alexander kindly agreed to republish what we think is of great value to our readers.
Present-day third-rate musicians earn on a dozen streaming platforms. Their revenue from each of them is mere pennies, but altogether they shape a pleasant sum, some get hundreds of dollars, others tens of thousands. But to collect this money, you need to put out your new singles everywhere, it’s complicated, time-consuming, inconvenient.
There are a few automation platforms that ease this pain. The artist drags the music into one window, the service instantly puts it out on all hosting platforms. The money moves in a different direction: the streaming services pay to the automation platforms, the musician gets a single check.
There are many intermediary systems in the world, they are not all that different, nobody wants to compete by lowering the commission, another way to stand out is necessary. Stem, the American startup of the day, is interesting. The startup sees and even filters their revenues – this means that it knows their financial credibility, which means it can lend them money with practically no risk.
The difference from a regular bank or microfinancing is the absence of payment terms. Instead, the musician specifies the percentage of their royalty that can be taken to return the lent money. With such an approach, the credit is closed immediately, once a song becomes popular – or the other way around, it lands forever if the trends have changed, and the artists fanbase dwindled. Stem takes on this risk, its commission is calculated at the very beginning and doesn’t depend on the return terms.
An example of the terms from the startup’s landing page: the musician makes USD 1 000 a month, lends 8 thousand, and returns 75% of the revenue. The surcharge will be 1.5 thousand or 18.5% of the amount. I can downright call it a theft, but, I guess, banks don’t fund unrecognized geniuses at all.
Stem itself brought in money eighteen months ago, it was a USD 10M round.
Translation: Kostiantyn Tupikov
Alexander made his career in Russian internet companies including Mail.Ru, Rambler, RBC. From 2016 to 2018 he was Chief Strategy and Analytics officer in Mail.Ru Group. In this position, he worked on M&A, investments, and new project launches. In 2018 he became Deputy CEO in Citymobil, a Russian Uber-like company that was invested by Mail.Ru Group and Sberbank (the biggest Russian bank), then he left the company to launch his own projects. Now Alexander is a co-founder of United Investors – the platform for co-investments in Russian early-stage startups. His blog #startupoftheday (#стартапдня) is one of the most popular blogs about startups in Russia.