NIELSEN OF THE DIGITAL AGE: ALEX WHITE AND NEXT BIG SOUND
Obsessed with understanding how bands become famous, Alex White started Next Big Sound to become the Nielsen ratings of the digital age – for music. Next Big Sound provides online music analytics to music industry professionals. The problem, as Alex describes it is, “We think that the music industry is in a state of dynamic transformation. And industry professionals need to base their decisions on data and what works. At Next Big Sound we demystify what is done on behalf of the artist and we make all that transparent. Our timing could not be better because what used to work isn’t working as well. People are looking for the new equation for the digital age. And we have it!”
Indeed, Next Big Sound is the next big thing in music. On their home page is the Geiger Counter of New Plays, New Fans and New Views. When you look at it, it will be different numbers than this moment: 60+M New Plays; 8+M New Fans; and 37+M New Views. That’s a lot of millions. We call that “traction” in entrepreneurship: getting customers/end-users/customers.
But, it wasn’t all easy going for Alex and his two co-founders. Yet it sounds romantic and easy…
What they did right:
- The three met while students at Northwestern;
- Alex took an entrepreneurship class with Troy Henikoff, a successful entrepreneur and adjunct faculty at Northwestern;
- They won money and notoriety with their initial business plan in university competitions;
- They garnered additional seed investment;
- Alex decided to forgo his graduating offer of a consulting job and focus on the startup; and
- The team was accepted into TechStars (Boulder) in 2009.
Sounds great, right? Wrong. It was hard. They made some key mistakes. That they are strong and viable today is testament to the commitment, talent and flexibility of the founding team. What were the key challenges? Where do we begin?
Where they screwed up:
- They had an initial fourth co-founder that didn’t work out;
- They formed the wrong type of legal entity (IL LLC) and had to switch right away (to a Delaware C Corp, usually no big deal but hard when you are not even out of the gate);
- They took money early on from an investor with Draconian terms because they were desperate and this came back to haunt them;
- They had the right industry but the wrong solution when starting out; and
- They needed TechStars to support them even though they decided to change their idea after the very first day!
They were young, inexperienced and naïve, but they listened, worked hard, and it paid off. Their challenges can really be divided into two key areas that most new entrepreneurs struggle with: People and Idea.
People issues. The co-founders met in Troy Henikoff’s entrepreneurship class. Alex won’t talk about the fourth member who is no more. And hey, we have all been through that one. Suffice it to say, it just didn’t work out. For the rest of the threesome, they were all interested in being involved in a startup, but it was not at all clear who would do what or that they were complementary. Could they form a cohesive team? As Alex tells it, “When we started we were kind of the same person. David [Hoffman] was more the Photoshop and design guy. Samir [Rayani] was transferring from economics to computer science. He loved programming and writing code. I loved people and and meeting with people, raising money.” But they were students and they had similar skills. So they had to figure out how to develop individually and gel as a team. David Cohen and Brad Feld, founders of TechStars have a great chapter on Alex and his team building efforts in their book, Do More Faster.
Idea issues. They didn’t get it right the first time. Alex’s first iteration of the company stemmed from his recording company internship: “When I say that we [Next Big Sound] started in his class, the idea was different then. I wanted to let anyone play the role of a record mogul where they could sign anyone to a fantasy label.” While they attracted thousands of bands and users as a streaming music destination site, there was no clear business model. “I had the uh-oh moment,” Alex admits. And they had previously applied to TechStars but they didn’t get in the first time. Alex knew that he was on to something, “But it wasn’t clear what that something was,” he admits.
People solution. Today, David is a world-class designer. Alex tells me that companies try to steal him all the time. Samir turned world-class too. And Alex is “now very comfortable talking with investors, networking and getting in the doors that need to be opened.” Alex realized that “the magic of the team is to have complementary but overlapping roles. Yes, they needed to work together but separately, leveraging their disparate skills. For example, “Samir designs the financial presentations, budgets and forecasts. That is a big reason that we were able to raise money. I told the story, but the story needs to be presented visually as well.”
The three are tight. Alex admits, “We have zero work-life balance.” But they are loving the excitement and the feeling that, “Every morning I wake up and I know that I am going to devote all of my energy and all of my day to Next Big Sound.”
Their youth has worked for them and against them. On the one hand, youth is sexy, appealing and gets them in doors. They were the youngest of their TechStars class, as Alex recalls, “by five-years. Everyone else was married with MBAs, kids, etc.” Their youth has presented a steep learning curve that they have had to overcome. As many New Venturists have to do… David Cohen told me that the Next Big Sound team was one of the first that had to “commute while they were in the program. It was kind of crazy. They were flying back and forth for mid-terms and finals and then to graduate.”
Now they have a sales guy in his 50s so they are not all piss-and-vinegar youth. Alex tells me, “We have learned so much from him [Colin Willis, SVP Sales] about how big companies think and how they run.” In turn, I gather than Colin is learning about white boards and unplanned things. Because Next Big Sound has few processes in place, and they lack resources.” Alex tells me that “It’s hard but I am patient and he [Colin] is patient. And so it works.”
They attribute a lot to their interactions with Troy Henikoff. Alex reminisces: “Each meeting with Troy led to five more meetings and that cycle kept continuing.” But, their early missteps meant that, “We were close to shutting the co down when we got into TechStars.” The TechStars experience and their mentors really saved the company.
Idea solution. How does a band become famous and go from the garage to a nationwide tour? That’s the question that Next Big Sound answers. The company’s products track plays, views, fans, and comments across all of the main sites. The site provides daily tracking numbers and searches and compares artists. On a subscription basis it provides deeper analytics such as basic recommendations as to how to improve online numbers. Next Big Sound’s centralized dashboard gives you info on any artist in the world. “It’s the Bloomberg terminal for the entertainment business,” Alex points out. Mostly, professionals around the bands, including record labels, agents, managers, and publicists, pay for the info. Some bands pay directly. As it really helps as a management tool for those with multiple artists. Today, Next Big Sound tracks more data for more bands online than anyone else in the world.
Next Big Sound today. The company is cruising along. They have a big new office in Boulder to accommodate growth. But they are still hiring (they need developers!).
About finances, Alex tells me, “We are “fighting towards breakeven.” Their investors want to put more money in. But Alex is cautious, “We want a few more revenue proof points. And that might cover growth expenses. So we are in a wait and see,” he says quietly.
Their proprietary charts (Social 50 and Next Big Sound 25) are distributed by Billboard Magazine. “To have our charts distributed to the whole industry by the major trade publication is huge,” Alex explains.
I ask about his goals for the next six to 12 months: “We continue the march to become the standard in the music industry; we continue to work with thousands of users and customers worldwide who sign up. That pushes the product forward and makes it even easier to use. And we continue to help artists navigate and benefit in the digital age.”
Take aways. Most startups face people/founder issues. You have to solve them or they will destroy your startup baby. And you have to function, period. Function as a team. That means you have to listen, adapt, and build strengths, recognize weaknesses and fill the holes so that you are actually a team. That’s hard, but it is essential.
You also have to allow ideas to iterate until you hit upon the real opportunity. Rarely does an entrepreneur get it right the first time. That’s ok. What you have to do is allow yourself the freedom to admit defeat and iterate to the idea that really provides a solution to a real problem. That too is hard, but if you don’t do it, well, you just stick with the first and bad idea and you will never be a part of the story.
Good luck, Alex and Next Big Sound. Can’t wait to see how you tackle your growth problems!