For promotion companies, new record labels, distributors, and other music-related businesses, looking for a raise in the capital has unique benefits and challenges. It is not a secret that monies are hard to find businesses in the music industry given that they can benefit from the arts councils or government sources. Add to that, it is tricky to find investors without having to concede the creative control of the company.
Here are some options that you can consider.
Venture Capital Firms
You can get capital from venture capital firms in exchange of equity stake in the business. However, most VC firms are looking for startups that have already reaped a bit of success and have gone further into its life cycle. One advantage you can get is that VC Firms funds businesses in several rounds. Unfortunately, there are only a handful of VC firms with experience and are willing to work with companies in the music industry.
Angel investors are usually wealthy individuals who want to venture on various businesses in different industries. They usually fund a company only once unlike with the VC firms. Angels are investing around approximately $20 billion each year in more than 60,000 businesses. Over the years the traditional networking to find an angel investor has changed with the help of online platforms.
There are many art councils and non-profit organisations who support music in a form of a grant. The amount of money is often less than what investors offer but the main advantage of this option is that money does not need to be repaid.
Major Record Labels
Record labels can either develop as a joint venture with independent labels or invest alone in a music company. However, you might have to give up something in return.
Small independent labels sometimes do not have the means for distribution. In exchange for helping get the project off the ground, the distributor often asks for a certain percentage of the net profit.