- Ian Hogarth, co-founder and CEO of Songkick, speaks at a conference
- Songkick is a concert service that helps users find out when their favorite artists are performing
- Songkick is the second most trafficked concert service in the world, with over 10 million unique fans visiting every month
- Hogarth discusses the challenges and lessons learned from building a startup in the music industry
- He emphasizes the importance of understanding the industry before starting a business in it
- Hogarth also highlights the struggles faced by artists in the entertainment industry and the consolidation of rights among a small number of companies
- He encourages resilience and not giving up in the face of challenges.

- Consolidation in the entertainment industry is increasing, making it difficult for startups to succeed without support from established rights holders.
- Larger technology companies can force industry changes faster due to their leverage.
- Startups in the entertainment industry need to solve a problem for the industry and understand their problems as well as the consumer's problems.
- Understanding the startup game and its randomness is important before attempting to play.
- The success of a startup is determined by three engines: gratification, growth, and economic.
- Building a gratifying experience and improving data quality are important for the gratification engine.
- Growth can be achieved through word of mouth, paid acquisition, SEO, and API widget distribution.
- Songkick found success by becoming the canonical page for concerts and tours, leading to social referrals, SEO benefits, and distribution partnerships.

- The success of a startup depends on several interconnected factors: gratification, growth, revenue, and the team.
- Building value and differentiated data can lead to social referrals, SEO benefits, and partnerships.
- Mobile and word of mouth are important for growth.
- The economic engine is essential for sustainability and making money.
- The team is crucial for solving problems and depends on the other factors.
- It is important to understand the interconnectedness of these factors to build an exceptional business.
- Developing resilience and not giving up is key to success.
- Surviving allows for the opportunity to experience platform shifts and changes in the market.
- Articulating the importance of the work being done can provide motivation during difficult times.

- The music industry has lost sight of the important connection between artists and fans
- The goal is to create a better future for live music with an online experience that feels authentic
- When feeling low, refer back to the earnest desire to solve a problem
- Spending time with users, both happy and unhappy, can provide motivation and practical insights
- Building a startup in a consolidated industry requires working with industry professionals and understanding the game
- Nurturing resilience is crucial for success in the face of challenges.

Ian Hogarth, CEO of Songkick, spoke at a conference about the challenges and lessons learned from building a startup in the music industry. He emphasized the importance of understanding the industry and the struggles faced by artists. Hogarth highlighted the increasing consolidation in the entertainment industry and the importance of solving industry problems. He discussed the interconnected factors of gratification, growth, revenue, and the team in building a successful startup. Hogarth stressed the importance of resilience and not giving up, and the need to create an authentic online experience for live music.

Talk at Startup School Europe 2014 at The Brewery in London

Now we're going to move on to the next speaker, which is Ian Hogarth of Songkick.

Y Combinator funded Songkick in 2007, and a Fun fact, it's actually through Ian that I found out about Y Combinator all that time ago.

So, if you don't know, Songkick is the simplest way to find out when your favourite artists are coming to town.

And they're now the second most trafficked concert service in the world with over 10 million unique fans visiting every month.

So yeah, I'm Ian Hogarth, and I'm 1 of the 3 co-founders of Songkick.

So this is Pete and Michelle, and I'm usually the 1 out talking, but they're even more responsible than I am for any of the stuff I'm about to explain to you that we've learned along the way.

So we started in 2007, and we were in the summer 2007 YC batch.

Yeah, we're the easiest way to find shows.

If you've ever experienced the sort of frustration of finding out about a show you'd like to have gone to the day after it happens.

That's the sort of the problem that Songkick's trying to solve.

The average user who starts using Songkick goes to twice as many concerts afterwards.

So it's all about making it easier to go to shows.

We're backed by some great VCs, Index and Sequoia.

And I guess we sort of see there being 3 main music apps on your phone.

There'll be a on-demand streaming app like Spotify, a radio app like Pandora, and a concerts app like Songkick.

And the average artist makes about 70% of their income from touring, so we hope we can be relevant to artists as well as fans.

So 1 thing that happens when you build the same company for 7 years is you get to watch waves of startups succeed and fail around you.

And it kind of rewires your intuition about startups.

And I guess I'd liken it to watching the first season of 24 after watching all 8 seasons in a row.

I remember being really terrified by this competitor, Songcake, that launched when we were just getting started.

And they grew to millions of users in a pretty short space of time.

And I was feeling so scared, like how are we ever going to do anything about that?

And what happened, though, is over time, the distribution platform that they built their product on, kind of like moved underneath them and they disappeared.

And that really resets your sense of what to be scared by.

Similarly though, you'll see startups that are kind of just seem to have it all figured out and they become the talk of the town and that won't really surprise you.

You'll be like, great, they're an awesome company.

And you suddenly read about them having a $100 million valuation.

What will surprise you is exponential value creation.

So that startup that was suddenly valued at 100 million dollars, the next year you read on TechCrunch they're valued at a billion dollars and you're like whoa okay well we've got a really good year coming we're gonna work really hard it's gonna get better.

And then the next year they go from a billion dollars to 10000000000 dollars.

And that just completely resets your sense of what is possible.

I think some of the people who have spoken today are perfect examples of that crazy exponential curve you can get into.

So, to put this all in perspective, if I go back to the summer of 2007, there were 22 companies in our YC batch, a lot less than it is now.

And I believe most of the others ended up getting shut down or acquired for relatively small amounts of money.

And when you see that play out, it really makes you internalize how hard it is.

And I remember getting to Boston that summer and just being really intimidated by everybody.

I mean, people were technically more brilliant than us.

There were people who were way more charismatic and better at presenting their products than us.

And pretty much everybody was more experienced at building internet companies than we were, and Pete, Michelle, and I.

1 of the startups in our batch that I remember being intimidated by was Disqus.

They're like an awesome pair of founders.

And it's plausible that Songkir can Disqus may end up being 10 to 100x more valuable than startups from our batch that were shut down or had an early exit.

Which on the face of it seems like we must have figured some things out, and there must be something to be learned from our path, the market, et cetera.

But the other company that really endured from our batch is Dropbox, which is likely worth 100x more than both of us at this point.

And I'm not all, you know, it's not all about valuations and money, it's about impact.

And I do think the valuation is often a pretty good indicator of that.

You know, what's more remarkable about that still is that, you know, Drew and Arash are 2 of the most humble, down-to-earth founders I know.

I think what's maybe more inspiring still is although Dropbox is an incredible company, you know, it's quite possible that 1 person in this room creates something that's 10x more valuable than Dropbox, which is kind of nuts when you think about it.

So I guess hopefully you take this all as a disclaimer for the advice that follows.

If you really wanna know the mysteries of the startup universe, go talk to Drew and Arash.

Also, I'm most interested in consumer stuff, so most of this advice applies to that.

So having caveated that I probably have about 100x less insights than most people who've spoken at startup school in the past, I thought about what I would like someone to explain to me in retrospect.

So first of all, doing a music startup is a pretty good way to get beat down.

Secondly, understand as much of the game as possible before you start to play it.

And finally, nurture your resilience so you don't give up.

So, on online music, being an excellent way to get beat up, here are some exceptional founders who have all to a greater and lesser extent taken a beating from following their passion into a music startup.

Dalton Caldwell, who's spoken here before, Sean Parker, Jeff Ralston, Dave Goldberg, who's now the CEO of SurveyMonkey, David Pakman, who's an amazing founder, Ali Partovi.

It seems to be a relatively well-trodden path.

And I was thinking about it on the cycle over here, that the founders of the most successful business to come out of Europe, start-up business to come out of Europe, Skype, actually did 2 different music start-ups in Kazaa and Audio.

So I then realised that Dalton had basically given that talk so I'm not going to rehash his advice here, you can find it on YouTube, it's a hilarious listen.

What I will give you is a slightly more reductive take on building startups in entertainment related industries, film, TV, art, music.

So if you're going to build a startup in 1 of those domains, here is the advice I would give you.

And I have some advice for how this translates into other markets.

So first of all, everybody thinks they're more into art, music, film than they actually are.

So there was a pretty fascinating study that Zillow put out around the subprime crisis where they surveyed homeowners and they asked them what was gonna happen to the value of homes over the next 6 months.

And the majority of people said, value of homes is gonna go way down.

And then they asked those same people, what do you think is going to happen to value of your home?

And everyone was like, oh, my home's going to stay the same or go up.

And it's kind of the same, I think, with entertainment.

And I think it's part of the sort of blind spot that founders sometimes have with the space.

Actually, most people are into much narrower sets of creative works than they realize.

And so a small number of creators drive most activity and revenue for these industries.

Now, the next interesting thing about these industries is 99.999999% of creators end up struggling for a very long time without success.

And so when they do break out, they're very happy to transfer rights for their work to somebody who is going to give them some financial stability, whether it's a label or a concert promoter or a studio.

And it might be tempting to sort of label that as selling out or something like that, But having had friends who've spent the last 10 years sleeping on couches to try and make their career as an artist work, it's just about getting stable and paying off your debts.

And unlike tech, where you can be a sick engineer, build a startup, totally fails, go get a great job at Google.

If you're a musician and your career doesn't succeed, you can't just go and join Radiohead.

So this transference of rights from the creators to these middlemen leads to a pretty small number of companies owning all the rights for these verticals.

So ironically, as the entertainment industry lurches from 1 model to the next, actually gets even more consolidated.

So for example, music moving from CDs to MP3s to streaming.

Because the companies who represent the rights are like, we're gonna get killed if we don't consolidate further.

And the departments of justice, et cetera, say, okay, you can merge.

So for example, during the last 10 years, the world's largest record label was allowed to get even bigger by acquiring EMI.

So Universal Music Group now represents 40% of the rights in the recorded music markets in terms of value.

Similarly, and to a greater extent, the world's largest concert promoter, Live Nation, was allowed to merge with the world's largest ticket vendor.

So it actually, consolidation to me seems to be an increasing trend rather than a decreasing 1.

And don't delude yourself that other creative verticals don't have rights.

Typically, there is some kind of rights structure, whether it's similar to copyright, whether it's in ticketing or merchandise or visual art or film.

So that level of rights consolidation means it's basically really, really hard for a startup to transform the entertainment industry without buy-in and support from those rights holders, which basically means waiting until they're ready to embrace you.

There's lots of different tactics for waiting things out, But that, in my opinion, is 1 of the main reasons for the success of Spotify now versus the nightmare that Dalton went through.

There is a caveat, which is much larger technology companies can, just through the scale of leverage they have, force things to happen faster.

So Google saved YouTube for label annihilation.

And 8 years later, owns the largest free streaming music service on the planet.

Or the way that Apple created the digital download market.

So the biggest question you need to ask yourself if you want to build a company in the entertainment industry is, why will the industry be willing to embrace you?

You need to understand their problems as well as you understand the consumer's problems.

So I guess if PG said kill Hollywood, I would say help Hollywood, grow Hollywood, or fail.

So the broader point here, which is hopefully useful if you're not thinking about doing an entertainment startup, is that the level of consolidation in your industry massively changes how you build your startup.

If it's highly consolidated, you pretty much have to find a way of partnering with the incumbency.

If it's much more fragmented, say vacation rentals or private hire vehicles, you know, you're probably best off just going full stack and competing with the existing incumbents.

So I thought, you know, 1 of the things that I most admire about what Patrick's done with Stripe is the way that they worked with the banks, rather than being like, kill Bank of America or something.

So the second thing I want to share with you guys today is the importance of understanding the startup game before you try and play it.

So this is another TV show, The Wire, and a great moment when the game of chess is being explained.

I don't think startups are a particularly rational game to play if your goal is financial success.

Particularly in consumer startups, there is a level of randomness.

And so if you're someone who's good at building things, you're probably gonna make more money by going and joining 1 of the hit companies of our era, or for example, I remember reading that the first 100 or multiple 100 employees at Facebook made more money from Facebook than the average founder of a successful startup.

Or finding a way to be involved in multiple startups.

VC is 1 way of doing that, but maybe new structures emerge.

And just a cursory overview of portfolio theory will teach you that if the market has a high degree of randomness, it's probably not a good thing to put all your eggs in 1 basket.

There's this brilliant VC called Matt Kohler who I think is sort of the perfect Bayesian agent here.

He joined LinkedIn very early on, moved to Facebook very early on, and then became a top VC at Benchmark.

So I think the main reason to try and build a startup is actually a pretty irrational 1.

You're just really motivated to solve a problem, a very specific problem.

And the satisfaction of building something to solve that problem kind of justifies 5 to 10 years of stress and a good likelihood of failure, a bunch of which will be kind of random and out of your control.

So if I haven't deterred you through that positive little positive message, then here are the rules of the startup game as I see them.

So there are 3 engines that I think determine a startup success.

This insight came to us about 3 years into Songkick's life from this incredibly brilliant guy called Sean Ellis, who is surprisingly not that well known, but I would track down his blog.

He's just incredibly insightful about what it takes to make something work.

So if I define a new variable, unicorn-ness, your level of unicorn-ness will be roughly your gratification engine to the power of your growth engine to the power of your economic engine.

And you become like a full unicorn, a la Airbnb, Dropbox, Google, if you get all 3 right.

And every engine that fails will reduce your unicorn-ness by an order of magnitude.

So if we take the gratification engine, that's been expressed in much less nerdy terms by Y Combinator as make something people want.

In our case, that was a pretty brutal experience.

We launched Songkick by combining some scrapers for ticket sites with a downloadable plug-in for your Mac that would, once you downloaded it, scan the XML file that contained the information about what music you listened to.

And at the end of all of that, you get a list of concerts in your area based on the music you listened to.

And it was a pretty crappy first time use.

The return on the kind of 5 minutes of your life that it took you to sign up and install the plugin was this personalized list of shows.

And some people were willing to do that, and they liked it.

But the amount of friction involved was way too high for most regular people.

So for a long time, you're kind of going around, why isn't it working, why are more people using it?

And we felt like the main reason that people weren't kind of adopting our products in larger numbers was that it didn't do enough.

And we added a pretty massive array of additional features that resulted in very little additional usage.

And the turning point came when my co-founder Michelle, inspired by Sean Ellis, started running these surveys that really dug deep into why the users that loved our product loved it and why the ones who are kind of like, meh, didn't find it very compelling.

And the bottom line was that our simple idea of personalized concert alerts and never missing a show was actually a very gratifying experience.

Like, people found shows they would never have gone to, and they had life-changing experiences.

And We would get these emails that said, oh, my God, I just went to 4 shows and they were some of the best nights I've had this year, thank you.

But too few users were getting to it and we just needed to radically improve how easy it was to get that gratified experience and that became easier when new streaming services emerged and API's emerged for mobile devices so we could get your taste faster and we also needed to have better underlying concert data And that was a really big lesson for me.

I think engineers, startup people, they cherish the idea of 80-20 or MVP.

But once you find something that works, the key is to do the 20-80, where you do this grindingly incremental work that gets the last 20% of value, but takes 80% of your time.

And for us, I think that really ended up being around data, getting more and more high-quality, timely, comprehensive, trusted concert data, which is a relatively hard problem to solve, so that we would become the trusted authority for a fan.

And when you talk to users, you'd really feel it.

They'd suddenly realize your data, you had like every small show in their city, and the trust level would go up, and they'd become more evangelical about the service.

Or you wouldn't have those problems where someone said, I was waiting for you to tell me this show is happening.

So data, we were always told, it's a commodity.

It turned out to actually be really the linchpin around solving this gratification engine.

So your gratification engine will have many, many levels of refinement that kind of compound on each other, whether it's the messaging when someone arrives at the site, the core experience, the onboarding flows, various different conversion rates.

And you should probably never stop trying to increase it.

The next engine is your growth engine, how new users discover your products.

I guess the first big point here is that your growth engine has no chance of really starting unless you have a great gratifying experience.

And I'll talk about that more in a minute.

But I think there are sort of 4 main ways of driving substantial growth with consumer products.

Word of mouth or viral growth, for example, WhatsApp or Snapchat or Kickstarter.

And Typically, 1 of the most compelling ways to do that is through building a communications app.

Paid acquisition, so for example, Groupon, Airbnb, and Zynga, when you have a compelling economic model, you can actually spend money to buy, use, or subsidize something about the experience they would normally pay for.

SEO, so Yelp, or Wikipedia, or Rap Genius.

And then API widget distribution, so YouTube, SoundCloud, Twitter.

So for example, Yelp has a killer mobile app, and they get tons of word of mouth growth in addition to SEO, or you probably didn't think of Airbnb as a company that grew through spending money, because they've done so many other aspects of growth, right?

They've got a killer product with word of mouth that's allowed them to spend money on optimizing a referral program similar to what Dropbox did.

They did an amazing job of PR very early on and throughout most of that company's life.

And they also did really creative stuff like the Craigslist stuff that's sort of become famous.

For Songkick, there were a bunch of different drivers of growth.

So the first big insight that really kind of clicked was that there was no canonical page on the internet for concerts or for a tour, similar to how there was a canonical page for restaurants in Yelp, or canonical page for a movie or director in IMDB.

And when you build enough value and compelling differentiated data to be the canonical page, you get all these other beneficial effects kicking in, whether it's social referrals or SEO or the industry linking to you or the ability to do distribution API partnerships.

And that core insight, when we sort of got it humming, led to a lot of growth success.

So we would do these partnerships with Spotify and SoundCloud and YouTube.

We started to optimize our site so that Google could discover the content we had better.

We started to build products for artists so they could link to Songkick more easily.

The second big growth factor came from mobile and word of mouth.

And in my opinion, the mobile app stores reward a gratifying user experience more than any other distribution platform in history.

And so in that case, really I think most of the growth just came from making the product more useful, easier to get into, more compelling.

So we've benefited from 3 of these channels, not paid because we've not had an economic model that would allow us to spend money to acquire users.

So this is how you make money from your users, so you become a sustainable company.

I can't say as much about that for us because it's still a work in progress and it's the reason, you know, 1 of the reasons we're not in the pantheon of unicorns yet.

Initially we bootstrap revenue by setting up these affiliate deals with ticketing companies so that when we found someone to show, we'd link to the ticketing company and they'd give us a small cut for the transaction we generated.

So kind of similar to Kayak or TripAdvisor.

And that's taken us to a revenue run rate of millions of dollars, but it won't take us to a revenue run rate of hundreds of millions of dollars.

And I think it's always been clear what the optimal revenue model for us would be, which is just you discover the show and you buy the ticket at the same time from us.

But that requires on us being able to scalably access inventory, which going back to what I was saying earlier about supply side consolidation and need to partner with the industry, that requires finding economic alignment with the people who currently hold the rights.

So it's a work in progress, but it's quite exciting.

In London, we actually have 25% of all the concerts in London you can now buy tickets to in a few taps through your Songkick app.

So it's quite exciting watching that develop for us.

Finally, there's the team that you build and retain to solve all these problems.

This is our team pushing a bus up a hill when it broke down on the way to a festival, which is Probably a reasonable metaphor for kind of startup life.

So each of these things I just talked about, gratification, growth, revenue, and team, they're all dependent on each other.

So if I disperse it mathematically, I've got this unicorn-ness is gratification, the power of growth, the power of revenue.

Gratification is dependent on your team, your economic engine, and your growth, because you need an amazing team to build a world-class product, and you need revenue to sustainably pay for those people's salaries, and in many cases, having an economic model actually allows you to provide more value to your users.

And finally, some products get better with more people using them, so you may actually need growth to be able to offer a compelling experience, so social networks, marketplaces, etc.

So the gratification engine depends on your team, the other 2 engines.

The next thing, growth, that is actually also dependent on other stuff.

So your ability to recruit a growth team, obviously, is a big factor.

If you have a revenue engine, an economic engine, you're able to access 1 of the most powerful sources of growth, which is being able to pay for users.

And a key point to make here is it's a lot easier to grow by spending money than not spending money.

And if you want a simple example of that, just think about the number of world-class, highly effective SEO people out there in the world compared to the number of people who can set up an AdWords account or buy ads on Facebook.

Most importantly, if you don't have a great product, you won't get the most powerful and fundamental driver, word of mouth, and you want to build on all the positive stuff that happens when that's working.

So, I mean, just as an example of how these things are interconnected, we have this partnership with YouTube that was very meaningful to us early on.

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Ian Hogarth