earbitscom

We're not secret about the artists we work with. I just didn't much care to use their names in a forum where people are being unnecessarily negative. We see it as our responsibility to protect their brand, not the other way around. I'm happy to answer questions, so instead of having "feelings" about who is involved and how, why not simply be curious and ask?

I like Dmitri's work and agree he's incredibly nice, but most "SV-friendly artists" are not going to see their work appreciate over time. Dmitri may be a rare exception but he's not one of our clients.

We work with traditional fine artists. Five out of seven are painters. One does conceptual work. Only one of them has anything to do with the tech world, and that's Kevin & Jenn McCoy, who minted the first NFT back in 2014. They, too, make mostly physical work. Our website shares two case studies.

I understand where you're coming from about the language. It has been a balancing act speaking transparently about the business and appealing to the sensibilities of traditional artists. But the program and the way we speak about it appeal to them because we're transparent, which is refreshing, and because our terms are very fair, thoughtful and equitable. We guarantee we'll hold work for five years, we pay royalties on profits, we promise not to take their work to auction unless their work is already auctioned regularly, and so on. These terms were all designed based on conversations with fine artists and a deep understanding of what's important to them. It's true that they are not used to seeing people talk so openly about the art market and financial incentives of art investing, but they are also not used to people taking such great lengths to design something that works for them. They appreciate our candor and it builds trust. Some artists are turned off by it, there's no question, but many find it a refreshing change. You have to consider that most are tired of the way the art world functions currently, and artists today have very different ideas about how it should work than artists even 10 years ago.

As for galleries funding projects, it happens, but most galleries except for the Gagosians and Paces of the world cannot afford that at all. Either way, it's rife with conflicts of interest and most savvy artists avoid taking gallery funding for production.

Hey all, Inversion founder here.

Nice to see some interest in what we're doing. Given the TC paywall and other misconceptions about how the art world and Inversion work, I thought I'd clear a few things up.

There are many different types of artists and many routes to success and monetization. We are initially focused on fine art because you cannot start out in other artistic fields and then be taken seriously by the fine art world. Also, the appreciating potential of fine art creates a VC-like opportunity, where a small handful out of 1,000 works will achieve unicorn multiples and return the whole fund many times over. We added an income sharing component to reduce our risk, but also to finance the offering of services that artists desperately need.

As artists achieve some success, the burdens of the studio become increasingly more difficult to manage. Things like invoicing, contract review, exhibition logistics, shipping, insurance, hiring assistants, managing payroll, etc., are all a distraction from their creative work, and most artists are not good at managing their business affairs. There are many, many companies that try to help brand new artists achieve sales, etc., but there are no scalable companies which help artists who are already making sales bridge the gap between earning a living and making enough money to hire a full time, competent studio director - to say nothing of hiring accountants, tax professionals, lawyers, etc.

Our goal when starting out was to invest in artists under a YC-inspired model. Right now, their only options for funding are mostly grants, which are time consuming and often provide very small amounts. The most equitable way to invest in contemporary fine artists is to simply buy a significant amount of work and hold onto it. Taking an equity stake in their studio would not be of interest to them, and there would be no liquidity events. So, we buy work and that is our "equity". On that work, we pay them a 10% resale royalty, donate 10% of our profits to charity, and other guarantees that are far more generous than 99% of collectors.

After many conversations with artists, it was clear that they are hamstrung by operations as much as they are by funding. Investing in them and letting them make terrible business decisions, or waste hours each week managing their own invoicing, would be a bad investment strategy. So, we added the studio management services as part of the value we bring. In the VC world, that's called Platform, and most great VCs provide some services to their portfolio in this way. We also needed to have an income sharing component to reduce risk, and offering services during the income sharing period ensures that artists are still seeing value as they pay back our investment.

Eventually, we hope to offer programs for commercial artists and other types of artists, but for now the unique dynamic of fine art appreciation and the branding requirements to enter the fine art market make that our beachhead market. We focus on artists whose work is likely to appreciate, which is a narrow group and requites solid traction to identify. We already have 7 artists we're working with. Their works are in most of the prestigious US art museums (The Met, the Whitney, LACMA, MoMA, SFMOMA, The Smithsonian, the Guggenheim, and others). Some of them earn our $50k minimum, or less in cases where we made an exception, and others earn very solid six-figure incomes. We have been providing all kinds of services to them - exhibition logistics including communication, creating 3d models of exhibition spaces to ensure proper installation, arranging shipping, and contracting with past collectors to borrow works, filing insurance claims for work damaged in transit, responding to inbound sales inquiries with marketing materials and invoices, monthly accounting reconciliation, and tax consultations, securing coverage by critics and publications, contract management, editorial direction for high profile grant applications, and contract enforcement.

These artists have joined us because we are super transparent about our model and our goals, and because our advisory board is highly regarded. They also join us only after 3+ conversations with our founding team, and sometimes after we have provided value to them before they even joined. We supported some of our artists for many months for free before we asked them to sign any agreement.

It seems most people in this thread don't really understand how the fine art world or our company operates, or how artists' careers tend to progress, but that's okay. I am happy to answer questions.

Inversion founder here.

We don't want artists who don't need us much. Artists always have needs that they can't, or shouldn't, be handling for themselves. Even the top 1% of artists get services and support from their galleries or their own full time staff. But bridging the gap between starting to earn good money and being able to afford a qualified staff is very difficult, and it's the pivotal point in an artist's career where they may find themselves stalled because, with every new project, there are logistical needs that distract them from finding the next opportunity, or creating new, ambitious work.

We are working with artists who have achieved great traction but are not yet at the point where they can hire a full time studio director, etc.

Inversion founder here.

Yes, this is spot on. And it is so hard to navigate doing this well, as part-time studio assistants require training, often leave when a new semester starts or they get their own solo exhibition offered to them, requiring replacing them and retraining that replacement. You're also only getting the skill set of those individuals, whereas with our company you're getting a team with a deep network and highly diverse experience. When our Artist Liaison doesn't know how to deal with something, they don't go back to the artist and make them handle it. They come to our management team and we help them do it well. We scale up and down with their income and operational needs, and our goal is to prepare them to take over our systems when they outgrow us and can afford a full time staff of their own, which we would even help them hire.

Inversion founder here. We invest by buying artists' work. One of the reasons they work with us is they are tired of relying on grants, which sometimes take weeks to apply for and can provide as little as $1k in funding. They are entrepreneurs running high-earning studios and they are tired of being looked at as charity cases. Given the people on our board, being involved with our company definitely adds to their brand.

See my comment above. We are already working with seven highly regarded artists. Their works are in the collections at The Whitney, MoMA, LACMA, SFMOMA, the Smithsonian, etc.

Inversion founder here.

Most galleries do not provide production capital, and when they do, there become arguments about who owns the work produced. It's a very bad idea and the savviest artists we've worked with don't let their galleries pay for production.

We already have 7 artists we work with. They joined us because the language we use on our website is totally transparent about our plans and incentives. One of them is a Guggenheim Fellow who has had two institutional solo exhibitions just in the 6 months we have been working with them. One of them invented the NFT and has work in the Whitney collection. Another has works in the Smithsonian, the Guggenheim, LACMA, MoMA, and nearly every other major art museum.

Regarding 3 months being very short. We work with each artist for 5 years. It's only the residency that lasts 3 months.

(EDIT: Inversion founder here)

You're right that you cannot apply the tech VC model - without significant modifications that honor the differences between artists and entrepreneurs. But you're wrong about them not needing studio management services. We work with artists who are earning, in some cases, hundreds of thousands of dollars. They deal with contracts, invoicing, exhibition logistics, insurance claims, hiring service providers like photographers, and much more. All of those things require management that distracts them from creating artwork. If an artist can spend 20 hours making a work of art that would sell for $20,000 (aka, they earn $1k per hour), it is an absolute waste of time for them to spend 4 hours per week on these tasks. That's over 200 hours a year, and a theoretical $200k loss in creative output.

60% of the artists we work with already have gallery representation, and 40% have already been in the NY Times.

We do not offer artists to use "our lawyers". We have engaged a law firm that specializes in working with artists to help them with contracts and consultations on IP law, etc. They represent the artists' interests and we simply pay the bill. We do not support litigation and the lawyers do not advise them on their agreement with us. In the event that the artist has legal issues which could be a conflict with Inversion, they would be referred to another law firm to avoid any possibility of a conflict of interest.

If you look at our board of advisors, you'll see that we have top artists, top business people, respected gallerists, curators, and studio directors, all of whom know plenty about what artists need. Every single one of them has an incredible reputation and supports Inversion because they believe in both the mission and that we founders have integrity about our approach to achieving it.

I've actually been a Storyworth user for quite some time and it's a slick service. It has really helped me connect with my grandmother.

Isn't that akin to not blogging about a great startup because you don't like their VC?

There are better ways to stick it to the man.

That's all a matter of technical resources, and we are aiming to solve that problem now very soon. More news coming!

Awesome! Thanks for listening!

Yeah, our blog is unfortunately neglected. We have tried a number of ways to make it more intuitive but it really just needs an entire overhaul.

We had to make cuts earlier in the year. Too early to say what we'll be able to do in this area just yet.

I cannot wait to share the whole story. Who knew all of the upside in starting Earbits would be in the movie rights?

What a thoughtful comment, poub. Indeed, we wanted to get to having user profiles, playlists and other ways to interact with the community. That was the problem. We knew what we needed to build for our experience to be more sticky, we just didn't have the resources to do enough of it fast enough. The good news is, whatever we decide to do next can only be about 10x easier than what we just attempted. ;)

You're right, which is why Pandora has been relying on investor capital for over a decade, and Spotify is right behind them. They haven't had a profitable year yet and they don't have a viable model.

Our business model, on the other hand, would be highly profitable at anything over about $1M in annual revenue, up to $100M, without playing any commercials. The problem was not our business model, as it is for most companies in our space. It was our inability to scale the audience to the point of sustaining $1M in annual airtime sales because the product wasn't yet sticky enough. That was a factor of being underfunded and trying to do too many things at once.

The capital thing wasn't an excuse. We tried to start a far more difficult business than (also failing) companies in the space, with a fraction of their capital. If we had an engineering team of 10 people and a ton of money to acquire content, there is no question we could have built a stickier service, and the unit economics were already great.

Thanks for saying that, skyfaller. My co-founder was incredibly focused on curation at a high level. We often got notes from bands who were turned away that, upon listening, I thought...I would listen to this! So we tried to be flexible but we had to make sure people knew Earbits was a place of quality. Anyway, you have an incredible attitude about it. I'm glad you're able to take that feedback and do something positive with it. That is the sign of a great artist in the making.

Am I qualified to chime in? We just shut down today after 4.5 years. ;)

This is very true, and unfortunate. It makes it easy to feel like everyone is being successful except you. I realized this a couple years ago and, when talking to other founders, I just stopped sugar coating things about my situation. I would tell them about our struggles, what was going on, and its affect on me. I don't think I've ever been brought to tears as many times as this year. It is super painful, but lying about it is bad for all involved. You can't get the support you need, nor provide proper support to others.

I can definitely vouch for the dark days. I feel fortunate to be an eternal optimist who knows these things are temporary, but the startup lows are about as low as they come. On top of that, you have things like breakups, family emergencies and other tragedies that are already hard enough to deal with when you are not nursing a struggling company. When those things hit at the same time, it can feel impossible to do anything.

Seriously, as a founder, find a few people you can really confide in and do so. And, don't be afraid to say things aren't going well. You never know what people can do to help. On that note, though today isn't the best day for me to cheer up others, I'm available to chat for any founder going through dark days. joey@earbits.com

Totally. Those were fun times.

Thanks, Neduma. Indeed, it's crowded, but that's not the reason these services don't succeed. Pandora, Spotify, Rdio, etc, all have plenty of users. They just don't have a sustainable model or approach.

Nah, you're absolutely correct. And in fact, it's crazy because one single song can have 3 writers, 8 performers, a record label, 2 publishers and two different performance rights organizations all with a stake in that track. But, we paid standard rates to publishers and only needed to convince the owners of the master recording to license the music to us, which is usually a label or band. Then we had listeners. We were mostly just trying to please those two groups, but that's because we paid the publishers outright.

Thanks, Oo! Those were the good old days. ;)

The truth is that labels aren't needed if you are a savvy business person as well as a musician, but most musicians are not. They need help understanding how to advertise, where to do so, and they need leverage in order to get better deals. More importantly, whether they need these things is secondary to the fact that most of them don't want to do these things themselves and it would be a massive distraction from the main goal of making awesome music.

We have 140,000 songs but we're not in a position to give them away like that.

You're spot on. Unfortunately, our approach was a double edged sword. No company who licenses a big catalog of music first ever survives to tell the tale. But building a two sided marketplace meant splitting half of our already thin resources in half, switching back and forth between pleasing listeners and pleasing bands, and we just weren't able to build the consumer experience necessary. In retrospect, had we focused on mobile first, built mostly listener features until that product was great, then focus on the artists, we may have had a better shot. The problem with that is, had we not built enough stuff to wow the bands and labels, we would have never gotten the kind of artists we did. We had to prove two different concepts on 1/100th the budget of our competitors, who only serve one side of the market.

About 80k monthly uniques, streaming 2.7 million songs this month.

If you're referring to mobile, yeah, we took too long to get email login setup. Chock it up to our cash-strappedness.

That's right, J. Truth is, with our results, we'd have had the funding we needed in any other space. Music startups are held to a higher standard.