Tunezy Takes Flight - Nbtc'14 - Where are they now?

Hi, I am Daniela Trivanovic, here in the extreme startup space with cofounder and CEO Derrick Fung. Derrick got involved in the music industry in this past year when he started his own start-up. So, Derrick, thank you for being here. Thanks for having me! So, let’s start off with telling viewers a little bit about Tunezy. Sure, Tunezy is an online commerce platform, we started off in the music industry when we realized that musicians weren’t making money selling music necessarily anymore, so its a commerce platform that helps them sell experiences, and experiences are defined as anything online or offline where musicians can engage directly with their fans, so it could be Skype calls with their fans, backstage passes, meet and greets, dinner with the artists, anything you know interesting and innovative like that. So, can you give a concrete example of how this works out? Sure. So Naughty by Nature is a hip hop group from the nineties and they want to sell experiences, and they came to us and we gave them some ideas. They had a show, it was their 25th anniversary for their song ‘Hip Hop Hooray’, and they were playing in NY, and before their show, which was at the Grammercy Theatre, we had a dinner experience at a big steak house in New York, and we had about a hundred fans come out paying about 50 bucks each to have dinner with this hip hop group. When did you get this lightbulb moment for this start-up? Yeah, so I think a lot of it came from speaking with musicians. We saw a lot of trends in the music industry, I think its not rocket science but since 2000 when Napster came out, and everyone started downloading mp3s, the music industry is facing a very difficult time in that people were downloading music, people with pirating music, and so musicians needed a way to make money, and I remember everyday just talking on the phone with artists, and asking them hey how do you make money nowadays, what are some innovative ways that you are making money? And more and more we found out that artists aren’t making a lot of money selling their music, they’re making a lot of their money selling experiences. So concert is that type of experience, and in the past concerts were a way for artists to promote their albums, but now concerts are a way for artists to actually make money. So that was one stream of income. And more and more we started hearing more about these more unique experiences, and I think social media has proliferated this new type of experience and I remember speaking to one artist, her name is Clara C, she is on YouTube ‘ClaraC Music’, and I asked her hey what percentage of your income is through these experiences, and I asked her manager, and he told me that a pretty big percentage, around 20-25% of their money is now from these backstage passes, dinner before the shows, and I said hey I think we’re onto something. And as soon as we pitched the idea to the music industry, people loved it, people saw it as a huge opportunity for the music industry. We know that you competed in the NBTC in 2012, the competition, this year our theme is ‘where ideas take flight’, so can you maybe speak a little bit about how NBTC helped your ideas lift off? For sure. So, at the time of NBTC we were still working out of my living room, and we were still trying to figure out the product, the vision, the direction, I mean we had it figured out but we wanted to actually see what people thought about it. So it was the first public unveiling of our product and of our team, just everything, and I remember applying for it, and I remmeber pitching, and I think it really was our first big, well it was our first big win for sure, and I think ultimately it was our first kind of moment in the spotlight. I think after we pitched once, and then we got into the final round and pitched again, what was great was that when we found out we had won we had all kinds of people approach us, we had investors, we had the press, I think the Globe and Mail, we had people who wanted to work for us, so I think it was a great starting point, and looking back it was definitely a pivotal moment for our company, because it was great for the team, it was great for morale, for the first time we really thought ‘wow we’re on to something’, it definitely attributed to the success of the company. So after we pitched at NBTC, we spent about five months, four five months or so, redefining the product, and during that process we actually decided to pivot the company, and it was from speaking to a lot of musicians we realized that there is a problem that’s here, and that they're not making a lot of money, record sales are down 50-60% since the days of Napster, and we thought that there was a huge opportunity. And so we completely evolved and pivoted the product, and we pitched again at another defining moment, which was the BillBoard Future Sound Innovators Showcase in San Francisco, I think about the same number of teams, I think about 80 teams internationally applied to pitch, we were selected as the Top 5, so we went to San Francisco, and we kind of unveiled our product and our vision to the whole music industry was there, I mean record labels, VC, Fred Wilson from U--- Ventures, Ron Conway, one of the first investors in Google was there, like a lot of really innovative smart people were there, and as soon as we pitched we ended up placing first, and that was another really big moment for us because we got validation from people in SANFRAN, Silicon Valley investors, from the music industry, and that’s when we realized we’re really onto something, and just focused our new efforts on this new vision. So Tunezy has recently been acquired by SFX Entertainment and you have moved to operate out of New York, so how has this changed your entrepreneur path? We’re all really happy about the acquisition, and there’s a couple of reasons why we want to do it. First, was because we realized that what we were doing is great, and we’re helping musicians to sell experiences, but we really wanted to be a part of a bigger machine. I think what I mean by that is that there are only certain types of companies that can offer us resources that would make sense for us to be part of that company, either through acquisition or a partnership et cetera, and so to give you a brief background about SFX, Bob Silaman who started SFX Entertainment, this is the second SFX, the first one was in the nineties, the first one he ended up selling to ClearCHannel, ClearChannel spun it off and it became Live Nation, which is now the biggest ticketing concert company in the world. And this time around the big focus was on electronic dance music, and I myself have been to a lot of these big festivals, the big one that SFX owns being Tomorrowland in Belgium, 180,000 people, Sensations, Electric Zoo, and I think I was very excited about it, because I saw more and more, especially on my news feeds, people going to festivals, people dressing up, these big DJs popping up, and it was very exciting for us and I think to be part of this big company and this vision and this new venture was very exciting, so that was one thing that was very exciting for us. And two, being in New York. Toronto’s got a great start-up community, but I think being in the music industry you have to be in either New York or LA, and for us being in NY is very exciting. And I think ultimately working at a bigger company now is very different, but what’s great about SFX is that they’re very entrepreneurial, it’s a relatively new company, I mean the company just went public on the NASDAQ just three months ago, so there’s a lot of groundwork that needs to be done, there’s a lot of things which haven’t been done which now are being done, and so being part of that was very exciting, I think for the team and the company. So I think for every entrepreneur, exiting by either going public or selling to another company, only do it if it makes sense, I mean for us it really made sense. What exactly does it feel like to be an entrepreneur, like I mean to wake up in the morning and know that you have your own business? So I have an analogy, that I tell people. It feels like you’re jumping off a cliff, and building an aeroplane on the way down. So, jumping off a cliff and building an airplane on the way down and I say that because when you’re an entrepreneur, you’re not forced to jump, you’re leaping, you’re making a decision to leap, and right after you leap, the whole time you’re looking down and you’re like wow that’s a, you know you can either fall smack down and fail, which a lot, which most companies do, or you successfully build a plane, and I think why I use that analogy also is because for a plane to take off, a million things need to happen, you need to have wings, pilots, you need to have engines, fuel, and for a start-up to really take off you need all these pieces of the plane so I think, um, in a lot of ways that’s what it feels like to be an entrepreneur, and I think that’s the best thing, the best feeling in the world, to start your own company and to fulfill your vision and to build something from scratch. It’s amazing. Fantastic analogy. For you, personally, what did you have to give up? So before I was, before the start-up, I was working in the finance industry, at CIBC, in World Markets on the trading floor, and that was what I gave up, and I think looking back, I remember the day I quit, I told my boss what I was doing, and he was like ‘you know what, good for you’, because when he was doing his MBA, he told me that he actually wanted to do his own company, but at the time he had a wife, he had a mortgage, there was just too much to give up, so I think for young people,especially, there’s really nothing to lose, and I think the worst thing would be when you’re 40 looking back and you regret not making that leap. So I left finance, I had about two years working in finance, and I started the company, I think in terms of building this plane, you know there are different parts of it really quickly - the pilots of the plane are the cofounders, and its very important to find cofounders who work well together and can drive this plane forward, um, the wings is the idea of the business, because you know without wings you cant take off, so coming up with the idea is very important. Um, the engines is the marketing of the company, if no-one uses your product, how will your company succeed? And the fuel of the plane is the cash, the money, and you need the fuel to keep the plane going...we raised cash, we raised financing, from a public company and some angel investors, and ultimately the people on the plane are your customers and your staff, so I think all these thins had to come together, but first the most important thing is taking that leap, and I think a lot of people are scared to take that leap, and I really encourage young people to take that leap, because they have nothing to lose, nothing at all. So where do you hope to see Tunezy in the near future or even in ten years? I mean, I think our vision has always been to help musicians and entertainers better engage with their fans, and I think right now the focus is on monetization, you know how to we help musicians make money off of their most engaged fans, and I think over time our product will evolve around that, so offering different tools, different analytics, um for entertainers and musicians, and now being able to work with SFX and some of their biggest festivals, being able to apply our technology to maybe Tomorrowland in Belgium, 180,000 people would be huge for us, working with some of these huge DJs like Avicii or Deadmau5 would be huge for us, so I think there’s a lot of exciting things that will happen to us over the next years let alone months, and I think um being in New York will be very advantageous for us, and I think that its going to be exciting, its a very exciting time for the music industry, there’s a lot of change, and when there’s a lot of change there’s a lot of, um, whenever there’s change, there comes opportunity. Whenever there’s problems in an industry, there’s opportunity, and I think being able to see that is very important for entrepreneurs. Thank you Derrick so much for being here. Please check out the Nspire website for more information on NBTC as well as the ‘Where Are They Now?’ series. We wish you all the best with Tunezy. Thank you very much.