Nashville music-industry veteran Scott Welch and his co-founders are on the road these days, working to raise $1.5 million in A-round funding for Highnote, an Internet venture based here.
Welch told VNC yesterday that Highnote has termsheets under review with Nashville-area investors, and is continuing to present the company's story elsewhere. Highnote was presented to Toronto-area investors in October, with presentations in New York and Los Angeles under discussion.
Highnote streams music and videos and is designed to generate ad revenue via click-through links that are embedded in popular music and video.
Welch said he believes would often be licensed to the company without charge, because the process builds traffic on artists' sites. Highnote would also pay for content through direct deals with content owners and aggregators, and would be pay regular license rates for other content acquired, essentially following the model of radio airplay.
Welch's client-artists have included Alanis Morissette, LeAnn Rimes, Mark Wills, Allison Kaplan, Paula Abdul and others. Welch said his earlier entrepreneurial gambits have included the late MP3.com and, more important, StubHub Inc., a ticketing venture that sold 18 months ago to eBay for more than $300 million. His Music Square firm does business as Scott Welch Management Inc.
Highnote's co-founders also include James Payne, who is Highnote CEO and tech leader, as well as Google's product manager for Geo Monetization; Ryan Miller, a former Yahoo! product manager and now Blockbuster online director for product management; and, Hari Sundram, M.D., who handles finance and business development for the group. Sundram played a key role in recruiting capital for a Stanford University spin-out called ChemTracker, a software-as-service provider.
Welch said his projections show Highnote generating nearly $1 billion in revenue by Year 5, largely by focusing the marketing of Highnote to those whom he says spend $8 billion annually to promote performing artists worldwide.
Income would be derived from subscriptions, as well as from partnerships with corporate allies and from click-through payments. One likely partner-ally is Toronto music lawyer Chris Taylor, who runs indie label Last Gang Records, according to a Billboard report. Taylor was host for Highnote's recent angel pitch in Toronto.
Welch said the venture could probably get buy with less than $1.5 million from angels, partly because he thinks he and his partners have only "about $5,000" actual cash sunk into the company, in addition to sweat equity and out-of-pocket expenses.
He said that in the past couple of months, Highnote has attracted about 25,000 unique visitors. Within 9 months, Welch said he believes Highnote can have 1 million songs onboard, as well as 100 advertisers and a half-million active listeners each week, on its way, of course, to much larger numbers.
Welch said he was motivated to join the Highnote venture largely because, "as a manager, I got tired of the [mainstream industry's] gate-keepers, and I saw a lot of great bands and heard a lot of great music that could never get heard," a problem he attributed to the economics of big labels and management approaches that "squash" innovation.
What's more, said Welch, Highnote will make Nashville home, explaining that the city is a better location for entertainment leaders who are "tired of living in L.A.," and who find Nashville's full-range music community and its lower cost of living extremely attractive. He then rattled-off names of Left Coast songwriters, performers, producers and publishers who have started spending more time in Nashville.
Welch said Highnote links will be particularly valuable in connecting consumers with new and emerging artists, and said that in the long term "niches" — Celtic is a possible winner — will be Highnote's bread and butter. Artists, label execs and others would bid for links to content featuring key artists or genres of music, and would pay Highnote when site visitors clicked-through to the advertisers' lesser-known artists and properties.
Welch said Highnote's analytics technology will learn from visitor behavior and queue-up content and ads in which the visitor is most likely interested, borrowing from the techniques of such companies as Amazon.com and Google AdSense.
In addition, Highnote's collection of anonymized visitor data can be sold to marketers, and the entire process can be syndicated, via such devices as placing Highnote widgets on partnering websites. ♦