Jacques Mattheij

Technology, Coding and Business

venture capitalists are not record labels

I’ve seen more than a few people comparing record labels to venture capitalists recently and this is not a nice comparison to make. Let me try to explain why I think that comparison is (a) false and (b) not nice.

True, there are some similarities:

  • Both VC's and record labels invest money in risky ventures
  • Both VC's and record labels tend to have more legal experience than the parties they deal with
  • Both VC's and record labels hope that by scoring the occasional hit that they can offset the losses from those ventures that did not work out
  • Both VC's and record labels have a revolving door where 'hopefuls' pitch (or send in demo tapes) in order to get a chance at being 'funded'

But that’s as far as any comparison should go. Venture Capital is different from your average record label in many ways. For one, the VC world is less predatory. There is a much higher standard of ethics (at least, amongst the VC’s that I’m familiar with, and yes, there are exceptions in the music world) than there is in the music business. No VC would ever consider that if your current venture becomes a success that they automatically have a right to any follow up success. No VC (in their right mind) would consider renting out their facilities at an insane mark-up so that you’re in debt with them and your only way out is to produce more.

Besides that, no VC would want to be known in the same way that record companies are known for inserting themselves in to the cash flow part of the companies they fund, to lie and cheat about royalties due and to lobby the government for favorable legislation which effectively means a loss to the rest of society (see the ‘copyright extension’ debacle).

No VC would sue the customers of their investments, nor would they claim to hold the copyright on the products of the companies that they invest in.

Sure, not all VCs are angels (pun intended), but to compare them structurally with the one branch of business that is universally perceived as dishonest and generally trying to enrich itself over the backs of others is insulting to say the least.

Even a comparison with Hollywood would be more apt, but still fraught with peril.

At best, I think the VC scene is to be compared with people that have ‘arrived’ that no longer wish to be directly involved in realizing their dreams (that’s hard work) but that instead have decided to kick back a notch, enjoy their lives and at the same time want to stay active, so they use their (newfound?) riches, contacts and experience to give others a leg up and to multiply the effect they’ve got on the world at large. Some of them are very good at this, others not so good but in general I don’t see them nearly as negative as I look at record labels.

Imagine record labels staffed with nothing but the people from successful bands, using their money to give other artists a faster way to the top.

I’m sure there are lots of mitigating circumstances with respect to record labels and their positions, but as long as they behave the way they do don’t expect any quarter from me, royalty fraud, price gauging and paying for special legislation may be the way for you but it does not give me any warm fuzzy feelings.

additional reading:

Janis Ian

Courtney Love