Case Study: How to launch a successful music startup

Joining me today is a former music industry executive who said, “The world is changing. Artists are starting to record in their bedrooms and find their audiences on YouTube and Spotify.”

He knew the music industry had to understand how to work with them in a new way and he came up with that way.

Conrad Withey is the founder of Instrumental, an online talent discover specialist which focuses on the music industry.

Frankly, I feel there are so many music startups and I want to find out how he’s made Instrumental so successful.

 
Conrad Withey

Conrad Withey

Instrumental

Conrad Withey is the founder of Instrumental, an online talent discover specialist which focuses on the music industry.

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Full Interview Transcript

Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy, where I interview entrepreneurs about how they built their businesses and I do it for an audience of real entrepreneurs who are building their businesses, often while they’re listening to these interviews.

Joining me today is a former music industry exec who said, “You know what? The world is changing. Actually, people online are starting out in their bedrooms, in their living rooms, at school just recording, uploading stuff to the internet—to the YouTube, Spotify, SoundCloud—to all of these different services and some of them are going to be huge. The music industry has to understand how to work with them.” And he thought and he came up with an idea for how to do it. That idea became a company called Instrumental.

His name is Conrad Withney, excuse me, Withey. Excuse me, Conrad.

Conrad: That’s right.

Andrew: By the way, first mistake already. If I ever make any mistakes in the interview, totally fine to correct me. I hate when I listen to someone else’s interview and I realize that the guest is being railroaded by the host and the host is making mistakes.

Conrad: Don’t worry.

Andrew: I’m not looking for my ego. I’m looking . . .

Conrad: I won’t hold back.

Andrew: Good. Keep correcting me. Instrumental is an online talent discovery specialist focusing on the music industry. They help at this point largely the music industry find these hidden gems, the people who are going to be huge in the future. We’re going to find out how he built this up into a successful company in a world where, frankly, I feel like there are so many music startups that have failed, that have gotten really badly hurt. How is he doing well? I wanted to find that out.

We invited him here to learn about that and we can do it thanks to two phenomenal companies. The first is a business that he and I have both used. It’s called DesignCrowd. It will help you hire phenomenal designers. The second will help you host your website right. It’s called HostGator. Conrad, good to have you on here.

Conrad: Thanks, Andrew. Great to be here.

Andrew: I was fascinated by your background at Warner Music. In my head, I had all these different stories that you could tell about rock and roll and how you discovered musicians and before the interview started, I asked you about one. Can you tell the audience what you told me?

Conrad: Yeah. I think I’m the least rock and roll music industry exec you’re going to have on this podcast. I suppose I was probably best known at Warner anyway for being the kind of counterprogramming A&R guy. I was doing the stuff nobody else was interested in, certainly the least cool stuff.

A good example of the kind of projects I did when I was there was I’ve always been audience-driven, always been fascinated by people building audiences that you can sell stuff too. I was watching “House,” the hit show all over the world. I think it was the biggest show in the world at one time—Hugh Laurie, big British star of that show, my wife and I absolutely adored it. We were watching that one evening. Hugh was playing piano in one of the episodes, blues piano. We were like, “My god, he actually looks like he’s really playing that. He’s really good.” My wife goes, “You should email him and see if he’ll do a record.”

That’s nuts, the biggest TV star in the world. I just email him anyway. Weirdly, an hour later, I got back a note saying, “Come in and have a chat.” I’m saying, “This is too easy.” Anyway, I went in and we talked and eventually, I met Hugh for a cup of tea and we talked about making an album. I went back to my boss and said, “I’m going to do a record with Hugh Laurie.”

He goes, “What? Actors singing? That’s just the worst idea. This isn’t going to work in a million years.” He let me do it. It did about 1.5 million records around the world. He turned out to be a genuine star. For me, I just try to look in places other people aren’t looking for opportunities. That was sort of my approach in the music business, anyway.

Andrew: What attracted you to him was you liked his music. Did you also say, “Hey, people are watching ‘House all’ over the world. They’re going to want to at least give him a try, and if they do, I know that they’re going to like his music because I do?”

Conrad: Yeah. I think it sort of gives you a head start. In the music business, the biggest thing you’ve got is how do you break an artist or how do you get a project to be successful and deliver a return on investment. The thing I thought about that is 80 million people or whatever are watching this globally. He’d become this unlikely sex symbol, which meant that women were watching him particularly and liking him as a personality. They’re really good music buyers.

I knew you had a person in Hugh who would get onto TV shows, would get press coverage. The next thing was would he make a decent record? Otherwise, you’re going to be shot down as this is a novelty. He happened to be an extraordinary blues pianist, guitar player, and a connoisseur about music. That bit I didn’t know. That was probably where we got lucky.

But actually, the initial idea stood the test of time. I think that’s probably—my success in what I’ve done, business point of view, has always been around if you can find an engaged audience that really likes something, you can build on that and you can probably sell something too.

Andrew: What is it that someone once said about you, you’re more Rotary Club than rock and roll?

Conrad: Yeah. That was great. We were waiting for this piece in the FT. It was in a magazine. It was like front cover. I was like, “This is super exciting.” I never had consumer price, where you [inaudible 00:05:24] consumer price for the first time. I read it. I hadn’t read the piece before it goes live. There was this quote. He finally got to sit down with me and he said, “He turns out to be more Rotary Club than rock and roll.” I wasn’t cool anyway but now everybody knows.

Andrew: What you talked about with Hugh Laurie is finding that person who most people would overlook but you know is going to be big or you know has a shot at being big. What Instrumental does is does that online, scours the internet or the places that actually should be scoured to find that person who isn’t huge yet but has the potential and you’ve got a system for doing it and that’s why the company has done so well.

I’m curious about how you do so well. I wonder how much of it goes back to what you did when you were 18 years old. Can you talk about that job and what led you to it also?

Conrad: Yeah. I left high school, [inaudible 00:06:20] in the UK, took a year out and wanted to travel and wanted to fund that travel. I did some work at home and then I got a flight over to Australia. Then I got there and then I thought, “Well, I’d like to stay here a decent amount of time. I’ve got to get a job.” I scout the paper for a job. There was this job that says, “Travel Australia and earn at the same time.” I’m like, “That’s the dream job, isn’t it?” So I contact them and it turned out to be door-to-door encyclopedia selling. I thought, “Well, that sounds terrible, but it sounds like it’s going to tick both the boxes I need.”

I applied and obviously, I think, most people who applied to do door-to-door encyclopedia selling get a chance of doing it. It’s not a very high bar. Then I got in and they trained me up. Just selling encyclopedias seems so old school, doesn’t it? That was the opportunity for me to do something that allowed me to just—I suppose it solved that problem of how do you fund a gap year.

But actually, it turned out to be a most incredible eye opener to what sales is like. They would send you with this example, one single volume encyclopedia and you’d literally go door-knocking. You would be taught the kind of patter that would helpfully get you to set up a meeting for someone to go and sell them a set.

But you would be told all these amazing rebuttals and ways to find your way in to these people’s lives. There’s no sharper learning curve than literally going down 200 or 300 doors a night and you don’t know who’s going to open up behind the door. You don’t know what personality you’re going to face, if someone is going to be aggressive or be lovely.

Andrew: What did they teach you about that? I feel like I wish that schools would force everyone to do some kind of sales, ideally door to door sales, if for no other reason than to make it less threatening to send out an email to a potential employer or better still a potential client. There’s to much hesitation we naturally feel about it, but if we were to do it on a regular basis at school, even if it’s just for six months, it would feel less threatening. You would understand the rationale behind it, like you were talking about they taught you the rebuttals. Talk about the rebuttals.

Conrad: One of the things is obviously encyclopedias are expensive. Most people are like, “I’m not in the market for that. I couldn’t possibly afford that.” They teach you a series of reasons why you can afford it, how you can prove someone can afford it. You talk about, “Do you buy newspapers? What’s your daily disposable income? These cost $2 a day. Of course, you can afford it.”

I think back to your point—ideally, everybody would get a chance to do it, but of course, it’s never going to happen. But the ability to not be put off by rejection is the thing you learn quickly. The first 50 doors are probably going to be slammed in your face. The next one is the one that turns into an opportunity. If you don’t get used to that rejection and the fact that that doesn’t matter, it’s like each one of those is its own little learning curve and you get better and better.

Andrew: Tell me about one of the rejections or one of the knocks that didn’t end up in a sale that you remember.

Conrad: I can remember quite a few time-wasted ones where I remember one guy I thought, “This is my dream.” I knocked on his door and he was unbelievably friendly. My pitch was just going down a dream and I was like, “This is great.” He invited me in. I thought this is fast-tracking the process. He sat me down and said, “Tell me all about it.” And I did. It was a 15-minute pitch. At the end of that, he said, “Well, that’s all very interesting. Thanks very much. Let me tell you about Jesus.” He was a Jehovah’s Witness and he was used to knocking on doors himself.

Andrew: That’s why he was finally friendly with you. Yeah.

Conrad: So he welcomed me in. I sort of wasted some time there. Most of the time, it was just people annoyed. You’re invading their evening, their kind of post-work time. It’s annoying. I get that. I think the interesting thing is related to business, what we’re doing and what I’ve done before is you just have to keep chipping away.

You will find the person for whom you’re a great fit. If your solution is clear enough and you can illustrate that quickly—the failing fast is a great learning. It doesn’t matter, just fail, just move on quickly. So the slammed door at least gets you to a close, you know where you’re at. The face to face makes it feel a little bit more tense.

Andrew: You ended up working at Boots, at Kraft as a brand manager, and then you just ended up in the entertainment industry for a big chunk of your life, about a decade or two almost, almost two decades.

Conrad: Twenty years, nearly, now, yeah. I always wanted to be in media and entertainment.

Andrew: How did you even get into it?

Conrad: Everyone wants to. I tried writing in letters and applying. I came from the north of England. I didn’t know anyone who was in media and entertainment. It was a difficult way in. That’s why I ended up at Boots. All my efforts failed, so I thought, “I’ll go and get marketing training. If I get training in something that could be used in different industries, then that’s a good starting point.” I did that for a couple years, moved to Kraft because it was in London.

There’s much more going on in London, as you would imagine. After a year and a half there, I was marketing cheese in the Middle East. That was not my dream job, I can tell you. But they’re an American marketing company. They teach you incredible best practice. I enjoyed that from that point of view. But then it was like I need to try and get in. I just kept looking for opportunities and jobs.

Andrew: What’s the opportunity that finally got you in?

Conrad: They were looking for a product manager in the marketing department at Polygram, which in those days was—it’s now Universal, but it was a British-led—actually, it was a Dutch company, sorry. But it was a European music and media company. I was moving into the music side. They looked for a product manager. I applied.

I was lucky. The girl recruiting had been at Boots as a graduate. She wanted someone who wasn’t from the music business. Most people in music at that time had been in record shops or had been in a band. You were in that world. She was trying to find someone who was not typically from that background.

Andrew: Boots is a pharmacy chain the UK, right?

Conrad: Yeah, it is, yes. It’s like Walgreens or something.

Andrew: She just said, “I need somebody who’s outside of this space who can think a little bit differently and hey, here comes this guy from Boots who also was a brand manager at Kraft. So he understands some of the things we’re looking for. I connect with him. Let’s give him a shot.”

Conrad: Yeah.

Andrew: You were in A&R. Isn’t that the person who looks for artists?

Conrad: I did marketing for about six months and then they offered me a role in A&R, which is basically the person who’s looking for new opportunities, new talent to sign up and forge deals with.

Andrew: Did you find anyone good?

Conrad: I started at that point in the video side. You remember home video, when that was a thing, VHS. I was signing deals with personalities to do VHS’s, to do home video releases. It was standup comedy, it was fitness, kids programming. I was out there going to comedy clubs or going to see shows and seeing if we could turn them into home video properties.

Andrew: What were you looking for at the time?

Conrad: Sorry?

Andrew: I understand your methodology today. You’re looking online for somebody who’s a rising star. There are some indicators when someone is a rising star. I understand what you were doing at Warner, where you were saying, “This guy, Hugh, he’s got a big following. I could see how people would be attracted to him.” When you were just looking in the clubs, what were you looking for that would tell you that people would actually buy the VHS tapes? How could you tell that someone is a winner with just that little information?

Conrad: It was a little bit like a manual version of what we do now. You would be scouring all the media you could to see where people were being talked about. Discovery in those days was only through traditional media or word of mouth. On the comedy circuit, you would obviously look for people being talked about, reviewed, but also what size venue are they selling, what kind of reaction are they getting from the crowd.

You literally had to sit there and see it for yourself and then watch how that developed. You would keep an eye on someone and if they were moving up and getting a TV show, you’d think this guy or girl is going in the right direction.

Andrew: Then you started—I’m going to skip ahead a little bit—you then in 2003 started The Rights Company, a business you sold three years later to Warner Music Entertainment. What was The Rights Company?

Conrad: So I took what I’d been doing within places like Polygram and a company called Momentum Pictures, doing just what I was describing and set up an independent company to do that. What we would then do is we’d try to spot the opportunity with talent first. We’d go off and sign an option with them, whether they were a comedian or sportsman or musician, whatever it was.

We’d try to take those rights, hence the name of the company. Then we’d try to license them on to big companies and flip them for more money. We’d try and sign them quickly and then sell them on when they got a bit more valuable and keep the difference.

Andrew: So what did Warner buy, then? It wasn’t the rights that you bought because you sold them all. What was it they were buying when they bought you?

Conrad: I think at that point, they were expanding their capabilities within the business. They wanted the music company to evolve from being just a record label to being what they described as like the 360 solution for artists. A big part of that was content. We were good at thinking about content ideas and looking for opportunities to part that talent with visual programming.

Andrew: So they were looking to hire your talent, you and your team.

Conrad: They pretty much bought a team is really what we did there. We exited a company that—

Andrew: What did you sell it for? How much?

Conrad: I can’t disclose that, I’m afraid. It wasn’t a figure that Warner was comfortable announcing at the time. So I don’t think it’s probably worth doing that. But it was a good return on investment, about a 8.5 times return upfront. We were happy with that.

Andrew: I’m still trying to get a sense of the scope. You know what? You’re from the music industry. I don’t think there can be any weird questions. Did it make you a millionaire?

Conrad: Yes. It was a good deal.

Andrew: Not F-you money, just enough to . . .

Conrad: What it allowed us to do is pay off a lot of debt, I suppose my wife and I both worked in the business, take a step back and actually, it took me into a new world because the deal was moving me into music, the heart of it. Even though I started within Polygram, I was always on the visual side. I was on the video point of the business. I suddenly was in the heart of music.

It actually gave me this eight-year insight into an industry I didn’t know a great deal about and time to rethink—I think we exited the business at exactly the right moment. It was a peak of what we were doing. I don’t think that company was going to go on and scale perhaps in the way I hope Instrumental can. It was a good, solid, profitable business. We made money from day one. Therefore, it was, I think, a smart addition.

Andrew: Okay. Let me talk about my first sponsor and then get into the big problem you saw while you were at Warner which is what led you to start your business. The first sponsor is a company called HostGator. I’ve got to tell you, Conrad, about this lunch I had with a guy named Syed Balkhi.

He is a guy—you know how people online will say, “Look, I bought this car,” and they put a picture of a car. He put a picture recently and said, “Look, I bought this building.” The building was the building the local bank was in and then he’s got his office space at the top. He’s constantly buying real estate.

The reason he could afford to do it is back when he was a teenager—I interviewed him about this—he founded a blog called WPBeginner, WordPress Beginner, that teaches people how to set up WordPress sites, how to add plugins, what the latest news is about in the WordPress community. He set up his blog and then as he found that there were issues that people had like how do you collect email addresses, he created tools for them. In that case, he created OptinMonster. He has a bunch of other tools, software that he sells on a SaaS basis like EZ Forms, EZ WP Forms.

The reason I bring it up is because I had this interesting experience where we sat down to lunch. I was treating, I think. But the first thing he did when he sat down was he said, “Oh, look, a penny.” The guy picks up a penny from the floor and shows it to me like he just got a prize and he puts it in his pocket, not just as a joke. He puts it in his pocket and he keeps it.

The thing that drove home to me is he is a guy who’s really big on growing his business, really big on revenue opportunities and still watches the pennies. Where can I save a penny? Where can I make an extra penny to keep this thing growing? That’s what’s allowed him to build up his empire, which frankly is beyond software. It’s also in real estate. I love talking to him about the real estate that he’s bought.

So, what does he have to do with HostGator? Well, I went on his website to see who’s hosting his website, a huge, huge blog in the WordPress community. The company that hosts him is HostGator. Now, why would HostGator be the company he picks? For a couple reasons. Number one, they’ve been around for a long time. They’ve been dependable since 2002.

And number two, the second reason is they’re not expensive. We’re always looking for the next most expensive solution. You don’t need it. HostGator is a solved—the hosting of your website is a solved issue. If you’re looking to be like Syed, build up your business right, you don’t need to spend a bunch of money on web hosting, whether it’s a blog or ecommerce site, a SaaS landing page, whatever it is that you need, HostGator has got you covered.

Their price is as low as $3—actually, it’s lower, it’s $2.64, but I don’t recommend you start with that. I recommend you start with the baby plan, which is a $3.95 a month plan because that comes with unlimited domain. Any idea that you have, you can throw it up on a website. If there’s someone you’re trying to court as a client, build a website for them. You’ve got unlimited domain hosting with them. Record your wife. Why not have a landing page for a party that you’re throwing?

It’s all included, unlimited domains. Here it is, a special URL where you’re going to get up to 62% off their already low prices. Really, be the type of person who cares about the pennies and wants to grow the dollars. Here it is, HostGator.com/Mixergy. You’ll get a super-low price and you’ll get tagged as coming from me, which will help me. They’ll know my ads work. And it will help you because we will protect all of our listeners. If you ever have an issue, we will stand behind you with any one of our sponsors, HostGator.com/Mixergy.

Conrad: Andrew, I’ve got to show you something. I love that story. Stay there.

Andrew: I’m not going to go anywhere. Let’s see what you got.

Conrad: That story is so funny. Can you see in this little jar? That’s the pennies. We have this thing in our company, if anyone sees a penny on the road, they have to pick it up and put it in this little jaw. We think it’s good luck.

Andrew: I think it’s the right frame of mind. I can’t remember the name of the company but I saw them just thrive and I remember asking somebody who came into my office here for scotch night who worked for them, I said, “They must have money to spend.” He goes, “No way. The founder saw I once bought a pair of scissors to cut.” He said, “No, don’t buy a pair of scissors. Go return that.” Then he comes in with some rusty scissors from his house to cut. I thought about it. The scissors is not the point.

The point is send a message to the whole team, we’re making money, but we’re not going to be spend thrifts. We’re making money, but we care about the costs of scissors. We care about the pennies. As you’re growing, it’s really easy for people to get disconnected and say, “This guy is rich. This business is going well. We shouldn’t care about the money. Let’s go for the faster decision.” These little points like pick up pennies, put it in the jar send a message.

Conrad: I have a theory that when that jar is full, just about there, that’s going to be when we really hit it.

Andrew: That’s actually a really good theory. I think there’s a correlation there.

Conrad: About a third of the way up.

Andrew: When you were in the music industry, you started to see Spotify. What else did you see go on?

Conrad: I remember being at Warner’s and seeing YouTube emerge. At the time I went into Warner’s, YouTube just got started. YouTube gave this environment to any kid to start distributing music, basically, record it on their iPhone or little video camera, upload it to YouTube, you could reach a global audience. These bedroom stars started emerging, which had never happened before.

There was this phenomenon around the fact that you had a kid who could accumulate a fan base in the hundreds of thousands, even millions, completely on their own, have this engaged audience with whom they could do all sorts of things. If you could get them to go to shows, they could sell products. They could get them to buy stuff. They were musicians, but they had not gone through the major label system. It was this realization that everything was changing in front of our eyes.

Then I would look inside the business at the processes and the meetings we would have and the discussions that would go on and they were exactly the same as they’d ever been. Twenty years ago, it would have looked just the same as it did at that point. I just found it odd. I thought this was a strange disconnect between where we’re going and how these companies—it’s the same, big old companies, they take a long time to adapt.

I became fascinated with that. I remember when I was there trying to sign a kid to a T-shirt deal rather than a record deal because I had the view where we basically give the music away for free on YouTube. He’s using that to build an audience and fan base. He can sell tons of T-shirts. Why don’t we not worry about the music in a way and do the T-shirt deal. I remember going to finance and saying, “Can you help me work this deal through?” No one understood how they could do it.

Andrew: They didn’t understand how to make a deal with this kid who was on YouTube?

Conrad: Not that they didn’t understand it. There was no way to structure a deal internally based around selling T-shirts as opposed to selling albums. So that deal wasn’t going to happen. Also, it was just counter to the culture of the business. So you’re like—I just thought that was fascinating. There are ways to make money there, like you should get out and try and figure out what that business is.

Andrew: So you said, “I’m going to go out there and I’m going to do this.” Your first version of the company was called Pop Shack.

Conrad: That’s right. That’s exactly it.

Andrew: Pop Shack?

Conrad: We were like we’re going to create an environment called Pop Shack. It’s going to be all about the younger musicians. We wanted to be fun and unthreatening, a welcome and collaborative community. We wanted to build it on YouTube because that’s where I was seeing this talent emerge. We created this multi-channel network which is a structure of a business you can build on a YouTube platform supported by YouTube themselves.

We were sort of the first music-focused MCM, at least coming out of the UK. I was then figuring out how do we find this talent first, how do we see them before anyone else and how do we get in touch with them so they’ll join the Pop Shack network and we can monetize them through these ways, whether it was selling T-shirts or brand deals or whatever. We did that manually. I’m not a tech guy.

Andrew: You were sitting on YouTube going through what?

Conrad: Manually searching probably like you would for any video. We had a team of people in London and then we even built a team India doing this. We had about 12 people in India searching for us. We realized a couple of key things. One, YouTube is really good at showing you content that it thinks you might want to watch based on what you’ve watched before, but it’s not brilliant about showing you anything you don’t know about or is unconnected to what you’ve watched.

It doesn’t show you everything. It’s using an algorithm to try and get you to watch more. So, therefore, it’s not actually diving down really deep into the depths of the content ocean that is YouTube to find the things that are starting to move that are not there yet. We weren’t finding enough talent. We know there’s more out there but we can’t find them. I think we got to about 3,000 artists through manual search. We were just like, “There’s more than this.”

Andrew: Let me pause there for a second.

Conrad: Yeah.

Andrew: Pop Shack was founded by your wife, right?

Conrad: Her and I, yeah.

Andrew: I see. Okay. Initially, from what I saw on ClickZ a while back, she was doing this as a way of doing what? Actually, I thought that I understood it, but I’m not sure that I’m following. When I look at this, ClickZ says the day you became CEO of the company, it said Pop Shack reaches over 2.2 million subscribers and drive 8 million video views per month.

Conrad: That’s right.

Andrew: How did that work then?

Conrad: She kicked off the Pop Shack project. I joined from Warner about a year and a half later full-time. At that point, the network had by then, I think we had probably 150 artists. I can’t exactly remember. When you accumulate the video views of the artists on the network, you get to that big number. What you’re doing is as a collection of talent posting videos on their own individual channels, as a network, you can represent that whole group.

Andrew: Represent them to who?

Conrad: What I mean is you are managing the content that they’re putting out on their channels and you can represent them to brands. So you can go and talk to a brand who wants to reach a teenage audience and say, “We can reach this demographic through this network. Why don’t you sponsor the content or get involved with some of the talent that we’re working with.”

If you think about the challenge brands have got reaching a young August, there aren’t many places to go beyond online. YouTube is obviously a rich English for that. We were trying to build a kind of kids network based around music that would be exciting for brands to part with.

Andrew: And your idea was, “You know what? We can actually discover some of them and make them into music stars with record deals and so on.” I wrote a note to myself of why would they even want to be discovered today? I see some of these people on YouTube. Why would they even need a record deal? I’m trying to think of who it was. It was one of the Paul brothers, Jake Paul or the other, who put this goofy song on Spotify and I found myself listening to it a bunch of times.

I realized he doesn’t need a record company to get him on there. He could just go put it on Spotify and at the end of one of his videos said, “This is actually the song I put on Spotify. Go listen.” And I’ll go listen.

Conrad: Yeah. He definitely doesn’t need a record deal. You’re absolutely right.

Andrew: Why would anyone at that point need a record deal if they’re big on YouTube?

Conrad: Yeah, it depends. You’ve got to remember that not everyone is that level, that big. Some of the big—like Shawn Mendes was big on YouTube, was big on Vine. He did a record deal, Virgin EMI. You were like, “Well, he doesn’t need to.” But actually, Virgin EMI were able to take him from what he was doing and turning him into a global popstar. They were to galvanize a level of support from traditional media that he wasn’t getting in the YouTube environment alone.

Andrew: But that’s such a small group of people, it’s like 100 people are going to be that. You’re not trying to find the 100 people who are going to—

Conrad: That wasn’t our strategy. For us, 1 in 100 might go out and do a record deal. We were much interested in the group, the community, and what we could do with them. For us, the interesting model we thought was going to be selling merchandise and selling live tickets to shows and introducing brands into that environment. It was the rest of the mix that we thought was going to [inaudible 00:31:11].

Andrew: You thought if we could find them, it doesn’t have to be the top 100. If it’s the top 1,000 or so, we can help them monetize their passion and their art and we’ll collect a little bit of money for doing that. You went on YouTube. I interrupted you as you were saying, “We started looking on YouTube. We found a bunch of artists but that’s slow.”

Obviously, YouTube will start to customize it to your interests. You’re trying to figure out what the top musicians are in general, you’re trying to figure out the top for you and repeat the ones that you like. So, you decided, “We have to adjust this.” What was the adjustment?

Conrad: We just were obsessed with the idea there was a lot of talent we were missing. We started to talk to data science people and explore what you could do beneath the surface, beneath the algorithm. This is where I decided to learn about the power of data science because very quickly, people were saying, “You know, you can take the YouTube API and interrogate it and find out what’s going on behind the algorithm.” I was like, “Really?”

So we built some basic tech and the first version, all it was doing—I say all it was doing. It was quite cool. It was looking at every new music video uploaded in the last 24 hours and it was then saying, “I’m not interested in anything that’s on warner or Vevo or the major platforms. I just want to look at the other stuff.” Then it was saying out of all of those videos, I just want to rank them by the ones that have got the most views in the last 24 hours and then I’ll prepare a chart. So, each morning, it would give us this chart.

I remember the first time we sort of turned it on properly. We went in the next day and we looked at what was in there and there about 120,000 artists. We got to 3,000 in probably a year. So it’s like, “Oh my god. This is a much bigger sense of what’s going on.” Those 120,000, they have to have released something pretty recently. They have to put something up in 30 days or something. I can’t remember. It was just an idea of a sense of scale that you’ve got that you couldn’t see through the manual route.

Andrew: Then you went to potential customers and you said, “Here is some data,” right?

Conrad: Yeah.

Andrew: What were you trying to sell to them or learn to them in those early conversations when you had all that data?

Conrad: The two things happened at the same time. One was that model that I described to you for Pop Shack of finding brands and selling merchandise, we were finding that wasn’t scalable. We sort of hit a brick wall. Revenues were not predictable. Investors were scratching their heads. We sort of regrouped and we were like, “What have we got here that’s actually cool and actually solving a problem?” We thought this tech could be that thing.

So what I was going out was sort of saying, “Well, we solved this problem for ourselves. We were trying to do something and we found it difficult and we’ve now found a way of doing it better through tech. Does it solve a problem for you? Could it be something we could sell to you or you could benefit from?”

Again, I door-knocked in a way. I went to see people I knew. You use your network. We also just started sending out emails to people. Because it was YouTube, we thought, “Let’s send the emails to all sorts of different sectors. Let’s send it to fitness, motor manufacturers, to the food industry and see who bites and who’s interested.”

Andrew: Who did bite? What were the results?

Conrad: We did get a really eclectic set of positive responses from magazine editors to brands. I went and sat down with lots of them, showed them what we were doing and grilled them on what their challenges were. The two that became most interesting—well, music always one because we started there. Then a lot of people were getting excited about influence marketing and YouTube being a breeding ground for influencers.

There was a lot of interest from brands initially saying. We’re looking for the next big thing in the influence world. Can you help us with that. We became quite interested in that and thought the marketing budgets out there are huge. Can we tap into that? Could that be our way into a big business?

So, actually, for 12 months, we were doing both. On the music side, they’d ask us to explore Spotify as well. So we started looking at data science solutions around Spotify and went that way. Then on the influencer piece, we just kept going out and seeing if we could get money out of brands. We did. We did cash out of brands. We got campaigns and we ran them successfully.

The biggest pain we found on that side was campaigns last three weeks a month, maybe two months and then they’re over. Then you’re kind of back to scratch. So you’re constantly having to try and win new business. You turn into an agency that’s seeking out brand campaign money that’s not very reliable and not very predictable.

Andrew: You can raise money at this point, right?

Conrad: Yeah. We’d raise funding. There was a round based on the tech and based on the opportunity we thought we had for it.

Andrew: How much did you raise?

Conrad: It was seed money at that stage. It was a few hundred thousand dollars. I can’t remember exactly.

Andrew: I’m going to pause for a second because I see that you’re starting to make some sales. Let me ask about one of the first sales. What was one that stood out from the early days, to give me a sense of where you were?

Conrad: We did a deal which I was super-excited about with Pepsi. So we worked with Pepsi on Naked Juice, which is one of those smoothie brands on a really sizeable influencer marketing campaign. What we were really trying to sell to them was you shouldn’t just be doing campaigns. You should be constantly looking for influencers. You should be like a record label. You should be trying to find talent that’s going to help grow your businesses and partner with them for the long-term.

You should be always on in this search for influencers. We couldn’t change that. We couldn’t change the mindset away from campaigns. We did the campaign. I would say it was a success. They were very happy with how it turned out. Then they went away and that was the end of that. I was definitely trying to turn them into some sort of subscriber to what we were doing and they were stuck in their model, which was [inaudible 00:37:16].

Andrew: I’m going to take a moment to talk about my sponsor and then we’re going to come back and talk about the big problem you had and how that changed the company. My second sponsor is a company called DesignCrowd. Before we started, you said that you had an interesting use for DesignCrowd.

I’ll ask you about it in a second, but just to tell people what it is, DesignCrowd is a site where you go in and fill out I think a form with just two questions on it and then they get a team of designers from all over the world—they’re not even a team. They work against each other. They all send in design ideas based on what you requested and you only pick and pay for the one that you like.

I’ve talked about how I used it. But Conrad, you use it too. How did you use DesignCrowd? The one that you do for clients I think is an interesting idea.

Conrad: Yeah. We never had an in-house designer. We wanted to improve our sales decks. Particularly when we were trying to pitch to brands and we wanted each deck to look as impressive as possible, I went on DesignCrowd and found some guys who would correct PowerPoint decks for you from simple slides that we would create and we’d send them over.

So we did that thing of we’ve got three or four of them pitching. One guy absolutely nailed it. We paid him for that design and then actually kept him on. Every time one of the team had a new pitch deck we needed, we would go back to him and give him the brief. We probably did six or seven different decks with him, maybe. Maybe more. He was based in the Middle East.

Andrew: I never thought to go to them for pitch decks or frankly even for Keynote. I use Keynote presentations all the time. I paid this one company $15,000 to create my presentation once. I thought they were great, super professional. They took my ideas through interviews and they turned them into slides, which I loved.

The part that really stuck with me was how beautiful the slides looked. It made my ideas so much better. I never thought to go back to DesignCrowd and ask them to do that. But now you put a thought in my head. I always need presentations. I should take the slides that this company created for me and say, “Here are the ones that I love and why. Now, DesignCrowd, you create a template for me based on this so I can reuse that template.”

Conrad: That’s it.

Andrew: I love that. If you’re out there, even if you do have a designer in-house, it’s so helpful to go to DesignCrowd, say what you’re looking for and then get—in my case, I had dozens of designers from all over the world, each one with their own perspective on design, on presentation create something based on your needs and then you pick the one you like, only pay for that one. As Conrad has pointed out, if you pay for someone or if you start to like someone, you don’t even have to keep working with them through DesignCrowd. They make a match and you’re welcome to continue the relationship with that person.

All right. I’ve got a URL that Mixergy listeners can use to get up to $100 off and use them the way that I have for—we needed a logo for our certified professionals at one of the businesses that I run and they created it. We needed them for cover art. If you need them for slides, for web design, for anything you need designed, go and check them out.

If you just want some inspiration—again, this URL, DesignCrowd.com/Mixergy is fantastic for that. You’ll get $100 off. You’ll see the design that I got and you’ll get some ideas for yourself for how you can get your business to look better, to close more sales because of great design created by a crowd of professional designers, DesignCrowd.com/Mixergy.

The big thing that I was going to bring up was you had to go back to your investors at one point and tell them that your revenue was so low that it hit what number? Do you remember what I’m talking about?

Conrad: Zero.

Andrew: Zero? What was that like?

Conrad: We had a quarter of zero revenue, yeah, January, February, March of that year. It was hard because we’d actually had a pretty buoyant end to the year before. Then everything stopped. This was at this time when we were trying to unlock brand money. It was painful because you set your targets in board meetings and you go back a quarter later and tell you how you’ve done. So going back with a graph that was flat at zero wasn’t working.

Andrew: You’re a guy who left a job at a major record label, good paying job. You had a family. How many kids did you have?

Conrad: Four kids.

Andrew: And now, two years into this business you’ve got zero revenue. Were you freaking out at night?

Conrad: Oh, yeah.

Andrew: I do. I freak out sometimes. What were you worried about when you were waking up in the middle of the night with worries?

Conrad: I had that—you just sort of relayed the story and that’s what I will be going around. You left? Why did you leave? You would have been fine then. No one was telling you your time was up. Why wouldn’t you just take the easy option? I suppose you end getting through those nights and wake up in the morning and realizing the reason you’re doing it is partly because you’re made that way and you can’t really resist the challenge and partly because not every day is like that.

Those moments are quite sobering for—what it did was it just forced us to step back and look at it and think, “This isn’t working, quite clearly. What could work? What thing are we doing—if we strip away everything that really does add value and solve a problem?” I think that was such a massive lesson for me.

My first business had gone well from the beginning. We’ve been profitable every year, three years. We’ve grown nicely. We’ve grafted that. We sold it. It’s like that’s what it’s like. It’s quite easy, this running a business thing. The second one was the opposite. The first business model didn’t work. We had a quarter with no revenue. We had a team. That’s painful.

So it forced us to think hard and about—I think about simplification. That was the lesson to me was go away and figure out the one tiny thing you do better than anybody else in the world or could do better than anyone else in the world.

Andrew: And that was a subscription and a simple product. What was the one thing that you could do better than anyone else?

Conrad: So we settled on scouting. Scouting is the music and entertainment industry’s version of prospecting. If you look at B2B businesses, there are tons of cool prospecting tools out there that you can use to drive new prospects for your business. We just felt that was an area that media, particularly music had not invested in. If you don’t have a good prospecting process, your business will do what ours did and run out of money. You won’t have revenue. How you find prospects is how you find talent.

So we’re like, “If that has been neglected, is that an opportunity to do something better than anyone else?” We could see this changing world where we talked about the scale of all this opportunity, the scale of talent. We knew the old ways weren’t going to last and were going to need to be complemented by some sort of tech.

So could we build that tech? We went out, we didn’t find a lot of competition. There were companies looking at it, so we’re not the only ones, but we felt by just going right into that small thing of how do you keep discovering new talent that’s worth a look and do that better than anyone else.

Andrew: Like lead gen for the music industry.

Conrad: It’s lead gen. That’s exactly it. The music companies don’t think about it as lead gen, obviously, but it is that. It’s like filling a pipe. They don’t think of it like that as well. I do. I look at our business. We’re constantly trying to fill the pipe with new deal prospects. Actually, that’s what talent is to these businesses. They are new potential partnerships that can be highly valuable from a commercial point of view.

Andrew: Okay. So you went back to your clients and you started charging how much at that point for this type of business?

Conrad: Well, we pretty much charge the same now as we did them. We guessed at what we thought it was worth. We sort of looked—it’s interesting. We broke it down as a daily ask and we’re like, “What we give you is a set of daily prospects, like we were just saying, leads for you to explore.” I thought, “What value might that be to me on a daily basis?” I thought actually, if someone just came in with this sheet and it was all like hyper-qualified leads, I’d definitely pay them $20 or $25. I’d think that was money well spent.

We then said do that every day, 30 days a month. It’s about $1,000 of value to you. Interestingly, that was also what record labels pay for a scout. Their solution was a young straight out of uni kid out there pounding the streets going to gigs. They pay them about £1,000 a month. We thought okay, if we represent the digital version of that, but actually, we might be much more efficient and much more productive, that seemed like a price point to start at. So, we tried that.

Andrew: That’s where you are right now?

Conrad: Yeah. We haven’t actually shifted far from it. People started paying it. We were like, “That’s a good validation. Other people were like, “This is too much. Come back cheaper. We said, “Well, if it gets cheaper, we will.” We were bold enough—we hired a guy to lead sales, it was really helpful to me because he was saying, “This is worth more money. This is worth more money. We stay high.” They’re like, “Okay.”

It means fewer clients, but it actually means the ones you’ve got are very engaged. I think that was the right call. My instinct was a little bit like, “Let’s get loads of people on and then we’ll grow that way.” I think that was probably a good call.

Andrew: I have your revenue here on my screen, but I told you I wouldn’t reveal it without your okay. Can you say what your revenue was last year?

Conrad: Yeah. I think last year in dollars we were about $1.3 million.

Andrew: Okay.

Conrad: So we’re just running at a nice comfortable $120,000 MRR. Our goal at the moment is we want to double that in the next six months. That’s our kind of company-wide target. So, that’s my passion at the moment is we’ve gone from this lumpy brand world where we had a quarter with no money. Even though it started smaller, gradually increasing MRR. It’s just a different conversation when you go see the board. You might miss your number a bit, but you’re not going to show a zero. Now, it’s all about how do we grow that.

Andrew: Before we started, you told me about a success story. Calum Scott, I know he was one of your early success stories before you were charging subscription fees, but I think it gives people a sense of what instrumental can do. Can you tell us a little bit about who he is and what happened?

Conrad: Sure. So I mentioned that we started with these YouTube charts when we were looking for talent on YouTube. We would look at them every day. We’re looking for our own reasons rather than for other people. We saw this video of a top of a chart, which was Calum’s bedroom recording of his song called “Dance on My Own.” The context for him was he had been on Britain’s Got Talent, which is a big—you know the show, it’s all over the world. He had done well on the show. I think he got to the final.

He had not won it and he had not been signed by Syco, which is Simon Cowell’s label. He wasn’t picked up by them. His management had been taking him all over the UK industry and no one had signed it. He had been left to his own devices, and he had gone home and recorded the song he sang on the show, made this homemade video and put it up.

We didn’t know anything about that, by the way. I hadn’t seen the show. We just saw the stats and we were like, “Bloody hell, this thing is engaging an audience.” We checked it out a bit more and we kept growing. We got in touch with him and said, “What are you going to do? This song is unbelievably popular.”

I went to Warner. They weren’t interested in it. He was a kid from a TV show who everyone had passed on. It was a cover. The music industry likes original material, but this cover was working. Eventually, we said, “Why don’t we put it out?” We built a little partnership with him. We helped him move from YouTube to Spotify and iTunes and all that and put a campaign around social media together. We didn’t spend any money.

This song was released. It did well at first. We thought, “That’s quite cool.” It’s about 3,000 copies or something, downloads. Then it kind of slowed down. For some reason, the social just started connecting and it kicked off. And all this data stuff that we’d seen just started to, I guess truly go viral because this was not money pushing it. It was just people loved it and they kept sharing it and they shared it with someone else. This sort of growth came along.

To cut a long story short, that song has done 300 million streams on Spotify now. It’s sold 1.6 million copies in the UK alone of that exact version that we saw on YouTube. And he got signed to Capitol records. He’s doing incredibly well. We’re super proud. I suppose for us, the lesson, what we could have done is think we’re going to be a label like everyone else. This is it. We’ve got the formula.

But actually, what we took from it was we had seen something in data that everyone else’s prejudice was obscured to see. Their view was this wouldn’t work for all the reasons that traditionally it wouldn’t have. He had come off this TV show and it was a cover and radio doesn’t play covers.

We were just like, “An audience is absolutely adoring this song and is viewing it and sharing it and subscribing to it. Let’s see if they’ll buy it.” We didn’t really think a lot more beyond it. We certainly didn’t expect it to do what it did. A lot of credit goes to Capitol because they took it on to the next level. We didn’t do the whole thing. That nugget of opportunity was all the data and nothing else.

Andrew: You don’t need hundreds of customers in your business to do well. You’re where you are now with dozens of customers. We talked about where the first customers came from. Where did the next batch of customers come from?

Conrad: A mixture, really. We invested in an inside sales team. We started pounding the streets in the old door to door way. We would be sending emails. We would be phoning people. That’s worked pretty well. Then we went quite heavy in on PR and content marketing because part of the challenge we have is we have to sort of get people to rethink the way they do what they’ve always done and to embrace technology, to embrace data and not think it’s all about gut instinct.

We thought the best way of doing that was sort of talking about it and sharing new ways, new thoughts. So, we’ve done that through content. We’ve got a blog called Frtyfve where we showcase the talent we see in the data and we talk about—

Andrew: That’s the one that’s on your site?

Conrad: So we have a blog on the Instrumental website, but we have a separate site, FrtyFve.com. That is our kind of—it’s a content marketing platform we use. We write about the artists we’re discovering. What happens is labels will discover that site through these emerging talent and then they’ll find that Instrumental is the power behind that content. We’re throwing out these little baits and hopefully trying to hook a potential customer. It’s actually been incredibly successful. It gives us a sort of credibility in the music space because we’re writing about music.

We show we’re passionate about the subject. We’re not pure decades coming out of Stanford or something and thinking we can solve all their problems. We recognize that the journey this talent needs to go on after we’ve thrown up a prospect is a long and detailed and does need lots of expertise and support, but we think we’re really good at that discovery a bit and we want to share it through content.

Andrew: And Conrad, you’re reaching out beyond music too, right? To where?

Conrad: Yeah. So that was another eye-opener because we sort of began to finesse this process and then we realized media companies need to try and find talent have the same problem. We work with book publishers, looking for all sorts of different creators, whether they’re food bloggers or fitness. We work with a company called Nitro Circus, who we love, who are based out of San Diego, extreme sports. We help them find emerging kids doing scooter tricks and stuff. We’re leveraging the data.

Andrew: Who’s looking for that? Who’s trying to figure out who the next extreme sports YouTuber is?

Conrad: In their case, I don’t know if you know the company, but they put on extravagant shows and they tour those shows around the world.

Andrew: You might have one customer that says, “We need to find the next big hits for our event.” And you’ll say, “Okay, we didn’t have an extreme sports division before. We’ll go into extreme sports to help you find it.”

Conrad: Exactly.

Andrew: More and more, it looks like what you’re seeing is your talent, your specialty is not just the music industry. It’s uncovering future talent that’s growing online.

Conrad: Yeah.

Andrew: You might need to change your name again from Instrumental, no?

Conrad: Being Instrumental is hopefully what we are. That’s the useful thing about it. It’s got two meanings. Hopefully, we won’t change it again. I think the process is the same. You’re looking for commercially interesting creative talent. Actually, we just point the machine at a different set of data and apply some different filters and up come extreme sports.

Andrew: When I was searching, when I was trying to figure out what keywords are sending traffic to you, artificial intelligence or AI was one of the things that people were searching for. I saw your eyes light up as I said it. Do you have AI capabilities or are people just looking for artificial intelligence and landing on your site?

Conrad: We do. We have some I would call it low-level machine learning in the system at the moment. That might be looking at tags and trying to interpret what a piece of content is better because often people don’t classify their music or their video correctly or are thinking about what we’re trying to do. We use machine learning to better cluster content and help make sense of it. We’re also investing in prediction AI.

So what that is that’s saying if there are different things happening at the same time and we know from looking back over 12 months of data that that combination of events is more likely to lead to future success, then we want to rank you more highly than something else. That’s just a continuous process.

The more data we collect, the cleverer we can be about knowing what’s going to happen next. I don’t think we’re ever looking to say what you did at the beginning, that this is going to be Ed Sheeran in 10 years. I think that’s completely impossible. I think what you can say is right now, these are really encouraging signs so you should definitely check this out first in the morning when you’re having your coffee.

Andrew: Let me close this out by pulling the curtain a little bit so people can see behind the scenes. You and I were scheduled to do this interview on Tuesday at 6:00 p.m. my time, which has got to be what your time?

Conrad: It’s about 11:00 or midnight.

Andrew: Which is madness for you to have done an interview at that time. I understand why you’d want to reschedule it. Then we had to find a way to make it work for us. The time difference between San Francisco, California, where I am, and London, where you are, is really difficult. What’s it like running a business when you are timewise so out of sync with much of the U.S.?

Conrad: It’s a challenge. I have to say I was very pleased that we brought U.S. customers on quite early and have kept them because I did think that was going to be a big problem. The great thing is the data is the data and it’s global and it’s real time.

Andrew: They’re not looking to have conversations with you and consulting services with you.

Conrad: That’s it. Yeah. They’re able to get on with a lot of it themselves. That said, we have just opened up an office in New York, which will help us bridge that gap. We’re sending people out to the West Coast, so we can get better at it.

Andrew: Potential clients do still want to have a conversation.

Conrad: Yeah. There totally needs to be the relationship there. Often, we were saying the relationship starts with our standard product, but quite quickly, it sparks ideas that these guys will have. So we’ve got clients like Disney over on the West Coast and the guys there are full of ideas about how they can improve what they do and how we might be able to help them. Absolutely, we need to go over and spend time with them.

Andrew: I’ll give you an example. Your website, WeAreInstrumental.com, for anyone who wants to check out the business, has got a chat box on it, which is really helpful when someone’s making a decision this big. I went in to chat right now and it says, “We’ll return tomorrow at 1:00 a.m.”

Conrad: Yeah, there you go. There’s our issue.

Andrew: It’s a challenge. You’re saying it hasn’t crippled you. It has been enough of an issue that you’re now starting to think about—

Conrad: We’re absolutely trying to address it. I think it’s not just the West Coast. We have clients the other way. We’re working with companies across Asia. The good thing about London is if you think about Asia—

Andrew: Right in the middle of Asia and the US.

Conrad: You are in the middle, yeah. But for sure, our biggest opportunity is the US and so New York is our first move to try to help.

Andrew: I’ve been wanting to live in Spain for a year. My wife and I have been talking about it for a long time. I love Spain. The time difference would drive me crazy, which is why we ended up in Argentina when we did instead of Spain because the time is a little easier.

Conrad: Spain is great, though. Have you been?

Andrew: Yeah, I love it. I love the little cities in Spain. I don’t love Barcelona that much. I get why you’d want to be there. The smaller cities are the ones that really excite me. What do you love about Spain?

Conrad: The food is incredible. I agree, [inaudible 00:59:14] the Pintxos Bars in San Sebastian are insane. They’re like their version of [inaudible 00:59:21]. So, it’s different. I love it.

Andrew: For me, that would be the ideal place to live for one year and eat the food and live the life and as long as you have high speed internet, who cares?

Conrad: I totally agree. Let’s do it.

Andrew: I’m a little committed. My wife just got a job at another tech startup here in San Francisco. We can’t even move across the bridge because it’s too convenient for her.

Conrad: I made the right move. My wife works with me here. So wherever we go—

Andrew: I saw you guys have been working together for more than a decade.

Conrad: Well, on and off, we took a break. When we sold the business to Warner, I made it redundant. She went off and had triplets.

Andrew: Yeah, I saw. You were in it. I don’t know what it’s like to work with your wife. I couldn’t do it. I love Olivia. I love to spend time with her. I don’t think I could enjoy working with her. That would drive me crazy.

Conrad: A lot of people say that. It isn’t easy. But it’s also—there are huge upsides. It’s like who do you trust more to be in your business? You’ve both got your best interests at heart. She’s great at—with the team, she has a different role to me in that relationship with the team. It’s a useful foil to have for discussions. Actually, what we do, as you say, if you have great internet, you can work anywhere. So we try and work separately as much as possible. She’ll probably work at the office more than I will. It seems to work, so far, so good.

Andrew: All right. The website is WeAreInstrumental.com if you want to go check them out. And I want to thank my two sponsors who helped me this interview happen. The first is a company we both use, Conrad and I have gone for great design from a company called DesignCrowd. If you want to check them out, go to DesignCrowd.com/Mixergy.

If you want your website hosted right by the guy who finds pennies on the floor and gets excited about it and ends up building these tremendously successful multimillion-dollar companies and he’s done this over and over, Syed uses HostGator. I highly recommend them. Check them out at HostGator.com/Mixergy.

Conrad, thanks for doing this.

Conrad: Thank you.

Andrew: Thanks. Bye, everyone.

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