Why Music Tech Startups STARVE while Billions Flow to the Top — and How We’re Solving It

The music industry holds vast amounts of capital. Yet almost every founder building music tech struggles to access it.

For the past two years, I’ve worked to understand why. That effort included structured interviews, field research, academic work, and direct collaboration with early-stage companies. Again and again, the same pattern surfaced. The money is there, the ideas are strong, but the connection between the two often fails.

This article explores that breakdown. It outlines six structural barriers that hold founders back and introduces a practical framework that has helped them communicate more clearly, reduce confusion in the room, and improve funding outcomes.

The need for this work first came into focus in March 2024, when Amplitude Ventures had been reduced to two people. We were taking consulting work just to keep going while watching other founders run into the same wall. The usual advice to cut deeper or scale faster felt far removed from the actual conditions we were facing.

That experience exposed more than a funding problem. The gap between the capital flowing into the top of the industry and the scarcity facing early-stage founders revealed a deeper breakdown in communication, alignment, and trust across the ecosystem.

At the time, I could not find any academic foundation focused on early-stage music tech financing. I made it a mission to help build that missing bedrock through practice, research, and direct work with the people most affected.

Understanding why this disconnect kept happening became my focus. As CEO of Amplitude Ventures and host of the Sound Connections Podcast (now one of the top music industry podcasts globally), I was speaking with both sides of the market every day. Investors were deploying billions into catalogs and established firms. Founders building tools that solved real problems were quietly running out of time and capital.

That inquiry became a two-year research process. It evolved into a Master's thesis at the University of Agder. I analyzed over 110 podcast episodes, interviewed more than 30 founders, investors, and industry leaders, reviewed 40 academic papers across behavioral finance and creative industry economics, and worked directly with a dozen early-stage music tech startups.

The research process reflected what I had seen in practice. Founders struggled to explain their work. Investors struggled to evaluate what they were hearing. Each interview added definition. Each missed opportunity revealed part of the pattern.

What emerged was a framework that now shapes how we think about innovation, investment, and sustainable venture building in music tech.

The Six Uncomfortable Truths About Music Tech Investment

Truth 1: The Market Is Mature, but the Pipeline Is Broken

The numbers show two distinct realities. Since 2020, tens of billions have flowed into the music tech sector. Private equity firms like KKR and Blackstone are not only acquiring catalogs but also buying the operational companies behind them. This trend, which industry analyst Cherie Hu describes as the rise of a "powerhouse market segment," has become increasingly visible.

What we are seeing is a change in how capital interacts with music. Academic literature describes this process as the “financialization” of the industry. Large institutional investors are applying new logic to music assets. They view rights as stable, long-term holdings. They see streaming as a predictable source of revenue. Infrastructure businesses are treated as sound investments with measurable returns.

Yet the companies receiving this capital are rarely the ones creating new tools or solving emerging problems. The money tends to concentrate on already proven models. On the Sound Connections Podcast, Morgan Hayduk and Andrew Batey described what this looks like for founders. They called it a "graveyard of dead music tech companies."

The difference in outcomes is hard to miss. While Blackstone can deploy billions to acquire Hipgnosis, a founder building a better model for royalty distribution struggles to raise five hundred thousand dollars. KKR categorizes catalogs as assets suitable for pension fund portfolios. At the same time, early-stage investors hesitate to back companies solving challenges in rights, licensing, or creative workflows.

The top of the market is fully capitalized and well understood. Beneath that, early-stage ventures operate with limited access to support or funding. There is no structured pipeline helping founders translate ideas into investable businesses. For those without insider access or early traction, the system often remains out of reach.

Truth 2: The Valley of Death Runs Deeper in Music Tech

All startups face the early-stage funding gap between building a first version of a product and convincing investors to support it. In music tech, this stage is more difficult. It demands more evidence, more patience, and a deeper understanding of industry dynamics.

The academic definition of this period refers to the phase where innovation struggles to move from prototype to commercial reality. In music tech, this stage consistently presents more obstacles. The expectations placed on founders go beyond having a working solution. They must also prove relevance, demonstrate real-world demand, and often secure buy-in from legacy players with deeply rooted influence.

This came through clearly in a conversation with the team at BeatConnect. On the podcast, they explained that in most sectors, a strong product can gain early traction. In music tech, a good idea is not enough. Founders need visible usage to make the opportunity legible to investors. One founder shared that major labels remain the most powerful players in the space. Without their support, progress can stall regardless of product quality.

This creates a loop that founders know well. Investors ask for traction before they commit. But reaching that traction requires early investment. Building at this stage is financially demanding. In many cases, founders are pushing forward without a safety net. And in cities or regions outside of traditional hubs, finding the right investor can take years.

The financial toll on founders is real. I’ve seen people use personal savings, take on credit card debt, and put their financial futures at risk while trying to bridge this period. One founder estimated that 99 percent of all music tech companies either fail or get quietly absorbed. That number reflects a larger problem. Many ideas never reach the stage where they can be properly evaluated, improved, or tested.

Truth 3: Investor Psychology Is the Primary Barrier

Through this research, one conclusion became clear. The biggest funding obstacles in music tech are not rooted in economics. They come from human psychology.

By applying behavioral finance theory to investment patterns in this space, it became possible to identify the psychological forces that shape decision-making. These forces do not make investors irrational. They reflect how people process risk and uncertainty when the terrain is unfamiliar.

Three recurring patterns stood out:

Loss Aversion

This principle, established by Kahneman and Tversky, shows that people tend to experience losses more intensely than they experience equivalent gains. In music tech, this tendency appears often. Many investors carry strong memories of failed deals in the space.

Hazel Savage, whose company Musiio was acquired by SoundCloud, described this clearly. She explained that some investors had been “burned” by past investments that had gone “spectacularly wrong.” That experience continues to shape how they respond to new opportunities.

The legacy of the Napster era still influences the present. Those who lived through lawsuits, collapsed platforms, and sudden regulatory challenges have not forgotten. One investor told me, privately, that he had lost money on three music startups in the early 2000s and would never invest in the category again. This mindset is widespread. For many, the fear of repeating the past is stronger than the potential reward of backing a new venture.

This level of caution blocks progress. Deep-seated suspicion prevents new entrants from getting the support they need, regardless of product quality or commercial potential.

Anchoring Bias

Music tech is often seen through a limited frame. Investors anchor quickly to the idea that it is a small or uncertain market. Once that idea is in place, it is hard to dislodge.

The numbers reinforce this view. Spotify trades at revenue multiples of 2 to 2.5 times, while comparable SaaS companies command much higher valuations. This sets a ceiling before the conversation begins.

But the bias goes beyond metrics. Some investors still view music as an industry that resists innovation and operates with outdated structures. Many assume that content businesses are inherently volatile, that success depends on unpredictable hits, and that growth is impossible to forecast. These perceptions shape how valuations are framed and how risks are measured.

This kind of anchoring affects investment decisions long before any due diligence begins. It limits the ability to recognize potential in models that look different from traditional software or infrastructure plays.

Ambiguity Aversion

Many investors do not understand how the music industry works, and they are aware of that gap. The complexity of music rights and licensing creates a barrier. As Hazel Savage put it, “There are things about our industry that if you know, you know, and if you don't, you don't.”

This is not a casual gap in understanding. It becomes a reason to avoid engagement altogether. Behavioral finance research shows that people tend to prefer familiar risks over unknown ones. For an investor, a SaaS product with clear benchmarks feels safer than a music rights platform that requires domain fluency.

Antony Demekhin observed that many investors in this space are “flying blind.” They may not realize that much of the industry’s value chain revolves around marketing and distribution. Their assumptions remain fixed on older mental models. As a result, they struggle to see how certain innovations can work.

This uncertainty leads to two common outcomes. Some investors disengage early and decline the opportunity. Others fill pitch meetings with basic questions about how royalties function, which leaves little time to evaluate the product or team. In either case, the underlying issue is the same. A lack of context makes it hard for even well-meaning investors to make informed decisions.

Truth 4: The Exit Math Is Fundamentally Different

Seventy-five percent of music companies are acquired for less than $15 million, according to Andrew Batey from Beatdapp. That figure defines the reality in this space. It shapes how founders should think about value and how investors should evaluate risk and return.

While other parts of the tech world chase billion-dollar outcomes, music tech operates on a more contained scale. Dan Runcie of Trapital has noted that billion-dollar exits are rare in this industry. That observation is supported by data and by the structure of the market itself.

The pattern is consistent. Most music tech companies are built to serve specific roles. They solve operational problems for labels, publishers, or artists. They fill gaps in rights management, data processing, or content workflows. These businesses are often precise and practical, not sweeping in their ambition.

This model creates a challenge for traditional venture capital. The standard venture approach relies on a few outlier wins to balance out a high failure rate. To make that math work, funds need the possibility of 100x returns. In music tech, even the best outcomes rarely come close to that.

The numbers illustrate the tension. A Series A investor might contribute five million dollars at a twenty-million post-money valuation, acquiring a quarter of the company. To produce a tenfold return, that business would need to exit at two hundred million. In this sector, that level of outcome is the exception, not the norm.

This is not a failure. It is a structural truth. Once this is understood, founders and investors can work with more accurate expectations. Dan Runchie from Trapital mentioned that owning ten percent of a $100 million exit can return the same capital as holding a much smaller stake in a $1 billion deal. The former is more likely in music tech and is often more stable.

This reality influences everything. It changes how teams are built and how growth is managed. It reframes investor conversations. The goal is not to become the next Spotify. The goal is to build a strong, focused business that delivers measurable value and can become part of a larger ecosystem through acquisition.

When everyone at the table understands this, better decisions follow.

Truth 5: Strategic Communication Is Everything

One of the clearest patterns in this research was also one of the most difficult to watch. Strong ideas kept falling apart in conversation. Founders and investors often struggled to understand one another, even when they were both interested in solving the same problem.

After observing dozens of pitch meetings and reviewing founder decks, it became obvious that many of these conversations were failing because of language. Founders were speaking from deep experience inside the industry. Investors were listening from outside it. The result was confusion where there should have been alignment.

As Amanda Schupf shared on the podcast, “Music companies have a hard time translating what they're working on into terms people who don't know about music can understand.” That gap isn’t caused by a lack of skill. Many founders are excellent communicators inside their domain. The breakdown comes from trying to explain complex, layered concepts to people without shared context.

In real meetings, this often looks like a founder using valuable time to explain how royalty systems work instead of focusing on their core value. I’ve seen investors lose interest at the mention of terms like “neighboring rights” or “mechanical royalties.” The energy in the room shifts. What began as curiosity turns into quiet hesitation.

This communication gap shows up in four recurring ways:

Terminology Music tech is full of specialized language. Terms like “synchronization rights,” “master recordings,” or “performance royalties” are rarely understood outside the industry. To investors, this language often signals complexity and risk. It creates a sense of uncertainty that weakens trust before the product can even be evaluated.

Business Models Many music tech companies rely on multi-layered business structures. They work across rights holders, creators, platforms, and service providers. These models often don’t match standard templates used in SaaS or marketplace businesses, which makes them harder to assess quickly.

Value Propositions What feels essential inside the industry can seem minor from the outside. A 10% improvement in royalty matching, for example, can unlock millions in value. But that impact is hard to explain without an industry background. The benefit is real, but it does not immediately register with someone unfamiliar with the problem.

Scale Perception Founders often describe their market using figures like “a four billion dollar market for music tooling.” That number might feel significant within the industry. But compared to trillion-dollar tech sectors, it can seem small. Without additional context, investors may misread the opportunity.

Karl Richter pointed to a more subtle challenge. He warned that partial understanding can be more dangerous than no understanding at all. When investors believe they understand the space but miss key structural realities, it leads to miscommunication and poor decisions.

This breakdown in translation slows down progress on both sides. It doesn’t reflect a lack of opportunity. It reflects a lack of shared framing.

Truth 6: Integration Works Better Than Disruption

The idea of tearing down old systems and rebuilding from scratch is common in tech storytelling. In music tech, that approach rarely succeeds. The most durable businesses in this space are not trying to replace the existing industry. They are improving it from within.

This became clear after analyzing successful exits and sustainable models. The companies that gained traction and created value did not challenge the power structure head-on. They focused on solving specific problems and worked alongside existing players to deliver something useful.

As Mansoor Rahimat Khan of Beatoven.ai shared, building in music requires alignment with the labels. These are the companies that hold decision-making power. Trying to bypass them often leads to resistance. He pointed to past examples like Napster, which ran into legal walls quickly. Companies that chose to build relationships were more likely to keep operating and growing.

Founders who succeeded in this space understood the importance of context. They built tools that helped others do their work more efficiently. These included:

• APIs that connect systems across labels, publishers, and platforms

• Analytics tools that help companies make better decisions

• Workflow systems that simplify royalty processing

• Creator tools that operate within existing creative platforms

Einar Helde expressed this clearly in his “API first” approach. His goal was not to create another platform competing for attention. It was to build technology that fits into other music products and strengthens them. That decision improved adoption and reduced friction with partners.

This approach brings multiple benefits:

• Customer acquisition is more efficient because the product adds value to existing systems

• Adoption happens faster because user habits stay the same

• Strategic buyers recognize the value of integrated tools and are more likely to acquire them

• Incumbents feel less threatened and more open to collaboration

• Revenue models are more predictable, especially in business-to-business environments

These patterns match the investment outcomes discussed earlier. In Truth 4, we saw that most exits happen at modest but meaningful valuations. Integration increases the chances of reaching those outcomes by aligning product design with acquisition logic.

Building in this way does not reduce ambition. It increases viability. It creates businesses that last.

The Solution: Parallel Narratives

After identifying these truths, we had a decision to make. One option was to treat the barriers as fixed and advise founders to avoid the music tech category altogether. The other was to build tools that could help them navigate what was clearly a difficult landscape.

Through repeated testing with founders at Amplitude Ventures, a practical framework began to take shape. Over time, we refined it into something that consistently improved outcomes.

We call it Parallel Narratives.

The core idea is simple. Founders often explain their companies using the language and logic of the music industry. That framing does not always translate to investors. Parallel Narratives asks founders to reframe what they’re building using models investors already understand. This is not about oversimplifying or misrepresenting the product. It is about finding the version of the story that resonates outside the industry.

The behavioral theory behind this comes from research on framing effects. In behavioral finance, the way a problem is presented can influence how it is interpreted. When founders frame their work through familiar structures, investors are better equipped to process what they’re seeing. This reduces confusion, lowers perceived risk, and opens the door to productive discussion.

Jeff Ponchick offered a clear example of this approach with Mogul. Instead of trying to explain the details of “neighboring rights royalties,” he described the company as “Robinhood for music royalties.”

That reference gave investors something to hold on to. They understood what Robinhood had done in fintech. They understood how user acquisition and market access worked in that space. The analogy created immediate clarity.

This approach is effective because it speaks directly to the psychological barriers identified earlier:

• It reduces ambiguity by using familiar frames

• It pulls attention away from narrow market anchors and toward broader comparisons

• It offsets fear of loss by drawing from models investors already believe in

But the work does not stop at analogy. Parallel Narratives requires founders to build a bridge between two domains. That means:

• Identifying the core business problem their company solves

• Finding successful versions of that problem in other industries

• Converting internal metrics into external language using standard KPIs

• Explaining value in terms that work across sectors

• Maintaining clarity without compromising truth

When applied well, this process does more than improve pitch outcomes. It helps founders see their work more clearly. It often reveals new partnerships, new positioning options, or new routes to growth.

Parallel Narratives is not a storytelling trick. It is a discipline. And for founders working in music tech, it has become one of the most reliable tools for getting funded and being understood.

The Practical Playbook

At Amplitude Ventures, we’ve worked with dozens of founders to refine this approach through direct feedback, testing, and real-world results. What follows is a practical system built from observed outcomes and live pitch meetings.

Each element addresses a consistent obstacle founders face when trying to raise capital in music tech. Together, they provide a repeatable method for communicating clearly, framing value, and improving fundraising outcomes.

1. Say “Music” Only Once

In your investor pitch, say the word "music" no more than once. This constraint pushes clarity. It removes the default shorthand founders often rely on and forces a focus on core business value.

For example:

• Instead of “music analytics platform,” describe “a vertical SaaS solution for understanding customer behavior.”

• Instead of “rights management system,” describe “compliance infrastructure for intellectual property.”

This rule helps clarify whether you're solving a problem that exists only in music or one that crosses into broader business contexts. It also prevents early anchoring and gives the investor a clearer lens to interpret your company’s value.

2. Proactively De-Risk the Model

Investors are aware of the common friction points in music tech. They include legal complexity, licensing opacity, and unclear revenue paths. These concerns often remain unspoken in a pitch. When that happens, they become reasons to pass.

Use one slide in your deck to address these concerns directly. Acknowledge the known risks, and then explain how you’ve accounted for them. You might include:

• Legal reviews or opinions validating your model

• Partnerships with trusted industry players

• Precedents from other ventures with similar structures

• A clear, concise explanation of how complexity is managed

This signals that you understand the investor’s perspective. It also demonstrates that the company is prepared, not defensive, about the known difficulties of operating in this space.

3. Prioritize Data Over Emotion

Many founders come into this work from a place of passion. While that energy is useful, it does not convert investment on its own. As Andrea Rosen pointed out in one session, investors often pull back when the pitch feels too emotional and not specific enough.

To build trust, support your pitch with data:

• Use verified market research and cite sources

• Present your unit economics clearly

• Show early traction with real user or revenue data

• Define what makes your offer different and why it matters

• Create financial projections based on grounded assumptions

This gives investors something to measure. It helps them move from interest to confidence.

4. Align with Broader Investment Themes

Some investors will never back a standalone “music” venture. But many will invest in sectors that touch music when framed within a larger theme.

Identify how your company aligns with one or more of these themes:

• Creator economy infrastructure

• Health and wellness applications

• Digital learning or EdTech platforms

• B2B workflow or compliance tools

This kind of framing expands your audience. It helps you reach capital pools that would otherwise be out of range.

5. Build Around Achievable Exits

Design your financial model for an acquisition outcome in the twenty to fifty million dollar range. That range reflects where most successful music tech exits occur. It is also much more credible to investors.

To support this:

• Identify likely acquirers early

• Build relationships with those companies over time

• Create integrations that make your product easy to adopt

• Set milestones that support realistic growth multiples

Investors want to understand how their capital comes back. When the path is clear and the numbers match the market, the decision becomes easier.

Reflections on Research and Practice

When I started this work, I couldn’t find any academic foundation focused on early-stage music tech financing. That absence became the starting point. It revealed a gap that could not be ignored, one that stretched across research, venture support, and industry strategy.

Through this process, one thing became clear. Most academic research on music tech investment remains limited and disconnected from the day-to-day experience of founders. There is a need for more people who understand both the structure of music technology and the psychology of capital. The most useful contributions will come from those who can evaluate venture models while also understanding why a ten percent improvement in royalty infrastructure is a real and measurable gain.

This is about building stronger feedback loops between research and practice. When founders understand the decision-making patterns they are likely to encounter, they can prepare for them. When investors understand how framing affects their judgment, they can evaluate more clearly.

Moving Forward Together

The work ahead requires collaboration. If this research reflects your experience or raises questions you've faced, feel free to reach out. I’m happy to share the full thesis and the applied frameworks we’ve developed.

At Amplitude Ventures, we’re also finalizing what we believe will be the most complete analysis of music tech funding and exits available today. This work is based on seven months of structured data gathering, founder collaboration, and real-world case study design.

We build companies. You can learn more about our work at amplitude.ventures.

What began as a personal gap turned into a shared challenge. Building companies is part of the solution. Building the foundation for how this category grows, academically, financially, and strategically, is the rest of it.

Jakob Wredstrøm is the founder of Amplitude Ventures and host of the Sound Connections Podcast. We build companies with founders, backed by a 70+ person team globally, offering full-stack venture-building support, deep music tech insight, and research-backed frameworks designed for the realities founders face.

If you're building in this space, let’s talk about how to shape a great investment case and company. If you're investing in it, we can help you evaluate better. And if you're researching it, we’d love to collaborate.

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