Revolutionising Startup Funding with Web3 Technology and NFTs
Revolutionising startup funding with Web 3 Technology and NFTs and the lessons we learnt along the way
Funding is the greatest hurdle to overcome for any startup. Statistics show that individual venture capital firms receive more than 1,000 proposals a year and that one in four businesses are not able to receive the funding they require. As a result, business loans, credit cards, and lines of credit account for about three quarters of financing for new firms.
When the pandemic hit in 2020, my co-founder, Frank McGowan and I, had the time to reflect on how the music industry operates and, as far as we could see, how things could be done differently. The idea of our rock music startup was born during that time, but instead of going the traditional, and many times disappointing route of approaching venture capital firms for investment, we looked to Web3 technology for funding solutions.
While starting this new business was the most daunting task of our lives, we believed in what we were doing and our conviction and will was strong. We are now launching Road Hounds – a community-focused social platform funded by a blend of private investment, NFTs and subscriptions. In addition, through the use of NFTs, loyalty programs and blockchain technology, our startup supports and champions new and emerging talent within the rock music genre!
Web 3 Technology Made Our Vision Possible
Web3, the next iteration of the internet, is also an umbrella term for a powerful set of tools, including NFTs, metaverse and cryptocurrency, which form the foundations of a new version of the Internet that has an added identity, money, and social layer. It is built upon open protocols that value transparency and innovation and syphons power away from big corporations, and instead gives everyone the possibility of truly owning and controlling their own assets, data and social relationships.
Blockchain technology has also created a unique opportunity for artists to create and publish music directly to fans, ensuring any royalties are channelled back to the originator with no middleman taking their percentage along the way.
There are so many young bands out there that need both an audience and a break. So we wanted to plug that well informed, impassioned worldwide rock music loving community into a super charged investment hub to help sponsor and fund that new talent? This is where Web 3.0 comes into its own. With blockchain tech you can make these investments happen while simultaneously protecting artist IP and community goodwill.
Our journey has been turbulent and stressful, but by far most importantly, we want to inspire others to break the mould and investigate what the new frontier of Web 3 offers them. Here are our top four lessons learnt along the way:
If you take the leap, choose your blockchain carefully
While crypto experts sometimes refer to “the blockchain” as a singular innovation, it’s important to remember that several blockchains exist for artists to mint tokens on; each comes with its own benefits and drawbacks. For example, Ethereum is currently the most popular blockchain for NFT projects due to its open design and robust community. Unfortunately, Ethereum also has some of the highest fees for creating NFTs, often up to $100 per NFT. Road Hounds uses the Proof-of-Stake (PoS) Ethereum blockchain. PoS blockchains use significantly less energy than first generation Proof-of-Work (PoW) blockchains.
Before minting NFTs, calculate the projected returns a given platform offers instead of just partnering with the first platform you see. There are also brand safety considerations to keep in mind. As the public becomes more aware of the environmental impacts of inefficient blockchain technology, more people are looking for ways to mint tokens without contributing to climate change. Always research the currently available blockchains and find a revenue model that lines up with your brand and conscience.
Be smart about smart contract royalties
It is vital to understand precisely how NFT royalties differ. When minting a token, the creator can use a smart contract to specify a percentage of each transaction that goes to a particular crypto wallet. This means that after someone buys an NFT from the initial token sale, creators will continue to earn revenue on each secondary trade within an NFT marketplace.
The critical part to remember is that smart contracts are immutable. In some cases, it’s possible to adjust the logic of a contract by managing outside factors. Yet, even then, once a smart contract is created, no one can change its specific terms — it will always attempt to send a fixed percentage to a fixed crypto wallet address. That means artists must have an airtight financial mechanism to ensure they will not lose potential revenue or set themselves up for future conflicts.
You can start slow
Road Hounds’ success has not come without challenges. As with any new venture, there have been bumps along the way. One of the biggest hurdles we faced was the scepticism surrounding NFTs as a technology that artists can utilise and also as a means of funding.
Many traditional investors and business people still see it as a passing trend, rather than a sustainable way to operate a business. We have to be patient, persistent and resilient and see this as only the start of an amazing journey, building a strong community foundation and an alternative pathway for new artists to reach their potential.
While NFTs are a promising alternative to traditional record deals, they are not yet a complete replacement for them. Though it may be difficult to wait, musicians who are just beginning to establish a brand for themselves may wish to stick to broader channels at first — and yes, that includes streaming.
Road Hounds started with private funding, enabling us to take the concept to the next level and go to market with an established product. We only began to build out our virtual metaverse in January 2023, hiring an expert team of developers and designers at Flipside Group to bring our vision to life. We also reached out to bands and artists, offering them the opportunity to showcase their music in a new and exciting way.
Apply hybrid strategies – spread the risk
For us, hybrid strategies that include music NFTs can be particularly effective, such as; fundraising for an upcoming album using an NFT token sale that rewards early adopters with additional benefits; marketing a song on streaming platforms to drive interest, then releasing a limited NFT with exclusive content; or publishing individual songs as NFTs instead of going all-in on an NFT music album.
The reality of the current NFT market is that the most valuable tokens are practically out-of-reach for most listeners. However, by broadening our approach and making NFTs an exclusive channel for a specific audience, musicians can make a larger impact with all fans while earning far more than they could on a single market alone.
At Road Hounds we see ourselves as pioneers, offering artists a new way to connect with fans, create and publish their art and be part of a community of rock lovers who are there to support and enable their talent to achieve more from an industry that for decades has promoted the chosen few and disregarded the rest. We are excited about the possibilities this brings and the impact our community will have on new music, undiscovered talent and the rock and roll industry as a whole.