The idea for Next Big Sound started in Troy Henikoff’s entrepreneurship class at Northwestern University. It was 2008, and three of the students in the class, Alex White, David Hoffman, and Samir Rayani, hatched an idea for a business in the music industry. Rayani and White had met earlier when White was running the concert booking group on campus. Rayani’s job was to sign off on White’s spending to bring in acts like Flight of the Conchords and Kanye West. White and Hoffman’s paths had crossed earlier, too, in that they both were organizational change majors at Northwestern. In the nearby photo, Alex White is on the left, David Hoffman is in the middle, and Samir Rayani is on the right.
The idea was for a fantasy network for music. Users would cre- ate their own fantasy record label, sign artists they believed would become popular, and compete against each other. As part of the class, students presented their ideas to venture capitalists. White, Hoffman, and Rayani pitched the idea for their fantasy music net- work, which they called Next Big Sound, and landed $25,000 in seed money. The three continued to work on the idea following graduation.
Next Big Sound gained traction and applied for TechStars. TechStars is a mentorship- driven business accelerator in Boulder, Colorado, that holds 13-week programs. They were turned down. Rather than becoming discouraged, the three stuck with the idea, and in the summer of 2008 participated in an accelerator program in Illinois. When the application date for TechStars in 2009 rolled around, they decided to give it a second try. This time they were accepted. They were the same team with the same idea, but this time their product had been built and launched, they had thousands of users, they had press (including a feature in The New York Times), and the three had proven that they could work together as a team.
In early 2009, White, Hoffman, and Rayani left Chicago for Boulder, reportedly making the 1,000-mile trip in Hoffman’s Volkswagen Rabbit. TechStars is a heavily mentorship-driven program, so the three had access to high-quality mentors from the beginning. They quickly realized that their idea, the fantasy network for music, wasn’t sustainable. It just didn’t have a revenue model. That caused the three to pivot. They spent a lot of time talking to mentor Jason Mendelson, who is a partner in Foundry Group, a Boulder-based venture capital firm. Next Big Sound’s team characterizes their TechStars experience as worth its weight in gold. They emerged from the program with a much sounder business concept and direction for how to move forward.
Next Big Sound is now a music analytics company. The premise of the company is to mine data to help the music industry make decisions, like whom to bet on in re- gard to the next big act. For years record sales information and radio play data were the only factors available to help music executives discern who the up-and-coming bands were. But now there are many sources of data, such as music sites like Spotify and Pandora, social networks like Facebook and Twitter, and video-sharing sites like YouTube, that help identify which songs and musicians are trending. Next Big Sound takes all the data and packages it into one central dashboard per artist or band. They sell access to the dashboard for a monthly subscription fee. With the data it collects, Next Big Sound says it can forecast record sales for 85 percent of artists, within a 20 percent accuracy range. The company’s data is useful for additional purposes. For example, it can tell the areas of the country in which an artist is the most popular. That helps the artist plan tours and special promotions. Similarly, it can tell which activi- ties an artist or band engages in provide the biggest bang for the buck. Appearing on some late-night talk shows, for instance, translates into more record sales than others. Having access to this type of information helps an artist or band make informed judg- ments when requests for appearances come in.
In regard to building a new venture team, the Next Big Sound team is unique in that it has three co-founders, which is above average in the start-up world. When asked how they get along with one another, David Hoffman indicated that they have healthy debates, but are able to come to consensus and get along well and trust one another. They also have complementary rather than redundant skills. When it came time to designate one of the three co-founders as the company’s CEo, Hoffman in- dicated that it seemed only natural that Alex White would assume the role, which he did when Next Big Sound launched in 2009, and he remains in that role today. Next Big Sound’s founders have had multiple mentors along the way, which they credit for much of their success. Hoffman recommends that the best way to get a mentor is not to ask for one. Instead, he suggests establishing a mutually beneficial relationship with someone, where each party has something to offer to the other. The mentorship will then come more naturally.
In the summer of 2012, Next Big Sound moved from Boulder, Colorado, to New York City, where the firm now has offices in Chelsea, an area on the west side of mid- town Manhattan. The move brought Next Big Sound closer to its major customers and the music industry in general. The company continues to gain momentum and stature in the music industry.
In this chapter, we focus on how the founders of an entrepreneurial venture build a new-venture team as well as the importance of the team to the firm’s overall success. A new-venture team is the group of founders, key employ- ees, and advisers that move a new venture from an idea to a fully functioning firm.1 Usually, the team doesn’t come together all at once. Instead, it is built as the new firm can afford to hire additional personnel. The team also involves more than paid employees. Many firms have a board of directors, a board of advisors, investors, and other professionals on whom they rely for direction and advice.
In this chapter’s first section, we discuss the role of an entrepreneurial ven- ture’s founder or founders and emphasize the substantial effect that founders have on their firm’s future. We then turn our attention to a discussion about how the founders build a new-venture team, including the recruitment and se- lection of key employees and the forming of a board of directors. The chapter’s second section examines the important role of advisors, lenders and investors, and other professionals in shaping and rounding out a new-venture team.
Source: Barringer Bruce R, Ireland R Duane (2015), Entrepreneurship: successfully launching new ventures, Pearson; 5th edition.