Duetti Secures $114M of Funding

Duetti announced this week a significant milestone: our third equity round, alongside our third debt package - both for a total of $114M - bringing the total amount of funds we have raised to over $235M within just over two years, while also significantly diversifying our financing sources. We have now raised more funds than any other music startup since 2021, according to The Information’s Creator Economy database, and are becoming one of the fastest growing music rights companies in at least a decade. 

With this announcement, it seems like an appropriate moment to reflect on our journey since founding Duetti in July 2022, solidifying our learnings and continuing to develop a comprehensive vision for the future. While Duetti’s core thesis of expanding catalog sales opportunities from A-listers to a broader set of artists sounds simple and straightforward, our strategy and execution are in fact highly contrarian as they challenge a number of long standing and strongly held beliefs in the music industry and the investor community. We believe that our willingness to offer a fresh approach is what has enabled us to grow the platform so quickly. 

We are excited to welcome Flexpoint Ford as a major investor as part of our $34M equity round. Our prior rounds were led by Viola Ventures and Nyca Partners - both experts in fintech investments with multiple success stories with asset-backed and sophisticated financial businesses. Flexpoint Ford is a generalist investor that also has unique extensive experience in the music sector with various investments in the space, which is why we are particularly excited to have them join our investor base. We are thrilled to also have both Viola and Nyca participating in this third equity round, demonstrating their strong commitment to Duetti. 

In parallel, we completed our third debt raise in the form of a $80M privately rated and placed asset backed securitization (ABS), in a deal which was structured and placed by Barclays . This is the first ever ABS of a rights catalog backed primarily by music of independent artists, representing a major industry breakthrough. Duetti is leading the way in educating the capital markets and getting investors more familiar with the longevity of independent artists. The ABS will allow us to significantly expand our financing sources, tapping into efficient and diversified pools of capital as we grow, which in turn will enable us to expand our financial offerings to the independent music community. 

Our New Approach

With that said, here is a summary of five key aspects in our thesis and strategy which we believe are challenging inertia and biases in the current music and financial environment. 

(1) Long Term Financial Value of Music Catalogs Is Not Only Limited to A-Listers

The music business, like many others in the entertainment sector, has historically been obsessed with top acts. Even today, the publicly listed music rights companies present at the outset of their annual and quarterly reporting their chart success stories - emphasizing the high importance they attribute to occupying the top spots. Financial investors have also been growing more comfortable with financing catalogs of A-listers because there are plenty of datapoints showing the significant long term value and stability of cash flows generated by the associated music rights. While various market observers recognize that listening habits are changing, questions remain as to the longer term value of the catalogs of independent artists. 

Duetti is challenging these long standing beliefs. While we are also excited to partner with and support artists at the top of the charts, we are more focused on developing financing options and marketing strategies for a much broader set of musicians, including those who operate in unique niches which may not be as applicable for mainstream audiences. We have invested considerable resources in constructing predictive, AI powered statistical models for catalogs of all sizes, demonstrating their long term value, in order to allow us to grow and scale. By doing this, we are paving a new path for the industry, enabling more efficient and diverse pools of capital to flow into the independent music community. In other words, through operational and technological efficiency, we have removed many of the barriers precluding independent artists from accessing the long-term financial value of their assets.

(2) Indie Artists Are Interested in New Financial Options - Including Catalog Sales

Over the past decade, there has been a growing number of companies promoting financial offers to independent artists. Typically these have been in the form of loans and advances, usually associated with complicated ancillary arrangements and a bunch of limitations, such as frontline options, automatic contract renewals and other aspects. Historically, many artists have preferred shorter term financial arrangements versus an outright sale of rights, given the fraught experience of creators with record labels and other industry participants.

At Duetti, we have taken a new approach. We believe that catalog sales offer an important differentiated financial alternative to independent artists, and while it may not work for everyone, more optionality is better than less. A sale allows an artist to receive higher upfront cash payment compared to a typical industry loan or an advance agreement, which in turn enables alternative investments, significant professional development and asset diversification. Our flexible modular approach (“one track at a time”) and our fast, transparent and simple deals also add a refreshing new dimension to an industry which is notorious for over-lawyering simple and straightforward business arrangements. Finally, the sale model enables us to heavily invest in catalog management and marketing, which in turn support our artist partners’ careers in the long term.   

(3) The “Traditional” Financial System Can Support Indie Artist Funding At Scale

We have seen multiple attempts by start-ups and other industry players to deploy alternative financing infrastructure supporting independent musicians including (i) marketplaces (connecting fans and artists for crowdfunding initiatives of music projects) and (ii) web3 platforms (enabling artists to issue NFTs or other blockchain related technologies for the purpose of selling music rights outright or via fractionalization). Some of these initiatives have been very well funded, but so far none have been able to drive significant investment into the independent music sector. 

At Duetti, we opted for a more “boring” option. We decided not to try and bypass, but rather to work within the framework of the traditional financial system. We saw an opening - institutional investors have been getting more comfortable with music, and while the bar is high, we can unlock significant resources by doing the work and educating investors on the longer term value of music rights associated with independent artists. From day one, this has required us to implement a very robust set of internal systems and processes, including comprehensive underwriting, due diligence, management capabilities and other aspects. This has enabled us to unlock value for the music community relatively quickly. For the first time since the “Bowie Bonds” of 1997, there is now an existing asset-backed securitization with institutional investors which primarily relies on the music of independent artists, which in turn will significantly expand the pools of efficient capital that is available to the industry.      

(4) Catalog Marketing Can Be Highly Impactful and Delivered Programmatically

The music industry has long favored deploying marketing resources for new frontline music (as opposed to older catalogs) which is clearly a very exciting and critical part of an artist's journey. The unfortunate byproduct of this has been a certain degree of neglect for developing sophisticated catalog marketing capabilities. Outside specific anniversary related and similar campaigns or marquee repackaging and reintroduction of music of major legacy artists (such as via film), we have not seen consistent marketing programs at scale for older catalog music.

We believe that there is a tremendous amount of value for artists and their backers in developing a data-driven set of tools for marketing and promoting catalog music. Artists who have already achieved a certain level of success have the ability to tap into extensive historical data and incrementally develop their audiences on that basis. Our primary marketing channels, such as digital initiatives on Meta and other social media, alongside a dense network of Spotify playlists and YouTube channels, are based on new methodologies of identifying niche communities and topics that are relevant for global audiences, and reintroduce music in that way. We are not hunting for a quick blockbuster approach, but rather for a slow and steady expansion of relevant audiences for artists we work with. We combine these tactics with other strategies, including metadata audits and tapping into sync placements of music in film, TV and ads. 

(5) Advanced Financial, Data, Distribution and Marketing Capabilities Can All Sit In One Place

We have gradually realized that it is hard for many to immediately “box” what we do using existing music industry templates of a “label”, a “distributor” or a “music fund”. Due to the historical development path of the music industry, all three concepts have been fairly distinct, and in most cases it is relatively easy to categorize existing industry players in the master recording space accordingly. A “label” typically owns at least some music rights through purchases of new unreleased music - and subsequently invests in music marketing, with a particular focus on frontline releases. A distributor in most cases does not own rights outright, but rather have a “services” approach to teaming up with artists. Finally, a music fund purchases catalog rights - but relies on partners, including labels and/or distributors, to manage significant aspects of the acquired catalog and the marketing of it.  

Duetti, in fact, has elements of all three concepts combined. We are building all of these in a highly scalable and data-driven way, and are putting forward a different kind of a music company. We connect with artists directly and manage catalogs through our own distribution integrations, alongside those that we have put in place with various industry partners. We also deploy catalog marketing strategies ourselves, and are constantly raising funds from efficient capital sources to scale further. We believe the combination of all of these is what drives a unique value proposition in the industry, which is much more suitable for the rapidly emerging new environment of music creation and consumption.    

Looking Ahead

Duetti is just getting started. We are encouraged by our early breakthroughs, but also are deeply aware of the challenges and complexities that lie ahead. We continue to work hard and scale our internal product tool-set and team in order to expand the delivery of new and alternative solutions for the music industry. Looking towards the future, we plan to continue expanding significantly - in terms of the options we offer independent musicians, our geographical presence, as well as our internal toolset and technologies. We are particularly excited to continue to invest in best-in-class management and marketing capabilities of music catalogs, which we think have long been neglected as the less exciting part of the industry. As always - we invite everyone who is interested to reach out, follow us on social media, and connect with us in other ways as we participate in building a new, exciting and diverse future of music.