In many ways, startup founder Scott Kitun is a disruptor. His current project, Songfinch, is a startup that aims to upend the music industry by employing songwriters to craft one-off, personalized songs for customers at $199 a pop. He wants the company to help create “a middle class of musicians” in a business where monetary success is famously difficult.
When you dig into Scott’s professional background and listen to him talk about his fundraising philosophy, you notice that his projects and investments share a common thread: finding ways to level the playing field between founders and investors within the venture capital landscape.
Scott co-founded Technori, a startup showcase that helped develop the tech community in Chicago by providing space for founders to gather and learn and pitch investors at monthly events. He launched a weekly podcast with WGN Radio to take those pitches to a national audience. By interviewing dozens of founders and investors over many years, Scott created a lucrative network that paid off in future fundraising.
When Scott joined a recent episode of the How I Raised It Podcast, he had recently sold Technori to KingsCrowd and was in the middle of fundraising for Songfinch. He later closed that Series A round with $17 million in funding, led by Valor Siren Ventures. The company’s fundraising to date totals $21.8 million and includes investments from music superstars Quincy Jones, The Weeknd and Doja Cat.
In our conversation, Scott shares how he used his podcast to meet investors, tips for selling a startup and advice for founders fundraising in today’s challenging market.
Create a podcast to build respect, credibility and value
When Technori started out, it was mainly sponsor-funded with a little money from angel investors. By the time Scott got involved full-time, he knew that certain aspects of the company had the potential for venture capital backing.
And despite hosting dozens of pitch events for member founders, Scott hated actually attending them. So he found an alternative route — creating a podcast.
“I had the same problem I was trying to solve for all the founders that came on our show,” he says. “I didn’t have a massive network — I mean, I had a network of founders, but they were all poor like me, so that wasn’t going to help.”
Recalling Technori’s early days, he says, “I don’t think I ever intended on getting a lot of plays… It was literally my cheat code for meeting the people I wanted to meet, whether it was for strategic partnerships and business or actual investors.”
Scott used the podcast to raise the first $1 million for Technori, but he didn’t stop there. The first five investors he brought into Songfinch were podcast guests more than five years ago. And in late 2021, Scott set up interviews to ask investors where they thought the market was headed. Six months later, those conversations became pitch meetings for Songfinch’s Series A.
Scott says podcast conversations create a sort of breadcrumb trail he can follow back to investors when it’s time to reach out with a pitch. Connecting with investors via the podcast pays off for three reasons:
- Podcast interviews give investors free value in the form of a stage and an audience, and Scott doesn’t immediately ask for anything in return. As a result, many investors often feel they do owe him something and are ready to return the favor later on.
- Scott works with an operator mindset, so he’s easily able to take the conversation from high-level fluff to in-the-weeds details, which earns respect from operator investors.
- The podcast’s success builds credibility. In the early days, Scott leaned on the reputation and lakefront location of the WGN radio studio to give him an advantage, but indicators like his verified social accounts and A-list guest roster also lend weight to his projects. “[The investors] thought I must know something that they don’t know,” he says, “so we were kind of on even footing, even if most of the time we definitely were not.”
Choose a niche that potential acquirers will value
When Scott sold Technori to KingsCrowd in early 2022, it was less a money-making scheme than a way for him to invest in the growing online digital investing space.
Scott and KingsCrowd founder Christopher Lustrino first connected over Scott’s Pitch Reviews newsletter, which offers his perspective on companies raising money via crowdfunding. More than 30,000 people subscribe to the newsletter, and subscribers have invested a combined $50 million in companies profiled in the newsletter.
The newsletter was a natural fit for KingsCrowd, which provides Morningstar-like ratings and reviews of crowdfunded startups. Scott wanted in on KingsCrowd’s Series A, but he didn’t have the liquidity to invest in the way he wanted. So he offered Technori as collateral.
“I've looked at this deal primarily as a way for me to get into what I think is the future of investing,” Scott says. “When we have a big exit at some point, and I've got enough money to become an investor full-time, I don't want to do it the way I've had to raise money so far. I want to do it differently, so there were a lot of reasons for me to jump into this ‘Technori to KingsCrowd’ deal.”
He advises founders interested in selling their startups to make inroads toward the kinds of companies they’d like to be acquired by. Creating and growing the Pitch Reviews newsletter didn’t cost Technori anything, but it positioned the company as a source of expertise on crowdfunding.
“I would start focusing my attention on building one single asset, [one] you know your [potential] acquirers desperately need,” he says, adding that the asset should be something those you target will fairly value.
Remember that investors need you too
Scott says that Songfinch’s fundraising success comes in part from his co-founders’ connections. Songfinch co-founder Josh Kaplan manages breakout rapper Doja Cat, and its CEO John Williamson’s 23 years in the music industry helped land an investment from legend Quincy Jones. Atlantic Records CEO Craig Kallman came through the Technori network, and seed round lead Sam Yagan of Corazon Capital hails from the Chicago tech scene.
Songfinch used its $4.8 million in seed funding to grow the business in significant ways. The company is on track to bring in $35 million in revenue in 2022, up from $5.5 million in 2021. Traction plays a big role in keeping VC conversations open in a challenging market.
“We seem to get through the cracks because our cap table is loaded with people who have a lot of respect within the industry, and because we’re very capital efficient,” Scott says.
When it comes to celebrity investors, Scott says they can certainly help open doors, but he recommends ensuring they provide actual capital.
He also tells founders not to let investors (or anyone) waste their time. It’s OK to be assertive in your convictions, and it’s essential to remember that investors need you too.
It’s an important reminder in a scenario where the power dynamic can often feel imbalanced from the start. And it’s one of the reasons that Scott invests his own capital in crowdfunding.“I want to shift this dynamic back toward equal,” Scott says. “There’s no superior person here. Be respectful and don’t waste people’s time, but at the same time remember — I need you; I need your money. You need me; you need me to make money.”
Nathan is also the CEO of Fundingstack.com which is a new platform for VCs and investment bankers to both raise capital and assist clients and portfolio companies.
Users of these platforms have raised over $9.7 billion since 2016.
This article is based on an episode of Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders raise money.