As of September 2019, YouTube boasted 2 billion monthly active users. Most content creators, Youtubers included, integrate sound into their media, music or otherwise. But licensing music can be difficult, and violation of copyright claims can lead to content being removed from a site. Not to mention licensing music or sounds can be expensive. 

On the other hand, many independent music artists struggle to distribute their work to content creators, especially those with significant influence. And again, marketing services can be expensive.

Thematic set out to solve both of these problems by creating a platform that brings together content creators and music artists…

Thematic offers a free licensing platform where content creators can license music for free in exchange for promotion of an artist’s music. After a song is submitted by an artist, an algorithm matches it to a content creator, at which point the creator can download the song and a link that is placed in the video description in order to credit and drive fans to the artist. The platform then reports this to the artist and integrates the data to improve the placement algorithm. Artists can also manage their work through the online dashboard which allows them to track how often the song is played, how many fans have visited their page, etc. 

To date, Thematic supports over 25k users and 245 active artists. Since its inception, Thematic has made over 57k song placements in over 35k videos. Notable artists include Lauv, Betty Who, Netsky, and Taboo of the Black Eyed Peas.

Thematic offers three tiered subscription plans. The freemium model allows for three songs per month, use on YouTube, and limited song access. The Standard subscription gives a user 10 songs per month and use on both YouTube and Instagram. The Standard subscription comes in at $8 per month. Finally, the Premium subscription offers users unlimited song use on all major social media platforms (YouTube, Instagram, Twitch, etc.) and Premium access for $25 per month.

Additionally, Thematic generates revenue by charging a 20% fee on all sponsorship transactions.

Co-Founder Michelle Phan is a makeup artist, YouTube personality, and voice actress. Her YouTube channel has over 8.9 million subscribers with 1.1 billion lifetime views. Michelle previously founded Ipsy, a beauty subscription box, that was valued at $800M in its last round. In addition, she has partnered with Google and Lancome. In 2015, she was named to the Forbes 30 Under 30 list.

Co-founder and CEO, Marc Schrobilgen, spent time at Sony Music prior to founding Thematic, where he led digital operations for the west coast. Afterwards, he founded Threshold Sound, a full-service recording studio and post-production facility.

The music publishing industry made $7B in revenue in 2019, with a 3.3% annual growth rate. More specifically, the global stock music market (including licensing) is trending and growing (and expected to continue growing) at CAGR of 7.46% from 2018-2022.

According to Thematic’s Form C filing with the SEC, the company had just over $10k in revenue in the most recent fiscal year, up from just over $7k in the prior fiscal year. The cost of goods sold were $0 and just over $5k, respectively. Net income for the most recent fiscal year was -$1.3M.

• Founder Experience and Depth of Team: Michelle Phan is a known entity and entrepreneur. There is no question that with her name attached to the business, it is likely to succeed. On her own, she brings millions of followers. Not to mention she has (very successfully) founded a business before. Safe to say she knows what she’s doing. Not to mention the rest of the team boasts impressive industry experience, as well as entrepreneurial experience. These industry ties are especially important in this market. If anyone is going to succeed with this idea, it will be this team.

• Early Traction: Thematic already has impressive and growing traction. Having founders with a following can only help. With the freemium product, customer acquisition should come easy, as there is no risk in trying the product, financial or otherwise. 

• Scalable Business Model: The three-tiered subscription model is both scalable and expandable. Not to mention the additional revenue stream of sponsorship transaction fees. This diversifies the revenue streams and allows for some wiggle room when offering a freemium plan.

Thematic is a Deal To Watch. For most metrics, Thematic landed in the category of Top Deal, and should be designated as a strong Deal To Watch. What barred it from Top Deal status came down to financials. There is little revenue and net income is severely in the negatives, but this is somewhat to be expected for a startup at this stage. 

What made Thematic a very promising Deal To Watch was the incredibly impressive team and scalable business model. Michelle Phan is a big name especially in the space and a proven entrepreneur. This paired with the multi-stream revenue model and early traction made for a rewarding deal. 

There are some competitors in the space, however, most only partially overlap in services or do not service the US music industry. Lickd, for example, helps YouTube creators use music legally, but is very early stage (in the first round of funding) and based in the EU. Alternatively, there are boutique licensing agencies that do not compete so far as price point goes, and cater to bigger name celebrities.

The team at Thematic has identified a pain point in a large and growing market. If anyone is going to win out in the space, it will be this team. Michelle Phan has a strong following and is a proven entrepreneur with connections in an industry that relies heavily on who you know, making Thematic a (very strong) Deal To Watch.