Trebel Music is raising at a pre-money valuation of $150 million. Trebel generated around $684,000 in revenue in 2020. That makes for a revenue multiple far above the 2 to 4 times average for companies in the media and entertainment industry. Overall, the company is somewhat overvalued at this stage.

According to one source, the online music streaming market was worth $12.8 billion in 2019. It is expected to grow at a rate of 9.8% per year to reach $24.7 billion by 2027. A second source estimated the market to be worth $20.9 billion in 2019, with a 17.8% annualized growth rate taking it to $77.5 billion by 2027. This is not a small market, but it is not particularly massive either. It is also full of huge, well-funded incumbents like Spotify, Apple Music, and Pandora. However, the overall growth rate is impressive across sources.

The first of Trebel Music’s co-founders is CEO Gary Mekikian. Mekikian also serves as the CEO of Silicon Valley Technologies, a startup incubator that invests in the entertainment, medical device, and technology industries. Before that, he worked at the Stanford Graduate School of Business in its case writing office. He was a member of two investment groups: the Tech Coast Angels (from 2011 to 2013) and the Pasadena Angels (from 2012 to 2015). He founded and worked as the CEO at GATeIC Integrated Circuits — a business focused on automating the design of low-power digital circuits — for eight years. Before that, he was a partner at OPES Financial Solutions, a microfinance company. Most notably, he co-founded and served as CEO of Inquira, which was eventually acquired by Oracle. Before that, he founded International Integration, a pioneer in automated porting of mainframe-based software that was acquired by Razorfish. 

Corey Jones is Trebel Music’s second co-founder and its head of music. He is also a music contributor for The Inertia, a media and content company. Previously, he worked in the private equity industry for Century Park Capital Partners and the mergers and acquisitions department of Edgeview Partners. 

The final co-founder of Trebel Music is Luis Soto Durazo. Previously, Durazo was a vice president of digital and over-the-top media at Televisa, and before that, he served as a digital director for Grupo Reforma.

Collectively, these three founders have very complementary skill sets and bring plenty of industry and entrepreneurial expertise to the table. Mekikian has two exits that clearly prove his business acumen and ability to lead. Very little information is given about key team members outside of the founding team, though 45 employees are listed on LinkedIn, including developers and growth team members.

Music apps and services are a dime a dozen. However, most of the popular music streaming services use paid subscriptions, while Trebel Music’s app allows users to listen for free. The companies that are most similar to Trebel Music are YouTube, Spotify, and Pandora. Each of these allow free listening in exchange for playing ads, but each one has its own major restrictions. YouTube offers music videos and podcasting, but listening is not uninterrupted and off-screen functionality requires a fee. Spotify and Pandora offer offline listening, but only through a paid subscription. Therefore, while there are plenty of other platforms out there, Trebel Music’s freemium business model sets it apart from the competition.

Trebel Music boasts impressive revenue growth over the past few years. Revenue in 2018 came out to $962,793, which roughly doubled to $1.9 million in 2019. In the first six months of 2020, the company generated revenue of $684,049. Today, management says that the company has an annualized run rate exceeding $4 million. 

Trebel Music generated a net loss of $3.4 million in 2018, however, and that loss grew to $3.8 million in 2019. Its cash outflows totaled $2.5 million in 2018 and $3.1 million in 2019. In the first six months of 2020, the company generated cash outflows of just under $1 million and its net loss increased slightly from $2 million to $2.1 million. 

Outside of its financial performance, Trebel’s user adoption metrics are promising. Trebel grew to more than 3 million users in less than 20 months. The company currently has 3.5 million monthly active users with hundreds of millions of downloaded songs. Though the company is currently targeting the US and Mexico, management has plans to expand into Brazil, Columbia, and other attractive markets. The company has also managed to strike up deals with Universal Music Group, Sony Music Entertainment, and Warner Music Group. It also boasts a partnership with Televisa, a Mexican media company that owns a 5% stake in the enterprise.

Trebel Music is facing some challenges. While the company is experiencing rapid growth, it has significant net losses and net outflows. The business is also in a highly competitive space and is significantly overvalued. In order to compete, management needs to ramp up marketing in order to lure users away from large incumbents such as Spotify and Apple Music. Establishing this social proof will be no easy feat.

The Trebel Music management team has a significant amount of both industry and entrepreneurial expertise. Founder Gary Mekikian has not one, but two acquisitions under his belt. The market opportunity, while not significantly large, is growing at a nice clip with most conservative growth rates hovering around 10%. The company has achieved tremendous user and revenue growth since its launch, and its partnerships could provide fuel for it to grow even more rapidly. Finally, the company is significantly differentiated in its business model, which allows users to listen for free and offline while still compensating artists appropriately.

Trebel Music offers free on-demand music to its users. Advertisers partner with Trebel to play ads during the music download process and can even target specific users based on their listening preferences. 

Trebel is operating in a highly competitive space against well-established companies like Spotify and YouTube. It’s suffered heavy financial losses so far. And Trebel’s $150 million pre-money valuation makes the company significantly overvalued. 

But Trebel Music also offers a free product that could stand out among its competition. The founders have complementary skill sets and boast not one, but two exits. Even more encouragingly, the team has managed to attract millions of users and establish important partnerships. Overall, the company has been rated a Neutral prospect at this time.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com. 

Analysis written by Daniel Jones.