Chatting with…Tim Chang from Norwest Venture Partners

Posted on | March 31, 2010 | No Comments

I first met Tim at the Billboard event a month or so ago.  The fact that he’s a VC and an active musician made it extremely attractive for me to interview him.

A few companies that NVP has invested in

Thankfully, he was willing to wake up early last Wednesday while he was in Vegas at CTIA Wireless Conference to be able to chat with me.  Our 45-minute conversation was pretty epic (hint:  ranged from talking about web analytics for musicians to John Cougar Mellencamp’s midwest soccer mom fans); however, to get a flavor for where to take the conversation, I asked him a few questions via email prior to speaking with him:

-How did you go from Gateway computers to venture capital?  What excites you about venture capital?

I sort of fell into VC, after returning to get my MBA at Stanford.  I didn’t know what VC was prior to B-school, and it turned out to be a perfect fit for my passion about constantly learning about new trends, trying to develop a crystal ball for near/mid/long term outlooks in fields I focus in, and working with brilliant, driven entrepreneurs.  VC allows me to be a lifelong student, constantly striving to keep on top of what’s evolving in the market, and betting on where things are headed.  Ultimately, VC gives me a chance to work with the same kinds of people and ideas in my favorite magazine: Wired J  It also allows me to stay involved in the media industry from more of a technology and business-oriented, behind the scenes coaching/mentoring standpoint.  It’s been absolutely inspiring to be able to interface and brainstorm with some of my musical idols and influences, in helping them think through how the business and technology of music is changing.

-Please briefly explain the roles of your position with NVP?  What part of the relationship with a company does your role begin and end? 

I’m an investment partner, focused on mobile, digital/social media, gaming, and also leading NVP’s Asia investment practice (with a focus on China).  My job is to know all the key thinkers and do-ers in my focus areas, and have as a deep an understanding and network as possible with the top people in these ecosystems.  Ultimately, I’m a talent scout with a checkbook, looking to back the best possible people – the best “deals” come from the best entrepreneurs.  I’m striving to constantly interface and collaborate with the brightest minds in the industry, and often “deals” happen as a happy accident when there’s a perfect fit and synergy between the vision, people chemistry, and business + investment opportunity.

-What are the 3 most important details that you look for in a company when considering for funding?    

1. Team
2. Team
3. Team
4. Organic traction/adoption
5. Proof of monetization ability and scalable business model
6. Other factors: unique IP or other unfair advantages (1st mover landgrab; distribution/channels, etc.)

-What are the 3 most important characteristics you look for in the team that runs the company?

1. Successful track record as an prior entrepreneur or executive
2. Ability to hire and attract top talent
3. Self-awareness of own limitations and scalability

-Do you ever go for your gut feeling or is mostly a calculated decision?  Why?

In the end, it’s always a gut-based decision, though heavily supplemented by due diligence data and market research.  For early stage investments, you’re always dealing with imperfect and partial info, so it’s more a game of risk management rather than connect-the-dots spreadsheet analysis of historical financials.  Half the time, I feel like an armchair psychologist, because so much boils down to the quality and particular characteristics of the team.

-Have you ever made a music investment before?  Who and why did you choose them particularly?

NVP has invested in SocialFM (fka Mercora), an early social music play which didn’t make it, as well as Mozes in the mobile marketing platform space.  SocialFM at the time had huge viral growth and adoption, but like most web2.0 music plays, was considerably challenged in working with the labels and figuring out a scalable business model.  Mozes is growing and riding the momentum of mobile – I’m still excited for them.  My own band, BlackMahal just signed on to use Mozes.

-What’s so special about the convergence music and technology?

Technology shapes the format of music and content; format shapes the distribution landscape; distribution shapes the business model.  Disruptions in technology redefines formats, which causes massive upheaval in distribution and business models.  This cyclical movie has been playing for decades: phonograph -> broadcast radio -> singles -> retail -> LPs -> 8-track -> cassettes -> CDs -> MP3 -> streamed cloud music -> ??   With each step in this chain there have been incumbents which faded away and new giants which have emerged.  Today, the key questions are “what does Record Label 2.0 look like?”  “What skill sets does a manager 2.0 need?” (answer: social media marketing & production chops, data mining/analytics, brand/lifestyle affinity dealmaking, etc.) “What does success mean for an artist today, and what does it mean to ‘break’ a new act today?”

-What do you see as being the 3 most important streams of income for musicians?

1)      Live performance
2)      Merchandising
3)      Deriving revenues from their music serving as lifestyle affinity “flavoring” for other products and services, from apparel, to speciality food/drink, videogames, TV shows/movies — think 50 Cent and Formula50 Vitamin Water (editor’s note:  50 Cent was given a 10% share of the company for his likeness instead of cash.  When VW was sold to Coke, he made $400M)

-What was the last concert you saw and the last CD/digital download/vinyl you bought?

Concerts: Nouvelle Vague, Rob Thomas, Zero7, Joe Satriani, Faith No More
Digital Downloads: Jamie Cullum, Alana Davis, Incubus

Since our conversation was extremely expansive, I’ll try to focus it on three things:  music as a lifestyle, relationship marketing, and how mobile fits in.

Tim and I both agree that traditional music collectability (aka ownership of physical music) will never be at the same level as it was.  He sees music as “the product of a lifestyle” as opposed to the product in and of itself.   “An artist needs to be a business”, and think, “who are the five brands that fit your demographics the best.”

After all, it’s no longer the case that signing a sponsorship deal or getting your music placed in a TV show is selling out.  It’s symbiotic because music flavors the emotion of a scene as well as adds more character to a brand’s image.  In return, a band gets more notoriety, exposure to a new audience, and money.

At that point, I politely interrupted Tim and told him about how ?uestlove, during our Social Media Week event, was talking about Okayplayer as a “mall of like-minded musicians”.  The same is the case with Friends of Enemies; even though I don’t particularly like the music they encompass, I respect their concept of communal growth.  Tim had never really thought of it that way, but most certainly saw the importance of what he calls “relationship marketing”, which is essentially focusing on your relationship with the fans are the primary importance of your efforts.  If the fans are happy and satisfied, they will value your efforts with money through fan clubs, apps, premium boxed sets, merch, concerts… (editor’s note:  please check out Headliner.fm for an alternative source of relationship marketing)

Tim went on to say that music is becoming a part of a “giant digital locker in the sky” that you can access from any device (phone, car, computer, TV, gaming system…).  So if the music is heading upwards to the clouds (music which is easier to create and share with people), how are musicians supposed to get people’s attention to make a buck?

As mentioned earlier, Tim was at a mobile conference, so I tried to focus on mobile technology, particularly apps.  After all, most people are on their phones more than computers.  “Maybe the tracks aren’t important as the link with your fans.  You can have MySpace-level conversation straight to your phone…the perfect marketing vehicle–the hub.”

In the future, I see the phone as being the only device people carry.  It’s only a matter of time until you can plug your phone into your car for it to run.  It’s only a matter of time until the speed of mobile browsers reaches that of computers making computers obsolete.  It’s only a matter of time until all music in the history of recorded music is accessible online for you to stream for free or cheap.  And it’s only a matter of time until you guys come up with an idea to pitch to Tim that will monopolize on the possibilities of mobile technology for the benefit of the music industry.

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