Get All Access for $5/mo

This New Crowdfunding Platform Lets Fans Invest in Music Artists' Success TapTape bets on fans to be the most knowledgeable and passionate investors.

By Alice Guilhamon

Opinions expressed by Entrepreneur contributors are their own.

Shutterstock

Become an active stakeholder in your favorite artist's success. That's the promise of TapTape, a new funding platform that allows music fans to invest in groups they believe in and get a share of future profits.

TapTape tailors to up-and-coming bands that have already started to establish themselves in the industry and fans who want to actively participate in their success. TapTape bets on fans to be the most knowledgeable and passionate investors.

"At the end of a crowdfunding campaign, the artist says to the fans "thanks for your support,'" says CEO and co-founder Christopher Nolte. "Our goal would be that at the end of a TapTape campaign, the fans say "thank you for letting me be a part of this,'"

Related: 5 Keys to Achieving Crowdfunding Success

TapTape lets you help finance your favorite bands in exchange for classic crowdfunding goodies, but more important, a cut of future profits in the form of "TapCoins," the company's virtual currency.

In that sense, TapTape resembles an equity crowdfunding platform in its logic, but without the selling of securities.

The recent approval by the SEC of final rules for Title III of the JOBS Act on Oct. 30, opening up equity crowdfunding to anyone who wishes to invest even small amounts of money, might change that for TapTape users in the future.

But until then, they are currently "the first ones who will be able to prove this model out before the new rules go into effect," Nolte says.

According to business and crowdfunding attorney Kendall Almerico, "Title III will eventually spawn many niche funding portals" and "TapTape is exploring one of those potential niche areas that could prosper for a platform: music."

After picking a music group, fans can invest as little as $1 to as much as $5,000. Bands usually use the money to cover production costs, distribution and publicity, and to rent tour buses, buy studio time or whatever other needs they have to keep rising. TapTape takes a 5 percent cut of the money raised and backers are only charged if and when the campaign they launched on TapTape is successful.

TapTape and the artists work together to set goals and a funding deadline. Backers make an initial payment, and if the artists make a profit, fans get a proportional cut from it in TapCoins, as well as bonuses such as free albums or other material rewards whenever the TapTape goals are reached.

Related: Everyone Pays to Raise Money

With TapCoins, users can reinvest in other bands on the platform or purchase limited edition merch from artists, get access to early releases and other music-related benefits. The idea is also to keep these funds focused on the music industry and make sure the investment stays in the music ecosystem.

When TapTape launched in public beta on Oct. 5, it chose to start with the San Francisco-based band, K Theory, which has performed around the country and amassed a strong following. K Theory has more than 70,000 SoundCloud subscribers and 120,000 Facebook followers.

"TapTape is all about empowering musicians through their biggest asset, their fans, and K Theory loves that," says the group's manager, Dustin Claretto.

K Theory has always tried to be close to its supporters, through free shows, free remixes, pizza party meet-ups before gigs and other perks, Claretto says. "TapTape was a way to do this on an entirely different level as the fans could actually share in K Theory's success."

Originally launched when Nolte was doing his MBA at MIT, the startup won the Creative Arts Prize in the MIT 100K Entrepreneurship Competition, as well as the SXSW 2015 MBA Business Plan Competition. TapTape is also backed by former head of Def Jam and Warner Music labels, Lyor Cohen.

Both co-founders are musicians. Nolte grew up playing piano, saxophone and guitar and Jared van Fleet started his career by going on tour with well­-known indie bands such as Beirut and Voxtrot.

Artists wouldn't be successful without fans and that's what TapTape wants to reward, Nolte says. "The goal is to have a significant impact on the way artists are compensated."

Related: Why This New Form of Funding Has the Music Industry Amped Up

Alice Guilhamon

Video Editor

Alice Guilhamon is a video editor at Entrepreneur.com.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Business Solutions

Increase Productivity with This Microsoft 365 Subscription, Now $25 Off

It can make the entrepreneur life a lot easier.

Business News

Apple Pay Later Is Ending. Here's What's Taking Its Place.

The program was available for less than a year.

Leadership

This Artist Answered a Businessman's 'Powerful' Question — Then His Work Became 'the Poster Child for Juneteenth': 'Your Network Really Becomes Your Net Worth'

Reginald Adams was the executive director of a Houston-based art museum for more than a decade before he decided to launch his own public art and design firm.

Leadership

Harvard Business School Professor Says 65% of Startups Fail for One Reason. Here's How to Avoid It.

Team alignment isn't nice to have -- it's critical for running a successful business.

Business News

Here's What Companies Are Open and Closed on Juneteenth 2024

Since it became a holiday in 2021, Juneteenth has been recognized by some major corporations as a paid day off.

Growing a Business

I Hit $100 Million in Annual Revenue by Being More Transparent — Here Are the 3 Strategies That Helped Me Succeed

Three road-tested ways to be more transparent and build relationships that can transform your business — without leaving you feeling nightmarishly over-exposed.