Ep. 173 – LUM’s Max Fergus on Disrupting the Music Industry

Ep. 173 – LUM’s Max Fergus on Disrupting the Music Industry

Brian Ardinger, Inside Outside Innovation Founder, talks with Max Fergus, Founder and CEO of LUM, a music streaming app rooted in the discovery of emerging music. Brian and Max discuss disruption, entrepreneurship, trends, content creation, building a team, and corporate startup collaboration.

Conversation Transcript:

Max Fergus, LUMBrian Ardinger: Inside Outside Innovation is the podcast that brings you the best and the brightest in the world of startups and Innovation. I’m your host Brian Ardinger founder of Insideoutside.IO a provider of research, events, and consulting services that help innovators and entrepreneurs build better products launched new ideas and compete in a world of change and disruption each week will give you a front-row seat to the latest Thinking, Tools, tactics, and Trends and collaborative Innovation. Let’s get started. Welcome to another episode of Inside Outside Innovation. I’m your host Brian Ardinger. We are excited to be live here from Milwaukee at Fall Experiment today. We have another amazing a guest Max Fergus. He is the founder and CEO of a company called Lum. Welcome to the show Max.

Max Fergus: Thank you so much. Brian looking forward to it.

Brian Ardinger: Let’s get started. You’ve just got off stage to talk a little bit about your business and some of the new disruptions that are going on in the music industry. Let’s start there. Tell me a little bit about Lum and what are you seeing in this crowded space of music?

Music Disruption

Max Fergus: You know the truth is that when most people talk about music disruption, they write it off right away. There’s a lot of corpses in the music industry, especially when it comes to emerging music. We’ve seen a lot of companies over the last five years try to create what a lot of people would call Spotify clones that just focus on emerging music. But the truth is that for the large part corporate and mainstream music is better than emerging music. If we are just trying to give these emerging artist a better chance to survive, if we give them the average fan or the end user the same experience that they’re going to get on Spotify and try to compete with algorithms that none of us can compete with, we’re not going to be able to do anything for the fan and we’re surely not going to help the artist. So the truth is and what Lum is rooted in is looking at the technology that exists all around the world that’s currently empowering content creators. That use streaming technology and putting that technology into music streaming for the first time, and that’s really what Loom is all about.

Brian Ardinger: Let’s talk a little bit about your background. So as a Founder, it’s always interesting to me to have an interview with entrepreneur and say how did they get to this space? I know you have a diverse background you spent some time in China, I did as well, and I’m interested in finding out a little bit about how that nugget of the problem that you saw out there and and the experiences that you brought to the table, gave you the decision to say, let’s start this company.

Max Fergus: Yeah, the truth is that most people think that when you start a company in college you either start it around booze or music? And so we already had a little bit of a disadvantage there because people automatically assume that we were starting another College startup, especially coming from a place like Madison in which case booze and music are both very prevalent. But the truth is that we didn’t start Lum. With the understanding that we were going to do music right away. We looked at industries that were growing rapidly like streaming like music streaming and made our decision based off the ones that were the most likely to be disrupted and music streaming was really powerful because it hasn’t just been growing really really far in the past. But it’s growing exceptionally fast right now and it’s going to grow even more so over the next 10 years and that was really what motivated us. I think to go down that path specifically.

Brian Ardinger: I understand you had some background in health care and a little bit in the VC space as you’re going through college. What made you decide this is what I want to do for the next 5-10 years of my life.

Entrepreneurship

Max Fergus: You know, I was always an entrepreneur but one of the consequences of going to a school like Madison. Is that you’re surrounded by people that are full of motivation. And so when I got to Madison as a freshman and started taking Finance classes, I got pulled into that right away and I was no different than any of those students, really motivated, to be honest with you really only motivated because I felt like I should be motivated now that I look back on it. I see myself going into Investment Banking and squeezing the last dollars out of really mature Industries. And to be honest with you, I didn’t have as much passion and that true motivation is only rooted in passion. And I think once I realized that and realize how much I really wanted to still be an entrepreneur after school there was no question that I wanted to go down this path instead of the one that I had previously outlined for myself.

Brian Ardinger: So we’ll talk a little bit more about kind of the background and why you started it and walk in that but getting back to the industry itself. What are some of the trends because you’re not just about music streaming. I heard your talk, you talked a lot about community and some of the trends in content creation and that that are changing the way consumers view content in general. What are some of the trends that you’re seeing and why did you see the huge opportunity for what you’re building?

Music Trends

Max Fergus: Absolutely and it all came down for us to the comparison of all of these streaming verticals. And the easiest one to look at is Twitch and Amazon because they’re in our own backyard. I barely even knew what E-sports was two years ago. Most of my friends went from really not playing a lot of E-sports to playing games every single day watching Twitch live taking it from a niche to an entertainment and Industry powerhouse like we had talked about but that wasn’t the thing that really interested us.  What interested us the most was that Twitch was making billions of dollars just off of micro payments from fans, virtually gifting their favorite Esports Gamers. Now digital tipping and tip jars aren’t new, but I can tell you right now without that Medium, would those fans have ever gifted in E-sports gamer, right simply through Venmoing them or finding them online. Probably not and we think that those business practice those business models are even more applicable to music in a generation right now. That is one of the most lean in generation of music lovers that we’ve ever seen you’re seeing it in music festivals popping up around the world. You’re seeing live venues in live entertainment actually increasing in the United States. But you’re not seeing any of that money or any of that increase in revenue going to the people that are actually creating the content in this scenario the actual musicians and at the same time, it’s causing a negative user experience for a lot of the fans.

Brian Ardinger: So about that experience, obviously, there’s platforms, you know, you have YouTube channels and you see a lot of people spinning up content and that. What helps the audience understand what’s good? What’s bad? That curation of that content I imagine is a very important part of what you’re building and what’s actually going to take off. So talk a little bit about that problem. Specifically for Lum and in general. This massive content. Everyone can be a content creator.

Content Creation & Building Community

Max Fergus: Yeah and that and that’s a great point because to be honest with you. So one of the first things that people ask us is why don’t your friends just go join Twitch or just go join Tik-Tock and Thrive there. The truth is that they could absolutely but still what about music streaming in terms of people streaming full-length recorded versions of their songs building out libraries and playlist and sharing it with their friends that industry is still a 131 billion dollar industry that is still on the brink of disruption. Those other platforms are diluted by other content creators and influencers that have nothing to do with music. And so by building that around music specifically we can better Market to a specific Niche target market of Generation Z, younger Millennials, that Target Market that is exceptionally interested in it.

Our algorithms don’t tell people what to listen to. Our algorithms tell people what others in their area around the country with similar affinities to them are actually interested in creating a better stronger relationship allowing Lum to actually play matchmaker between these young artists and these young fans that are actually looking for them. Can you imagine the power for a young artist? Define their first Super Fan not being one of their friends or their Mom. That’s a really powerful experience for anybody and I think one that we’re really excited to capitalize on that. We’ve already seen.

Brian Ardinger: Let’s talk a little bit about community. So as a Founder, no founder, no business really kind of starts without having some support and resources and the best Founders know how to kind of find that community and find those resources talk a little bit about your early days of idea generation to finding the right people to surround yourself with to help get it off the ground.

Max Fergus: Like I said, a large majority of the founding team for LUM was students and alumni from the University of Wisconsin and even further than that. A lot of them were our really close friends. And I think if that wouldn’t have been the case, a number of us probably would have taken those jobs after school, but going more specifically to your question around the platform. I remember the first day we ever launched our Pre pilot beta like even before was on the after we were testing it on test flight. We got about a hundred artists on and a hundred fans on to this pilot application. Sitting in my dad’s house because the wi-fi at our office wasn’t working that day and within the first 30 minutes, I think we had never been more excited about the potential of Lum than we had been before because our product at that point was terrible. It was a wireframe platform with about four screens, but me liking a post and telling an artist that I enjoyed hearing their music, to be honest with you wasn’t something that they could even really do on Soundcloud wasn’t something that they could do on any other platform around the world. And just by giving them that one experience that artist is still a user today on Lum because they’ve never seen it anywhere else.  We always say artists are more than the sum of their streams. It’s so much more about the relationship that they could build with their fans.

Brian Ardinger: So, how did you go about finding that Community for yourself as early entrepreneur to know? What are the resources? Where can I go to spin up a business from scratch?

Support Starting

Max Fergus: To be honest with you? It came from all over the place. I really wish I could say that there was one thing that was more important than another thing. Obviously the University of Wisconsin-Madison was huge. I can’t even deny that and I think that the bigger pieces by the time we had gotten to pressure chamber when we had one pressure chamber after graduating that summer. We realized the full plethora of resources that was available to us. We asked ourselves early on, can a music streaming company survive in the midwest when really it needs to be located in New York or LA but we had the Madison Chamber of Commerce and the Forward Technology Festival and the UW and all of these resources and mentors, Angel money, all floors. And giving us resources that we desperately needed but even more so than that, I would actually say one of the biggest things that has helped us is the Starting Block Community, which is the new entrepreneurial community based out of Madison run by Chandra Miller Feenin, which I would say has helped Lum potentially more so than anything but as probably given Madison a bigger entrepreneurial ecosystem and spirit boost than anything that we’ve seen over the course the last 10 years.

Brian Ardinger: So let’s talk about your team. As a Founder that’s one of the best things you have to do in the probably the most important thing to do is surround yourself with the best and the brightest that you can find and that can complement what you’re doing. How did you go about finding your team and building that out?

Building a Team

Max Fergus: A thing that people always say is that the intellect and the students at UW don’t match up with students at Harvard or Stanford or some of these other really top ivy league schools or schools around the country and I don’t disagree with all of that. But what I disagree with is that the top quartile of students at the UW are just as smart and as motivated and as passionate as any of those students at any of those universities and I wish I could take credit for going out and finding the smartest kids across the school but the truth is that they were surrounding us at all times. It was not hard to find students that were exceptionally motivated and exceptionally excited to like I said, challenge themselves and explore new career opportunities. We did a risk analysis of our company early on of the nine major types of risk that startups come accustomed to failing to, and the first thing that we had checked off the box was our team risk.

Brian Ardinger: So you’ve been in business 18 months issue around there. What are some of the obstacles are the biggest things that you’ve had to face in the last 18 months that have made you think twice about what you’ve done.

Obstacles

Max Fergus: Yeah, to be honest with you. I don’t think I don’t think yet I’ve thought a single time about what I’ve done and then a negative way or that I would ever go back on it. In terms of obstacles i think the biggest obstacle for us is two-sided marketing. I would say. Not because we have a better chance necessarily at reaching artist or reaching fans, but because of the capital and the human capital that’s required to reach both of the market. Ultimately, you have to come up with separate branding strategies that are completely cohesive when you’re reaching out to artists and reaching out to fans so that when they get on loom the user experience is exactly what they perceived it to be because they have an expectation of that coming in.That cost a lot of money it costs a lot of creative assets and it is a Capital High business to run in general. But we are one of the leanest startups of all time and my Dad gave me great advice when we started Lum and he said you have to treat that money like it’s your own and because of that we have Runway even after raising our C financing in May of just over a million dollars through the first quarter of 2021 still over, you know, 16 months out.

Brian Ardinger: Let’s talk a little bit about what’s next. You’re on a fast pace. You’ve alluded to in the conversation before about some of the new things that you’re going to be launching. What’s next for Lum

What’s Next

Max Fergus: As you saw earlier we announced that really exciting things. I will say this when you’re going to a restaurant that has a menu with too many options. Sometimes it’s hard to pick what you want to eat and over the course of the last month. We’ve been dealing with that a little bit. We didn’t know anything about data. When we started Lum and so when we have companies like Universal and Sony and Live Nation reaching out to us because they want to use our data for better leveraging it for live entertainment, for advertising, for especially A&R.   A&R is an industry where 11 million dollars a day is spent to sign 2 acts and these labels believe that Lum can better give them those next emerging artist then the current data platforms that they’re spending a million dollars a day on right now to find those Acts. Luckily for us we’ve had some really great mentors and advisors that have helped us really focus on what we want to do. There’s always time for that. But what we need to do right now is create the next business model for music and Lum is launching in the next two months the first ever fully free music streaming platform that allows for fans to directly support and tip their favorite emerging artist, whether it’s in their local areas regionally or nationally and the amount of technology that were throwing in on top of that to make sure that that process is as exciting and interactive and engaging for our fans and artists is really really exciting for us.

Brian Ardinger: You mentioned some of the bigger companies are coming to you now. At Inside Outside Innovation, we talk a lot about corporates and how they can interact with startups in that what are some of the challenges or opportunities that you’re seeing with interacting with some of these larger companies and what are the pitfalls and opportunities that you see.

Corporate Startup Collaboration

Max Fergus: Well, the first thing I’ll say is that from a live entertainment side our relationship with Prane Productions and Live Nation has been phenomenal, supportive, Cornerstone established companies that really believe in the values that we also believe in around moving music forward and when you go beyond that and you look at streaming. One of the big misconceptions about Lum is that we are trying to overtake or compete with a company like Spotify, so completely incorrect. We actually think our business model is very synergistic with a company like Spotify creating low-cost value ways that have high Revenue impact potential, to use Lum as a stepping-stone platform For Young Artists to Brand themselves, power, use Lum as a tool to engage with their fans, grow their fan base, show that they can do it themselves. So that maybe one day they eventually can leave a content creator supported platform and sign a label and go on to Spotify and make millions of dollars. Right. Lum is the pathway and the tools that give them the opportunity to do that. How do you do that? Right now you get lucky or for Billy Eilish your Uncle is the VP at Apple music, you know, there is no really way.You know, we use the analogy often that in the NFL the top 1% of people that make it to the league, with some variation, are usually the ones that should be playing in the NFL right? There’s no secret LeBron James not playing basketball, but they’re really trying to, but it music that’s not the case. The top 1% of the people making the most money are absolutely not the most talented right the maybe the entire first five percent is as talented as they are and Lum is just a tool to help them get to that next step.

Brian Ardinger: If people want to find out a little bit more about you as an entrepreneur or LUM, what’s the best way to do that?

Connect with Max and LUM

Max Fergus: Absolutely you can find us on lum.Fm is our website, at the same time. We’re also currently available on iOS across the country downloaded on the Apple App Store. You’ll actually find us likely in the top free music charts on any given week and at the same time will be actually launching our Android version here over the course of the next three or four months.

Brian Ardinger: Thanks very much Max for being on Inside Outside Innovation.

Max Fergus: Of course. Thank you so much. Appreciate it.

Brian Ardinger: That’s it for another episode of Inside Outside Innovation. If you want to learn more about our team our content or Services check out Insideoutside.IO or follow us on Twitter @theIOpodcast or @Ardinger until next time go out and innovate.

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Find this episode of Inside Outside Innovation at insideoutside.io. You can also listen on AcastiTunesSticher, Spotify, Overcast, and Google Play.

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Ep. 173 – LUM’s Ma...