Bands typically start out by self-financing and/or getting money from family and friends. If you need to get external funding from the market, first you need to determine your needs. Are you looking to fund your business overall or fund a specific project?
If you are looking for funding to grow your band’s overall business then your potential funding sources are angels, venture capital, private equity, and banks. If you are looking to fund a specific project/product (e.g., you need funds to record and market a new album) then your potential funding sources are grants, crowdfunding, peer-to-peer lending, and banks.
Each funding source has unique requirements and ways of operating. Regardless of which option you choose, you still need to understand your band’s business, choose the right funder, have the necessary documents, and tailor your pitch to the funder you choose.
Funding Sources for Your Overall Business
High net worth individuals who provide money in exchange for an equity stake in a company. They typically are brought in at the startup/early stages of a company and can be actively involved – they can provide strategic/management/technical advice along with their investment. They usually require a business plan and pitch deck.
Venture capital firms provide money in exchange for an equity stake in startup firms and small businesses with perceived long-term growth potential. These investments typically have high investment risk but potential for higher than average returns. Venture capitalists take bets on new companies with the expectation that their investment will grow. They will require a business plan and a pitch deck.
Private equity firms make investments into established businesses to help make them profitable. The investments typically are long-term and can take many forms: the investors can provide management and/or technical expertise, working capital, or buy it out entirely in order to turn it around. Examples of PE firms that fund artists: Round Hill Music Royalty Partners, Alignment Artist Capital. They will require a business plan and pitch deck.
Banks can provide funds for a startup business. Traditionally, these funds are hard to get but if you have a good relationship with your bank then it would be worth it to try. Banks will require a business plan and an application.
Funding Sources for Projects, Products or Individuals
Money from a government, foundation, etc. for a specific purpose to an eligible recipient. Grants are different from loans and equity – they have different criteria and goals and grants do not have to be repaid. They will require a proposal, grant application, or something comparable. Submission deadlines can be fixed or rolling, depending on the funder.
The practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.
Peer-to-Peer (P2P) Lending
A company would approach a bank on a project basis when it needs a loan or line of credit for equipment, working capital, business expansion, etc. The company should be in business for a few years and have a successful track record. It requires a bank application, corporate and financial documents.
A revenue plan to figure out what’s profitable, what’s not worth the cost, and your timeline for making money.