In the music industry, a 360 deal is where a record label provides an artist with financial, marketing, and distribution support in exchange for a percentage of future revenue streams.
360 deals create a direct relationship between founders and investors.
This solves the fundamental misalignment between founders and investors:
- Founders shouldn’t have to go all-in on each idea.
- Investors should back founders long-term, not just for one startup.
360 deals get a bad rap because of the way some record labels have used them to exploit artists.
- Motown Records’ 360 deals used to force their artists to tour 200+ nights a year.
- And Motown owned the artists’ likeness, masters, etc.
But 360 deals can be way better than the standard VC model.
- VCs bet on one startup at a time.
- So they’re incentivized to keep founders locked up in their original startups.
- They don’t want founders to diversify.
- They want a portfolio for themselves but not for founders.
- So they’re incentivized to keep founders locked up in their original startups.
The perfect 360 deal would be simple, fair, and transparent:
Idea: $100K/year in exchange for 10% of all revenue streams created in that period:
- Now I don’t care whether the Creator makes a YouTube channel, podcast, OnlyFans, etc.
- Or all of the above.
- If they make money, I make 10%. That’s it.
This is like the Team 10 model, but I’d focus on supporting rising stars vs. trying to create new stars.
There are two key ways to model this investment structure:
- Incubator: “YC For Creators”
- Platform: “AngelList For Creators”
The YC For Creators model has been explored by investors like Blake Robbins.
- This model only works if you’re great at identifying rising star Creators.
- I’d bet on Blake to be the best at this model.
- What’s the ideal “standard deal” for this kind of incubator/accelerator?
The Platform model has been explored by Creators like Mr. Beast.
- I call this idea Creator Stock Exchange.
- Robinhood-like UX. Crypto-based securities?
- SEC regulations might have to change for this to be legal in the US.
- Robinhood-like UX. Crypto-based securities?
- Can we create a platform where fans invest in these 360 deals so they’d share in their favorite Creators’ wins?
I’m torn between the incubator vs. platform model and still in the early stages of exploring this idea.
- My DMs are open @neilthanedar if you’re interested in this riffing and refining on this idea!