Is new Jozi artist investment platform Sunkambe set to be the JSE of music?

Recording, launching and distributing an album can typically cost an artist tens of thousands of rands — money many new and upcoming musicians often don’t have. Added to that, artists, much like startups, face a near impossible task financing their projects from banks.

Enter Sunkambe, a platform that allows artists to crowd fund the distribution and recording of an album in return for allowing investors a share of their royalties. The platform is set to launch later this month.

In April Sunkambe was one of 25 startups from around the world selected to pitch at Seedstars World Summit’s startup garden in Lausanne, Switzerland. In the same month the startup received R50 000 grant funding and business support from the Innovation Hub.

The startup’s founder and CEO Shaka Ramulifho (pictured above, right) says he knows “very well the challenges of accessing finance from private and traditional banking institutions”.

Ramulifho, who founded the Joburg-based company last year, likens his platform — which he is aiming at ordinary investors, major record labels, savings and investment groups — to the “workings of the Johannesburg Stock Exchange”.

Sunkambe will charge a 15% commission on all capital raised on the platform, which Ramulifho says cost about R250 000 to develop

“We turn artists into real businesses that are then listed for investors to invest into. The investors become shareholders in that particular artist future potential revenue for 18 months. Any revenue that occur within that 18 months is shared between investors and the artist,” Ramulifho said in an email to Venturburn.

How it’ll work

Upon investing, investors will be sent a digital certificate which will serve as proof of ownership of the respective artist’s music rights. Sunkambe will also enable investors to listen to, vote for and invest in artists. Sunkambe will take a 15% commission on capital raised on the platform.

In addition, users of the platform will be able to view artists bookings revenue, upcoming events and financials based on similar artist comparison data on the app.

“We selected 18 months, after we took into account data around the rate of change of music in general and activity spikes in terms of sales and booking revenue between the launch of an album and 24 months later. We found during our research that it is most rewarding between one and 18 months,” explains Ramulifho.

Record labels and independent artists will be able to create profiles on the platform for free. Ramulifho says an approval committee — composed of industry experts “that have the expertise and experience to know what sells in the music industry” — will select campaigns that will be open to investment based on artists motivation, sound, traction, and social media sentiment.

“It is important to note that our approval committee invests their own money in artists they approve. If the decision is not positive, the artist may be offered a place at our incubation programme for six or 12 months in order to address recommendations suggested by our algorithm,” he says.

Should the campaign fail to meet its target, artists will have the option to extend the campaign for a second round, or take whatever has been raised.

‘Risk of financial loss’

Ramulifho is convinced that music fans and investors will favour his platform’s model over that of tried and tested donations-based crowdfunding platforms such as Kickstarter or its local equivalent Thundafund.com.

He says his company sampled the views of ordinary people in Braamfontein and Sunnyside, Pretoria and on the whole most weren’t aware of donation-based crowdfunding. The general sentiment, he added, is that “people want something back”.

From Ramulifho’s explanation, Sunkambe sounds a lot like an equity crowdfunding platform — which is not yet legal in South Africa.

Ventureburn asked if he had approached the Financial Services Board (FSB) to get the green light to go ahead. He said he had a “walk-in session” to determine if Sunkambe would fall under the regulator’s radar but pointed out that he had not been given any “negative feedback” from the authority.

He cautions that investments on the platform may “gain or lose value and there is always risk of financial loss inherent in such products”. However, he pointed out that Sunkambe has put in place three measures that will ensure returns are paid to investors.

These measures include Sunkambe managing all revenue for artists on the platform, half-yearly investor reviews on artists which “will impact future campaigns”, and investment fraud cover which he says the startup is looking to implement once it secures an insurance partner.

Pitch perfect

The startup might be on to something, along with being selected to pitch at Seedstars World Summit’s startup garden in April, the company was last year among five entertainment tech startups selected to join SA telecoms company Liquid Telecom’s Liquid Launchpad. This subsequently led to the investment platform pitching at AfriCom.

In addition, the startup has been incubated at Tshimologong Digital Precinct and also won last year’s MIT Global Startup Programme and was top seven in the 2017 Standard Bank Innovation Challenge.

‘Finding partners tough’

However, despite all this success the startup — which employs four staff and has an advisory board of six experts in finance, legal, marketing, music and app development — is yet to raise any venture capital or angel investment funding.

Ramulifho said instead he has drawn on  his personal savings and loans from family and friends to fund the development of the platform.

He adds that finding partners has been “particularly tough”, as has been customer awareness. “We came close with a Sweden based venture capitalist firm we met through Seedstars, but we couldn’t agree on the equity ask. We are having a lot of coffees with VC firms at the moment,” says Ramulifho.

Future plans

And the startup plans to launch an “Invest with a Service” feature in the next two months which will allow artists to list services they require, like legal representation. “This allows companies to invest in artists with a service in exchange for future potential revenue for 18 months,” he explained.

In addition, the Ramulifho has further plans to launch a live music rights exchange “where music rights will be traded with a daily value”.

So, is will Sunkambe become a JSE for musicians and help artists to source the funding they need to launch their career? This then remains the big question.

Featured image (from left to right): Sunkambe COO Khangwelo Sikhauli and Sunkambe CEO Shaka Ramulifho