CC#19: Chainsmokers: From Artists to Tech Investors

How the Chainsmokers raised a $35m fund from the likes of Ron Conway, Keith Rabois, Mark Cuban & many others; and how they built an events ticketing platform on the blockchain.

The Chainsmokers are known for some of their catchy hits, like Closer, which I haven’t been able to get out of my head since 2016. Last night, Alex Pall (1/2 of Chainsmokers) joined on the Good Time Show with Sriram and Aarthi and as a surprise to myself and many others, they have actually been active in the tech world for a couple of years.

The interview started with the hosts curiously asking Alex about some of their top hits and their background before quickly shifting to tech, startups and investing.

Alex: "There’s actually a lot of parallels between music and the tech/investment space. I have far more in common with investors and founders than I thought I would. The importance of appealing to your consumers/users is something that is critical to both music and startups. Differentiating yourself is another one. For us—it was trying to find that sweet spot of what the Chainsmokers do well and focusing on that. I remember at some points hearing fans say we always make the same song. And I think this is a slippery slope that founders also have to face—finding the balance between doing what fans (or in the case of a startup, users/customers) want, instead of what feels natural.”

Garry Tan, Managing Partner of Initialized Capital, followed up with a question about #SELFIE, one of the first big hits the Chainsmokers ever had. This prompted them to share a story that would later serve as a foundation for the Chainsmoker’s investment thesis as early stage tech investors.

“That was a really weird moment. Hype Machine was a gateway for us. Before that, we would put a song on Soundcloud and hope it would get 1000 views. If we made it on Hype Machine we’d suddenly get a couple million streams. We would identify songs on Hype Machine and send a blind email to the band or musician and we offered to make remixes for them. About 99% of them told us to fuck off. A few times, they got excited about it. Drew was busy creating the remixes, and I’d be hard at work scraping this website for every writer that had a hit. My list was over 10,000 songs at one point. I emailed every writer on my list. There was a period of time that Google shut down my Gmail—I’m sure they were skeptical and thought there was a bot that was sending out hundreds of emails per day. We had a big show coming up at LIV in Miami, that was like the Super Bowl for us at the time. We thought what if we make a song about a night out at LIV, the crowd will love it and they will book us again. What if we make it about a drunk girl at a night club. We sat there and wrote out the lines. We called our friend Alexis and asked if she could come over for 20 minutes and say the lyrics. She came over and read them in between classes. It turned into this massive viral hit, but the joke was on us cause this song was not really indicative about the music we actually made. It was a really exciting moment but bittersweet cause you could tell musicians were like “fuck you guys!” We ended up getting a big contract with Republic because of the song, and a few weeks later we went to them about the next big song that we were gonna drop next Roses. Republic proceeded to drop us from the label and we released Roses. The song ended up defining the sound that the Chainsmokers would later become known for.”

The interesting thing about this is—it’s not often you hear of a musician scraping thousands of emails from a database and aggressively reaching out to those contacts in order to create opportunities. This is the kind of thing you would hear a tech startup founder doing, but is almost unheard of in the music industry, especially in 2015.

Aarthi replied “This is the story of startups. They get rejected over and over again, but eventually they get so good that they don’t get rejected anymore.”

Alex: “To me, until someone tells me no, then it’s a possible yes. Theres a delicate balance between being annoying and aggressive. You don’t want to count yourself out. Especially in investing, I found it really important to keep following up. The most important moments came after continuing to bang the door. You guys in tech are 1000x more enjoyable to deal with than anyone in the music industry. I remember we were going to have lunch with Peter Thiel and we were expecting him to tear us apart since we didn’t know much at the time, but he ended up being so nice and helpful.” 

Sriram: “Tell us more about Mantis (their venture capital firm).”

Alex: “This has been one of the most awesome years for Mantis. I’m sad we haven’t been able to play shows, but it’s been exciting to focus on venture capital firm. I was driving back home one night and listening to this podcast with Ashton Kutcher and he was asked about his thoughts on all of these celebrities and artists getting into venture capital, and he said “Be prepared to lose money.” For us we were really excited about it. We’ve been angel investing ever since we had enough money to do so. We learned about the importance of the founder and the team. It was all really inbound  deal flow. We just had our first deal go to $0. I should be sad but I was excited about it because I understand that this is just a part of this game. The way Mantis got started was that Drew came to me and said we should think about starting a fund. I thought this would be a big opportunity for us to prove ourselves in this space. We already had a lot of the things that would make us good in this space, such as a hunger to learn and a very strong work ethic. When I first started taking calls and meetings with founders, I remember I was googling things like TAM (total-addressable market) and LTV (customer lifetime value) in between meetings.”

Sriram: “How did people react when you guys first started getting into this?”

Alex: “What’s really nice is how welcoming people were to us. As DJs, when I see another celebrity who doesn’t have a musical background getting into the music industry, I think they’re gonna reflect poorly on us. But we didn’t experience this in tech. We met with so many people in 6 months and got so much advice that people started to contradict each other. We were asking people like Bill Gurley, Peter Fenton, and many others. The thing I can tell you is a smart investor constantly admits they know nothing. It was awesome to hear but also terrifying. We actually co-founded a blockchain ticketing platform and a tequila company, but we’re talking about SaaS and I have no business being in this space. So I thought am I foolish to be in this space. Getting into areas that we don’t know so much about gives us this freedom to invest more freely in ways other people wouldn’t.”

Garry Tan: “How do you guys attract founders and what are some of the things you look for?”

Alex: “What makes us appeal to founders is the 1 to 1 relationship. We think of ourselves as founders who built the Chainsmokers. We always provide founders with that friendship and being very hands on. For us—we really come into it as a friendship and we want to be that support system for founders. We like to think of ourselves as your bloodhounds. We like to stay up all night and talk to founders about what challenges they’re facing. A function of our world has always been about hospitality and relationships. What comes around goes around. I personally love hanging out with these founders/VCs and I’ve learned so much from them. The other thing is we realize that being a founder is hard and lonely, and by going out with the founders or taking a short break with them, it can help their productivity significantly when they do get back to work. Everyone knows the music industry has a strong “party connotation”, so when we first started, our founders would often be warned “You can go out with them, but don’t go out with them too much.” But we’ve found that it definitely helps alleviate some of the stuffiness. It’s cool to be “those guys” for these founders who are 21-23. That’s where creativity is really fostered. When we’ve been in the studio for 2 weeks straight in the past, my mind gets cluttered and it gets hard to think clearly. But the moment we step out and speak to a founder, its like holy shit I’m inspired again. So that’s what we do for founders in a sense. They get excited about meeting us for lunch/dinner and return to their companies feeling refreshed.”

Sriram: “What are some of the commonalities between top artists and top founders that you’ve observed?”

Alex: “One of my best skills, and I’m not sure how I gained it, is hanging w the right people and being observant. However, I often look for qualities I see in myself, and Drew—we’ve had the same team from the start. You don’t need the nice suit, experience working at Goldman Sachs, or Stanford University degree. The most important thing for us is the work ethic. No matter how successful you are, you typically have a curiosity to see how far you can go. Theres some musicians who are natural born killers. But the people like Elon—hearing about how he’s in Austin in a shitty airbnb, building the next big thing. That’s what we like to see. The hard work, willingness to go to any length to succeed at what you do. And having a great partner/team. Recognizing skills in other people. Drew, luckiest thing to happen to me in my career. Some people can do it all, but some people need the Robin to their Batman.”

Garry: “Having good partners is super important. GTM, or having a clear path to your first 10 users and first 100 fans is very important. What are some other criteria you guys have?”

Alex: “It’s so different for every company, sometimes people focus too long into the future. I like the small milestones. You want to challenge yourself but be realistic about the little goals you want to set and hit. It will allow you to effectively make progress and grow.”

Alex: “Brian Chesky was interviewed after Airbnb had just IPOed and they told him Airbnb’s market cap was around 80b+. Brian appeared notably surprised and responded saying that they’re going to have to work harder because the higher the price, the higher the expectation. He’s a killer. He gets stuff done. This doesn’t change over time. The stakes may be higher at later stages, but you should still try to stick to what you do best. Building a great team around you is also incredibly important, and this is one of the most challenging things for big companies to do consistently.”

Aarthi: “Tell us more about Yellow Heart.”

Alex: “Four years ago, we were playing at a google event in San Francisco. One of the Managers connected us with a guy named Josh Katz who wanted to pitch us. He told us he wanted to create a ticketing platform on the blockchain. I was totally sold, and part of the reason was that he is the biggest music connoisseur in the world. He goes to more concerts than anyone else. So he was the perfect person to do this, since he was building something he needed. We had been building it out for a couple of years. Nobody cared about blockchain back then, people laughed at us. At one point, we almost sold it. Then COVID happened, and the backbone of our business was destroyed. I remember having all these calls with investors and they would tell us we had a great idea except that there were no concerts happening due to COVID. And now with the sudden onset of NFTs, this space is growing faster than ever before. Ticketing is so old and antiquated. We’ve played at enough shows and witnessed some bad experiences, typically caused by bad actors. We actually love LiveNation and Ticketmaster but they own the whole market. There are situations where our fans are having to pay $500 for a $75 ticket. All for some scalper to be making the difference. With blockchain, we can help artists take a majority of their cut without having to pay ridiculous fees to some 3rd party. I can go on forever about what we’re trying to do. People are starting to say there’s a lot of value here. I feel like this is a really great moment for us to really make a difference.”

The Chainsmoker’s debut fund called Mantis closed in September of last year with $35m raised from some of the world’s top tech investors, including Ron Conway, Mark Cuban, Keith Rabois and Jim Coulter.

To learn more about Mantis, visit: https://www.mantisvc.com/