Ola Sars is a serial entrepreneur and the co-founder of Soundtrack Your Brand which is a background music streaming service with curated background soundtracks for business use. The company has raised over $50 million from investors such as Balderton Capital, Wellington Partners, Northzone, Creandum, Industrifonden, NJF Capital, and Spotify to name a few. Prior to this he helped built Beats into a $3 billion business.
In this episode you will learn:
- The importance of knowing your shares and who is really in control of your company
- Why founders should be more paranoid
- Why focus and simplicity is so important for startups
- The basic business principles that will make or break your venture
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Ola Sars:
Connect with Ola Sars:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a founder in Europe, and what we’re going to learn from his journey and his story, oh my gosh, I think that we’re all going to really enjoy and get a ton of insights from his journey and how he’s now building and scaling his latest company. So, without further ado, let me welcome our guest today, Ola Sars, welcome to the show.
Ola Sars: Thank you so much. It’s a pleasure to be here.
Alejandro: Originally born in Stockholm, and you were raised there. You did a little bit of traveling here and there to the U.S. but born and raised in Stockholm. How was life growing up there?
Ola Sars: Very good. Obviously, it’s a great city. We’re a small country, but very fortunate in being able to grow up here and also spend time in different parts of the world at the same time, but I always had to come back for many reasons.
Alejandro: Very nice. Did you have anyone in your family being an entrepreneur or anyone close to you that was into business? How did you develop this love for business?
Ola Sars: That’s an interesting story. I think I earned it from my mother, who was an entrepreneur since day one, building her own business. She was very present in my life, and my dad was at the UN, so he was not at home, obviously. But she was, and she was running a business at the same time and raising children. She probably showed me that you can build a business and have a family and try to balance that out; obviously, easier in these times as back then, but a woman at that time and building her own business and raising a family with a husband on the road was probably the evidence that anyone can do it.
Alejandro: Absolutely. You did a bit of business school and so forth, and then you did consulting? Is that right?
Ola Sars: Yes. I did both consulting as an employee, but also as an entrepreneur starting my own consultancy firms, and actually being able to sell them, as well. I’ve always been a little bit too rebellious to fit in any kind of more structured environment, I would say. I tended to do my own thing with what I was doing. That kind of goes through my whole story, and I think somewhere in my personality mentality, I like to run the show, and I like to take the risk, and I like to build things myself.
Alejandro: Talking about running the show, after this corporate experience working for others, you are in Ibiza, enjoying the sun and the party that they have going on there. A certain sequence of events really altered everything for you. What happened there?
Ola Sars: Alejandro, I was there, and you know how it is there. It’s one of those wonderful places when the sun is coming up, and everything feels possible, and you’re with good friends, and you’re looking out over the ocean. We would spend with my best friends every summer there for weeks and get a house together and hang out with my real friends. Many of them are in the music scene. What I realized, to cut a long story short was that they were actually successful in building a life with something that they love. It sounds a bit cliché, I know, but in my pragmatic, Swedish mind, they were actually being able to have fun at the same that as they were making money. Myself, I actually drew up a matrix, which I called the SARS Matrix for fun, but I still related to fun versus bordering on the x-axis, and it is money out versus money in on the y-axis. Obviously, the challenge in life is to be able to position yourself in the right time corner, being able to generate money in, and having fun at the same time, maximizing that equation. For me, that was either sports or music. Right in front of me, this was all the way back to 2007, 2008, right in front of me at that point having this emotional angle to it, but there was also a rational part I’m seeing a whole market that was about to change right in front of us. Music was going digital. It was very clear that was the path in terms of music production going digital, music distribution going digital, and music consumption going digital at the same time. It was only at the beginning, and I chose to move in that direction and started my first music company called Tonium. We built the world’s first pocket-size DJ system called Pacemaker.
Alejandro: That’s amazing. As you were pointing to, this leads you to Tonium; then, there’s an interesting pivot there too. All-in-all, before the acquisition, you spent about four years or so building this, and this led into a pivot that led into an acquisition. But I want to know what was that transition from Tonium all the way to Let’s Mix because you also had raised some money for this.
Ola Sars: Right. Tonium was a company that developed and distributed a platform called Pacemaker. It was a very innovative platform and very early. It was a platform where our idea was based on the fact that the music market would be a market of abundance, meaning that any music would be available anywhere and time in the world. The company that’s able to solve for that equation actually recommending the right music to the right consumer for the right context will win. So distribution would solve itself; consumption would solve itself in terms of being able to playback all the music in the world [7:25]. The whole recommendation and curation that was the golden nugget. We figured out, what’s the best way of building today’s recommendation engine or this curation engine? It was to connect to the world of DJs, which is a good connection to [7:43]. The fun thing about that is, DJs were [7:47] when they started selectors. Their aggregated intelligence was something that we thought would be the core data set to build a recommendation engine for the future. So, how do we get that intelligence aggregated? We build a platform to connect with the DJs of the world. We developed Pacemaker, which was – then before the app store, believe it or not, for us old people. That hardware product that we developed and built became a beautiful Swedish designed product which we distributed in 20 markets, but with the trojan horse intent to connect to all the music pacemakers of the world and extract their music intelligence. Then, when we were to extract that music intelligence, then we were building a recommendation engine based on that intelligence. So, it was a bit pretentious, but what we were building was what we called a taste-exchange marketplace for music. So, it was fairly advanced, thinking a bit too early, I would summarize that. When you add hardware to any equation in order to solve a business problem, then you add a whole new level of complexity. I had never done hardware in my life before, and I experienced with the hardware that it’s way harder than you ever expect.
Alejandro: Got it. What happened next? How did the pivot come about?
Ola Sars: I would say we failed with expanding the pacemaker hardware to the global success. We rolled it out in 20 markets, and we sold tens of thousands of this amazing product, but we realized that the hardware business, in itself, was consuming us. In the concept, there was a lot of software. There was a software to connect to music libraries. There was a software to DJ and mixed with the music. There was a software to upload and share the DJ mix and the method that came from the DJ mix. When we were unsuccessful with the whole concept, the ecosystem, we sold off the hardware to our 3M-based manufacturer, and I personally acquired the online platform, which was the world’s first DJ-driven or Pacemaker-driven music service called Let’s Mix. I pivoted and acquired the online asset, and I started focusing on that part of the business, which was a really, really good music service. Still, I kind of think about it at night that I should have kept Let’s Mix. But it was basically an upload and share platform for DJ mixes with a very strong recommendation. That concept exploded, and I started rolling that small company. Previously, in the Pacemaker concept the Jamie and Dre at Beats by Dre, I had been in contact multiple times around them trying to acquire my Pacemaker business, which I wasn’t able to broker with my current investors, which is another interesting story. When you’re in the middle of Wired Magazine with this ecosystem product, and everyone is talking about you, and your investors think you’re going to be the new Apple, you realize, yourself, that it’s just too complex, and you need partners. But I was not able to convince my current investors that bringing in the Beats guys would be a gamechanger. So, that was a pivotal moment for the Pacemaker hardware platform, but now, when running the show and owning Let’s Mix myself, I was able to re-gauge, and the timing was perfect. Both Jamie and Dre were thinking about building their empire around a music service and expanding their strategy around that. That ended up with me building up Let’s Mix quite quickly but then selling Let’s Mix to Beats and turning that concept and team into the Beat’s Music platform.
Alejandro: Then, the acquisition happens, and then you start building this division on Beats. What happened, because Beats is incredible, especially the outcome that got to Apple for $3 billion. So, tell us about this.
Ola Sars: Yes. How do I do that in a short Swedish boring way – working with these amazing people, but in this absolutely crazy reality? I’ll try to summarize: by us actually, against all odds, being able to develop an on-demand consumer streaming service with maybe a 20th of the team that Spotify had in size and investment, and maybe a fifth of the time. And being able to do that under very crazy circumstances where Jamie and Dre and the team are extreme entrepreneurs, and maybe structure and understanding of the massive complexity of building a music service wasn’t really anything they wanted to hear about. They just wanted to hear about when we were able to launch. That was an extreme learning. I loved the period working with this team and what they were able to do on building a leading brand for mainstream America and the strategy of a music service being the epicenter of the leading music brand for the next-generation music lovers. We pushed through, and I spent almost three years building that and launching that in the U.S. Then, completely worn out, on a level where it was a health issue. At the same time as my family was in Stockholm, and I was flying back and forth to LA and San Francisco every two weeks. Some family issues on my parents’ side just led to this very, very binary decision to decide that I’m out. I had a lengthy conversation with the guys and with Jamie, and so forth and explained. They understand, but they said maybe it’s not the best time to do it; but, I did it. I left the concept to evolve, and everything was working fine then. But, obviously, I didn’t know about what happened a three months later with the three-billion-dollar acquisition of the Beats Company, and when I left, I had sold my shares. So, I had left my position in the company. But it’s not a question of them not being. We couldn’t discuss it. It was not clear, and I was just under development. I don’t think I would have made a different decision if I had known anyway where I was because of my personal position.
Alejandro: Out of this experience – it’s unbelievable how timing and luck always plays a key role. We’re talking about a couple of months before that three-billion-dollar deal happened of you walking away and checking out. What lesson was there for you?
Ola Sars: I think, in retrospect, as a person – and, once again, I think I’m not driven by money. It sounds cliché to say that, but I’m really not. I’m driven by building great concepts and scaling them. Scalability is my thing. I think the learning in this exercise is that, “Wow! We could actually build a music service.” We had started off four years later with Spotify. You could build something with so much more efficient ways if you’d do it later in the cycle of an industry. Like, for example, what I just said, we were able to build the global streaming service with a team of under 100 people, and Spotify was already up at the 3,000 to 5,000 people at that point. So, that’s one learning. If you look at previous companies, you can 5x or 10x the efficiency rate of developing something if you’re doing it second or third. That’s one very interesting software insight and scalability building insight. The good news is then, for me, who knows the music industry, people tend to underestimate the complexity of doing that, even though, in theory, it’s easy to do it, but it’s all about execution. In the music industry, you need to know what floor to get off on when you’re visiting Sony or Merlin in New York in order to get anywhere; in order to get the commodities back through source to your software. It’s never as easy as it looks, and if you build a team with a lot of experience in that industry, you can’t break that massive scalability and prove efficiency, but wow, you really need to think about what to solve for in order to reach that increased efficiency.
Alejandro: Of course. So, for you after the experience with Beats, then you go back to Stockholm, and you ended up founding another company, Soundtrack. Tell us about Soundtrack, your brand, and how you brought this new concept, this new baby to life.
Ola Sars: When I was on the consumer side building streaming services on that side, and then as a fellow Swede, everyone knows each other in this small city, so down in the market where the commerce is Spotify; multiple people working at Spotify are close friends. I had gotten the question of Beats multiple times from brands asking, “How do we get streaming in our business? How can we relate to people, and what’s going on in the music market? How can we use music to augment our brand experience? How do we relate to this thing going on? My response would be, “I don’t know because I have to work 24 hours on building a consumer service and getting that out in the market. But that stuck on me, and when starting to discuss that at a pure together with Daniel Martin, it also was clear that they had gotten multiple questions from brands on how do we get Spotify in our business? How do we get Beats in our business? Which I quickly realized, “Okay, I have done three companies. I might as well do a fourth” based on what I just told you about the complexity and underestimation of the complexity of building music services. But I’ll do a very basic and simple business idea that I can explain to my mother very easily. I’m taking streaming to the B2B market. I’m taking a macro or a market transition from the consumer side and applying it to the B2B side. That was my business idea. Obviously, that requires a whole set of software and user logic because brands and businesses have a completely different use case when it comes to music. Then, I realized that there were no streaming licenses for B2B in the world. But music was being played everywhere, so I also had to redo that again to what I’ve now done as 9,000 [19:29] licensing deals with publishers [19:32] in order to enable them the first drop of the product. So, I flew home and talked to my friends in Stockholm. I took the money that I made from the Beats deal and put it all in establishing Soundtrack and invited Spotify to be co-owner, and they came in as my co-founders of Soundtrack. Soundtrack was a procreation or co-founding together with Spotify that I drove, and I innovated, but I brought them along. And there we were in 2013 where the embryo of an opportunity to bring streaming.
Alejandro: Very nice. In terms of the business model, how do you guys make money with this?
Ola Sars: It’s very basic, B2B SaaS, but with content. We sell bimonthly subscriptions per location. So, if you run ten restaurants in Madrid, then you’ll have one centralized account, and you’ll have one or two subscriptions per restaurant depending if you have different music in the bar or in the lounge or whatnot. Then, it’s all about back to my initial thesis of what music at what brand at what time and what context in order to achieve what experience and what type of behavior. That’s a very intriguing, fun equation that I can work with, hopefully, until I retire. The IP aspect and the AI aspect of that scaling BrandSounds around the world is a very interesting product and intellectual challenge. Music defines if you are going to keep the guests in the bar and sell another ten drinks. We have statistically proven that it affects upline sales with around 9% together with McDonald’s in a global study. So, the right music at the right place with the right brand drives business. That defines a massive unlocking value potential, which was the core idea. If I can monetize the unlock value through music and brands, then I have a golden nugget or even possibly a diamond. So I’m selling subscriptions in 73 markets rolling out based on 9,000 licensing deals that no one else has on a very intelligent product software staff that is sold online primarily with a scalable SMB SaaS model, and I’m selling it with a higher margin at $30 a subscription per month.
Alejandro: Very nice. How much capital have you guys raised to date for the business?
Ola Sars: Up until today, roughly 50 million dollars. That’s just a base kind of ticket to get our streaming service up and running, I would say, which is not trivial to raise before you’re monetizing. That’s another barrier.
Alejandro: I know that during one of those fundraisers, there was a little bit of internal turmoil that created the outcome, and I know that this has led to a few disagreements, to say the least, internally. Would you mind sharing what happened?
Ola Sars: I think it’s a classical interesting founder’s story, investors story. I’m not pointing any fingers in any direction. I’m merely trying to just explain the dynamics of raising money from multiple investors and then ending up in a period which didn’t work out. Then trying to work your way through that crisis, I would say. It was all wonderful to raise the initial funding and me putting my money in and the business idea anyone can understand. The team I built was amazing, and we were on a roll. We starting rolling out our first commercialization under the Spotify business brand in early 2016. I was testing it a little bit in Sweden. Then we rolled out our first reel when we started rolling out our own markets on our own Soundtrack product was 2018. At the end of 2018, we were planning to raise a significant growth round, give or take 40 million dollars. The short story is, we were unsuccessful. We failed. We crashed into a wall at the end of 2018. The reason for that is that we were just in with too much complexity rolling out. All of these licensing deals worldwide at the same time as we were doing product, so our strategy wasn’t educated enough. We were going too broadly into the market. We were doing enterprise and SMB at the same time and building up a massive cost base of field sales. We were running four sales channels at the same time for a global market with all the other complexities that come from rolling out a software company. The short story: we had the wrong strategy; we had the wrong focus; we had bad dynamics in the ownership and in the board room. Those dynamics hit a peak when we weren’t able to close the round. We were extremely close. We were just kind of one partner away with a couple of investors to actually build that round. That probably would have been the worst that to happen to the company. But, in 2018, we crashed. I was able to establish a rescue package with the current investors at 10 million dollars to try to turn this around. But, obviously, I was questioned and scrutinized. But during the first half of 2019, as we were rolling out product into the global markets, I was forced to cut 40% of the cost base in our company while keeping the growth running. Then coming out of that, at the first half of 2019, where I felt that I had successfully turned the business around, there was basically an internal battle around the strategy and if I’m the right person to run it, and if there was someone else. Some opportunists, obviously, when you have that situation may be, “We’re rolling out the unique platform in the world,” and then some people might think that’s a very valuable asset that they might put their hands on and that opportunity. I was very close to losing the company that I founded and put all my money into to an extremely intense governance exercise and strategic card game through the whole second half of the year, which I was just able to close at the end of and kind of reset my board and put myself as the Chairman and CEO just last month and refinance the company myself and get it back on track. Actually, during the day that I closed it, I got the note that we had a global pandemic, as well, running with the COVID, which, obviously, affected the company. It’s not easy to build companies in the music space for sure.
Alejandro: Well, it’s not easy to build any kind of company, Ola, but it’s amazing. From this experience, especially for the folks that are listening, what kind of advice would you have for them as their looking at maybe bringing on people into the business that is going to affect the corporate structure or the corporate governance, and what are some of the things that they should be looking at?
Ola Sars: I think from my personal experience, I’m not a control freak, but I probably should be much more aware of my position from a governance perspective, and I’ve learned that – really look at where the power is of the decision-making. I’m totally fine with a founder, myself, in this case, being asked to step aside to bring in a more competent CEO, but in this instance, it was actually an attempt to take over a significant part of the company by resetting the company, and basically absorbing the company into a new group. That group was driven by a couple of people that were successfully introduced into the work that we were doing, and it was driven by individuals, not institutions. You need to be more paranoid than I was. I was a bit of a naïve Swede. I just felt that I had come out working with these wonderfully crazy people in the U.S. I thought I could deal with anything, but business people are probably more going for the kill than these crazy music people. So, it was an attempt to take over my baby, and it was because I wasn’t paying attention properly. So, you need to really think about your position and how to protect that position.
Alejandro: Absolutely. For the folks that are listening, what is the size of your business right now? How big is the company? How big is Soundtrack?
Ola Sars: We’re a pretty small B2B SaaS company now. We’re 75 employees. We were just about 110 when we ran into the wall in 2018, and we re-engineered in the course of both B2B SaaS business. We are just at a million dollars on MoR on a monthly basis, and we’re just hitting the growth right now because we rolled out all of our markets, and we just released the product. What I’m happy about product-wise now, the last couple of months, there’s a big release coming after the summer that’s pretty much going to give me a first complete [29:32] offering. That will be a unique B2B music service that is very hard to replicate and very hard in transferability, with a little business running. My focus now is value and profitability and trying to build a diamond in the music industry and not getting carried away by building out office space. Just keeping it slim, neat, focused, and looking at the B2B metrics every day and scaling from there, and being very humble and sober about the business.
Alejandro: Very nice. I know that you see that there’s significant growth ahead, especially given how the music market is undervalued. But I’d like to ask you a question here that I ask the guests that come on the show, and that is – you’ve had an incredible journey. You’re on your fourth startup. You’ve seen the good, the bad, and the ugly of building and scaling a business. If you had the opportunity to go back in time and have a chat with your younger self, with that younger Ola that is thinking about launching the first business, what would be that one piece of business advice that you would give to your younger self and why knowing what you know now?
Ola Sars: I think it would be back to where I am right now. It is, find a very focused core business. Think about it as running a store or selling lemonade on the street. You buy a commodity, you mark it up, and you sell it at a margin in some type of context. It’s that basic. If you don’t have the answers to where am I going to source the lemonade? At what cost? What is the willingness to pay for my lemonade? What will that lead to in terms of margin, and what’s the volume in the setup? These basic, basic business principles. Then, obviously, I didn’t know how complex – I knew it was going to be hard and a bumpy ride going into the music industry. I wasn’t that naïve, but as I said previously, I think if I would have stayed focused on Let’s Mix, it wouldn’t have been as interesting and fun and the learning curve of selling to Apple and everything and co-founding with Spotify, but I honestly think that if I would have stayed laser-focused on Let’s Mix, that would have turned into a massive business. So, the learning is, find the basic business idea, and when you have it, don’t get carried away. Focus on the economics of that, and you can pretty easily and somewhat intelligently figure out if there is economics in what you’re doing.
Alejandro: Very profound, Ola. For the folks that are listening, what is the best way for them to reach out and say hi?
Ola Sars: You can email me on email@example.com or I’m on Twitter or LinkedIn. I try to answer everything and connect with people in all types of industries. As long as I have time, I’ll try to respond. I’m happy to talk to anyone.
Alejandro: Amazing. Well, Ola, thank you so much for being on the DealMakers show today.
Ola Sars: Thank you for having me. It was a pure pleasure, and I really love the stuff that you’re doing, so I’m honored to be on the show, Alejandro.
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