Steinbeis coach supports startup in the world of advertising music
Press rewind – back to a master’s degree course at Baden-Wuerttemberg Pop Academy, where Markus Schwarzer, Jakob Höflich, and Joshua Weikert first met. The three friends quickly realize that they not only share a passion for entrepreneurship, they’re also united by a strong interest in tomorrow’s world of music and have overlapping skills in the field of business, communication, and IT. It was almost like they’re predestined to work together at the nexus of music and technology. And so it came to be that they embarked on a project while still studying, based on the notion that people should unite through music. Now fast-forward three years. They’ve now just released their first app for musical moments – Groovecat. After successfully drumming up investments totaling a six-figure number, their concept is available in app stores and they are rubbing shoulders with the alumni of the world’s only music accelerator: Music WorX in Hamburg. The journey from the dreamy days of a student project to becoming a key new player in music tech was accompanied by the city of Mannheim and the state of Baden-Wuerttemberg, two key sponsors who played a central role, most notably thanks to the fast-track consultation process offered by Business Start-up, the Steinbeis Consulting Center, and backing from the ESF funding program.
Looking back at his time before the coaching sessions, Groovecat CCO Jakob Höflich says, “There was something special about that time – we were brimming with ideas and the urge to do something, but what we lacked was structure, the long-term view, and a holistic approach regarding a comprehensive business model. Oh, and at the same time we still had to write our master’s dissertations.” Thanks to the Mannheim economic development agency, represented by Sonja Wilkens, the team heard about the ESF funding program and they were put in touch with the Steinbeis Coach Eligiusz Skwara. A couple of phone calls later and the first appointment was set up. After that, the Groovecat team took part in regular workshops with Skwara.
The aim of the coaching sessions was primarily to make Groovecat “investor- ready” and work out a visionary but at the same time sustainable business model. The main issues that had to be tackled in the first coaching session were: How do I create a free social media tool for music, but also how do I make it appealing to investors? The first major milestone during the coaching sessions came with a radical change in the strategic direction (pivot) of Groovecat, from offering a social music app to working as a search machine for advertising tracks. The idea is based on a revolutionary data set that makes it possible to select music for any kind of audiovisual content. Not only did this add a B2B dimension to the business model, it also pinpointed a central issue that many face when choosing a track to go in advertising. It’s expensive, it takes too long, it’s subjective, and it’s not based on proper information because until now, the data lacked real substance.
Looking back at the coaching sessions, Groovecat CEO Markus Schwarzer says they were the starting point for the business model pivot and successes until now: “We initially provided benefit to music lovers, but we didn’t solve a tangible problem. Eligiusz used the coaching sessions to constantly prod us where it hurts, and doing that allowed us to look our weaknesses in the eye, adapt our business model, and reject our original concept. If you’ve ever had to throw out an idea you’ve felt really passionate about, you’ll certainly know how difficult that is.” Looking back, taking this step was worth it, however. After the pivot, Groovecat moved to the premises of the Music WorX accelerator and won a variety of prizes, one of which was the CyberOne Special Award from bigFM. It also went to the final round of the Mannheim startup awards at the end of 2017, thus qualifying for the BWM investment fund offered by the Mannheim Economic Development Agency.
After several pitches and further rounds of negotiation, the BWM investors finally decided to come on board in April 2018 with a six-figure investment. And although the coaching sessions finished a long time ago, Skwara continues to provide the team with the support of a trusted adviser. He is also still a constant companion when searching for investors. The fixed coaching process has thus developed into a long-term partnership precisely in the area where young entrepreneurs normally have little or no experience: attracting capital. Skwara: “The way I see it, being investor-ready is about two things: ensuring startups are in a position to win investors over in the heart and in the head. With Groovecat, we succeeded on both fronts. The team has every potential to change a market worth billions – but what’s much more important is that they have the ability to translate strategies into actions and implement those actions. The current trend in user numbers and the interest expressed in pilot projects by big players like Sony Music go to show how well we’ve done. So there’s now nothing to stop us taking on more investors.”
Now that the app has been successfully launched, there are two challenges for Groovecat. One will be to continue expanding the user franchise – steadily and organically. The other will be to process valuable data sets as efficiently and qualitatively as possible, in keeping with the company culture, and in a way that does not divulge personal user data. To do this, the team has already entered into a partnership with the audio communication department at TU Berlin, which will help Groovecat with data analysis. The team also flew to New York in December to take part in a 5-day startup and entrepreneur program. The trip was a prize won at the STEP USA pitch organized by German and American chambers of commerce. Not only can the United States be considered the homeland of social media, it’s the biggest international market for advertising tracks and thus a lighthouse location on the long journey ahead for Groovecat.