From Moscow to Berlin, digital music startups attract top investors

From Moscow to Berlin, digital music startups attract top investors
There has been a slew of deals as Russian streaming music companies attract buyers and new investors
By East-West Digital News in Moscow October 1, 2020

From Moscow to Berlin, digital music startups are attracting top investors

As the global digital music market pursues solid growth, last week saw three deals involving companies from Russia or with Russian founders, reports East-West Digital News (EWDN).


Sberbank acquires Zvooq

Just a day before touting its transformation into a tech “universe,” Sber announced the acquisition of Zvooq, one of the most established Russian music platforms. No details about the transaction were disclosed. 

Founded in 2010 by UK expat Simon Dunlop and Russian businessman Victor Frumkin, Zvooq developed a sophisticated platform, aiming to provide a personalised music experience based on listener mood, activity, places and events. It got initial support from a group of Western and Russian business angels; then it raised substantial amounts from established investors, including $20mn in 2014 and $5mn in 2016.

The service now claims to offer some 40mn tracks to 8mn users from 12 countries. It has partnerships with telcos from Russia and neighbouring countries such as Azerbaijan, Kazakhstan, Ukraine and Uzbekistan. 

“Investments in Zvooq are fully aligned with the development strategy of the bank’s ecosystem, enabling us to strengthen our offerings to entertainment market customers. After all, Lifestyle is an integral part of our life, and entertainment is the fastest-growing vertical on this market,” stated Lev Khasis, first deputy chairman of Sber’s executive board.

Zvooq has been rebranded to Sber-Zvuk. Mikhail Ilyichev, who headed Zvooq between 2014 and 2017, will be re-appointed as the service’s new CEO.

According to company register data cited by RBC, Zvooq’s Russian legal entity generated RUB346.9mn in revenues last year with a net profit reaching RUB17.4mn ($5.4mn and $270,000 respectively). 

While Russia has over 64mn online music listeners, according to Sberbank, paid music services have generated only limited amounts thus far. The domestic digital music market was estimated at $166mn in 2018, including $137.5mn generated by streaming services, according to Statista data cited by RBC. The streaming segment specifically is expected to reach some $153mn by 2023, attracting 21.8mn users, up from 18.4mn in 2018. 

Among the main players on this market are Yandex, VK (“Boom”), Apple and Google, as well as Spotify, which made its offer available in Russia in July 2020

Muzlab buys Market Music

Last week also saw the acquisition of Market Music by Muzlab for $4mn. The former, a Belarusian-born startup now headquartered in Moscow, is the leader in music broadcasting and digital signage in Russia, Belarus, Ukraine and Kazakhstan. It claims to serve more than 50 chains and 5,000 shops, cafes and gas stations. 

Based in Moscow, Muzlab is a B2B music streaming company. It has developed a platform, Market Player, that uses artificial intelligence and stores visitors' data to deliver targeted media content. Founded in 2016, Muzlab serves such Russian and international clients as Burger King, Calvin Klein, Decathlon and Tatneft. 

Muzlab has raised more than $2mn to date from Russian individual investors, including Eduard Tiktinsky, Mikhail Peregudov and Alexander Sysoev, according to VC.RU

Target Global and Impulse VC invest in Endel

Endel, a Berlin-based music startup founded by Russian tech entrepreneur Oleg Stavitsky, also made the news last week when it announced the completion of a $5mn round led by US serial investor Kevin Rose. Among the other participants in the round were Target Global, a Berlin-headquarter VC firm with Russian roots, and Impulse VC, a Moscow-based fund, which is said to be affiliated to Russian billionaire Roman Abramovich. 

Endel touts itself as a “cross-platform audio ecosystem” that offers “personalised sound environments to help you focus, relax and sleep.” Stavitsky told TechCrunch that “Endel’s approach draws on several areas of science, including research around circadian rhythms (so that it complements where you are in your daily sleep cycle), the pentatonic scale (so that its sounds are pleasant) and sound masking (so that you’re less likely to hear anything distracting).”

The company is working with partners to do more to validate the science behind its approach. Stavitsky claims its sound environments can lead to a 6.3x increase in concentration and a 3.6x decrease in anxiety.



This article first appeared in East-West Digital News, a partner of bne IntelliNews