Bandcamp’s VC: Investing In Music Is “a Little Like Vietnam…”

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You can put money into a music startup, but can you get it out?

Well, a lot more investors are getting in – in a major way – though this is a difficult space to read right now.  On one hand, extreme funding is happening around Rdio, Spotify, X5, and Pandora, and lots of fresh cash is coming in.  On the other hand, major segments of the investment community have sworn off the sector, based on the quagmire we know all too well.  “No one gets out of this space alive,” one burnt VC recently told Digital Music News.

So what’s going on?  It seems confusing on the surface, though outside of a few gargantuan funding rounds, the environment remains cautious.  “Money is coming off of the sidelines, and 2009 may have been the bottom,” explained John Boyle, CEO of the BAM Group recently at Digital Music Forum East (Boyle just exited Hello Music).  “But valuations are lower, return expectations are lower, and bets are more diversified.”

But what about the burned investors of yore, the ones crushed by licensing and freebie-loving music fans?  Oh, they still exist, and some are creeping back in.

That is, with appropriate levels of fear and trepidation.  Just ask Tony Conrad of True Ventures, whose portfolio now includes Bandcamp.  “There are certain spaces where we’re not as excited, like music,” Conrad recently told TechCrunch.  “A lot of us were part of the first wave, [and] music’s a little like Vietnam… I’m not sure I want to go back in.”