Music Startup Funding Plunged 67% In One Year, Study Finds

music startup funding
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music startup funding
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Photo Credit: Heylagostechie

A new study of startup funding suggests music startups received 67% less funding in 2020.

That’s a startling drop in funding for new music initiatives in an extremely difficult year. Despite the bleak news for the music industry, startups overall received 42% more funding in 2020 than they did in 2019. It’s just that most of that funding was focused in areas outside the music industry. The average amount of funding each company received went up dramatically in 2020, too.

In 2019, the average amount of funding raised by startups was $17.8 million. In 2020, that number jumped up to $28 million in one funding round – a 57% increase. The top countries for startup growth according to this report are interesting, too.

The study was conducted by BusinessFinancing using Crunchbase worldwide data. Accordingly, the country breakdown is largely dominated by developing economies in South America, Africa, and South Asia. Estonia led the world in new startup funding, a 1300% increase over 2019. Other countries seeing massive 300%+ funding growth include Chile, Colombia, Ghana, Kenya, Pakistan, Finland, Thailand, Austria, and Philippines.

Unsurprisingly, the countries that secured the most funding for their startups include the United States, China, and the United Kingdom.

VC funding for the music industry dried up 2020 thanks to the pandemic. It saw a whopping -67% decrease in funding for 2020 compared to the previous year. 87 new music startups were funded in 2019; one year later that dropped to just 68.

Music startups funding in 2019 was over $1 billion. In 2020, that number dropped to around $328 million.

Other industries heavily impacted by the venture capital funding going elsewhere include the travel & tourism industries, media and entertainment, natural resources, and clothing and apparel.

So where did all the venture capital funding that left music startup companies go?

Perhaps unsurprisingly, the Science & Engineering sectors saw the biggest increase in VC funding for 2020. From around $2.2 billion in 2019 to $9.7 billion in 2020, those sectors saw 300+% growth. Biotechnology, Manufacturing, Agriculture, Messaging, and Financial Services startups all saw 100+% growth in their funding for 2020.

It will be interesting to see if music startup funding can make a comeback in 2021. There are hundreds of organizations that are devoted to helping musicians get back on track during the pandemic. But music startups are taking a back seat to other endeavors as the world is still recovering from the COVID-19 pandemic.

We’re just now getting to a point where some states are loosening requirements for live events. New Orleans and New York City have started allowing live music venues again. But large-scale touring events are still off the table until much of the population has been vaccinated, according to Dr. Anthony Fauci.