DURHAM — ReverbNation, a company whose website is host to more than 2 million music artists, has raised $3.6 million in new funding to accelerate its growth.
The company already has hired more than a dozen new employees this year and expects to add between 14 and 20 by the end of the year. It employs about 60, most of whom are in downtown Durham.
Many of those new hires will focus on enhancing and extending the company’s existing software products and developing new ones, said co-founder and CEO Mike Doernberg, a serial entrepreneur whose last company, marketing software firm SmartPath, was acquired by DoubleClick in 2004.
Founded in 2006, ReverbNation’s latest round of funding was led by Observatory Capital, a venture capital firm based in Chevy Chase, Md. Investors who previously had invested $6.5 million in the business, including Raleigh’s Southern Capitol Ventures, also participated in the funding.
“I really liked what they had done with the business on a modest amount of capital to date,” said Observatory Capital’s Jonathan Perl.
Perl also is a fan of Doernberg, whom he got to know when he was a partner at Durham venture capital firm Intersouth Partners, which backed SmartPath.
ReverbNation’s bread-and-butter is serving, and profiting from, the 2.3 million artists who have profiles on the site. Most of them are up-and-coming (and down-and-out) acts that don’t have a record label.
The ReverbNation website and its software products help artists connect with their fans, promote themselves and distribute their music online.
“ReverbNation is your central hub for marketing your music across the Internet,” said Jed Carlson, a co-founder and the company’s president.
The privately held company doesn’t provide detailed financial information but says it has been profitable for the past year, with revenue doubling in 2011 and on track to do so again this year.
Its business model wouldn’t have worked in the days when record labels ruled the music business with an iron fist. But those days are gone, with many indie bands side-stepping labels altogether in favor of producing and distributing their music themselves.
ReverbNation claims to be the largest company in its space, which includes competitors such as Bandcamp, CD Baby and TuneCore. The company attracts more than 20 million unique visitors each month, mostly fans who browse the site looking to find out about local bands and concerts or dig in to their favorite musical genre.
Many artists pay ReverbNation nothing at all. “We are like any freemium company where most customers use the free option,” Carlson said. Freemium companies provide basic services at no charge, but customers pay for enhanced services.
ReverbNation artists can spend up to $500 per year for premium services, or much more if they take advantage of the company’s promotional software, Promote It, which it launched in August.
“They have a lot of very powerful, and I think incredibly easy-to-use, marketing software tools,” said Southern Capitol’s Jason Caplain.
Artists can, for example, use ReverbNation’s software at no charge to distribute their music to online sites such as Facebook and Myspace. The artists can choose whether the music is available via streaming only or also can be downloaded.
But the artists pay a flat $35 per album, per year, to distribute their tunes to venues that sell music, such as iTunes, Amazon and Spotify.
The company’s newest product, Promote It, can create and distribute online advertising campaigns for artists that pay anywhere from $25 to $500 per campaign. It already has generated 100,000 ad campaigns, which can be as simple as providing free songs to likely fans.
Although ReverbNation has a low profile locally, it’s a well-known brand in the music industry.
“There aren’t too many bands out there that haven’t heard of ReverbNation,” Carlson said.