Robert Hatcher is the founder and CEO of Aurign. Aurign is a music publishing tech startup that uses blockchain technology and data analytics. Robert created the company over two years while completing his MBA. Robert and his team were the winners of the first annual 2020 Heartland Challenge Startup Competition. The $50K in prize money from this competition and the winnings from other competitions has helped take his startup to the next level. In this episode of Be EPIC, Robert and I discuss how he balanced school and the startup, treating a business idea as a hypothesis, and the opportunities business planning competitions can provide.
0:00:06.0 Matt Waller: Hi, I'm Matt Waller, Dean of the Sam M. Walton College of Business. Welcome to Be EPIC, the podcast where we explore excellence, professionalism, innovation and collegiality, and what those values mean in business education and your life today.
0:00:26.7 Matt Waller: I have with me today Robert Hatcher who is the Co-Founder and CEO of Aurign, and that's spelled A-U-R-I-G-N. And Aurign has just made tons of successes in business planning and entrepreneurship start-up competitions. And Aurign is a music publishing database that collects royalties, and captures accurate metadata, basically makes the use of licensing publishing rights easier. And they use artificial intelligence and blockchain technology. So first of all, Robert, how did you get the idea for this business?
0:01:12.9 Robert Hatcher: Well, to land on the solution that we have today, one of the services that we provided was a collaborative studio that allowed music artists to basically share and communicate and collaborate remotely, similar to what we're doing today. And I have a technical background, I was a full stack developer, as well as a data scientist. And obviously, for those who code and program, we use a assistant called GitHub, which is a version control system that basically tracks the changes that you make to a particular code and project. And you know, what I saw paralleled, I felt like we needed our own kind of version history system for the music industry, especially for music artists because essentially, there's a lot of stakeholders in the publishing agreement, and there's a lot of communication between multiple parties. And if somebody's left off or there's some type of error, that affect somebody's revenue and somebody's revenue stream. So I thought that we could basically take what we were learning from GitHub and apply it to our own application.
0:02:25.0 Matt Waller: So I know one of the things you do is you capture metadata for music rights. How does that work?
0:02:34.0 Robert Hatcher: We collect data while music is being processed and while it's being created. And essentially, with that information, it helps us identify the users that are participating. And from that data that we can collect, we can start to create these agreements automatically instead of the current process where you have, let's say me and you are music artists. And typically, we either have a manager or A&R or somebody who's responsible for managing the business side of our business. And what will happen is my manager will have to get in contact with me and figure out who I've worked with in the past. I would tell him, "Oh, you know, I worked with Matt last week." He will have to get in contact with you or and your manager and verify whether we agree upon terms of percentages. And as you can imagine, typically, you can see anywhere between three to 17 people that's collaborating on a track. So you can imagine how people have been left off, disagreements. All parties involved can continuously see how the origin of the song is being created and where it started from. So for the business manager and for the artist, it eliminates that anxiety and that fear of being ripped off of a song.
0:03:53.7 Matt Waller: Now, Robert, am I might correct that you, to keep track of rights and permissions and licenses, you use some sort of a blockchain ledger?
0:04:04.6 Robert Hatcher: Yes.
0:04:05.3 Matt Waller: What made you decide to use blockchain for that?
0:04:09.0 Robert Hatcher: A lot of potential advanced services wanted to do the same thing that we're doing as a digital rights management platform, in the same way when it came to music rights or when it came to rights that... Any type of licensing rights. It could be photography. It could also be the management of a particular sale, etcetera. And with the transparency as said before, you can see how the changes have taken place, who's participated, what the original agreement is, and it keeps everybody honest. Because without it, the way that it is now is I can create a publishing contract and say, "Well, me and Matthew decided 80-20 split." But in reality, the last time me and you actually talked, it was a 50-50 split. But there's no record of the original conversation, there's no record of the original agreement. So for us, blockchain provided a level of transparency and immutability that we felt was extremely important to our industry. And what we felt like we could have a huge advantage versus some of the other trending companies that will come out is they all share a single point of failure, and that point of failure is that even with the blockchain companies that are out now, there's no way to verify that the information that is being put on the blockchain is actually correct.
0:05:40.0 Matt Waller: That's a great use of the technology, for sure. Now, you have competed in lots of business competitions and won lots of money. Roughly, how much money have you all won in business planning competitions?
0:05:58.1 Robert Hatcher: I would probably say, I would estimate maybe about a half a million dollars.
0:06:03.4 Matt Waller: Wow! Now, obviously, most of the people that win these competitions are solving a problem that is persistent for a long time. What do you estimate the size of this market to be?
0:06:18.4 Robert Hatcher: I think that's the fun part. We estimated that it's about a knot and a half, a billion dollar market. What's been fascinating or a fascinating trend over the past decade is that it's been estimated somewhere between two-and-a-half to $4 billion that goes unclaimed by independent music artists. And that's been a trend that has been a byproduct of streaming services. We call it DSPs, digital streaming providers like Apple Music, Spotify, etcetera. And what has happened is before, you needed a record label to manage distribution right in physical CDs. And during the distribution process, everybody within the company, they would go ahead and manage all the registration process with the publishing and... What a lot of people may not be aware of is that every song has the potential to collect between three and five different types of royalties. So in the past, physical CDs were being manufactured, and distribution was in process, you couldn't have the time to make sure that the registration and everything was okay. But now, what we've seen is I can literally create a song today and upload it on Apple Music or Spotify. And a lot of these up-and-coming and young artists are completely oblivious to the actual business side of the music, and the difference between a mechanical license versus synchronization license versus your sound recordings and how to collect the royalties and the process for each individual license.
0:07:48.4 Robert Hatcher: So you have all these artists who are uploading music that are not actually going through the proper channels to register their music, which is why people hire a business manager. And we thought that was such a great opportunity for us because essentially, what we can do is automate that process for all the parties that are involved.
0:08:06.6 Matt Waller: So, when I think about entrepreneurial start-ups, of course, one of the challenges is finding product market fit, but you first have to develop the technology. And as you're developing the technology or continually testing it with potential customers and getting feedback, and then morphing or pivoting until you have really strong product market fit. How have you gone about doing that, trying to move towards product market fit?
0:08:39.3 Robert Hatcher: Each step of the way, we've basically tested our core hypothesis, as well as our product, whether that was in a design stage, whether that has been in the implementation stage. It's such a tedious process and it could be frustrating. But to your point, it is such an important process because if you can decrease the level of risk and understand the demand before you go to market and as you start to go to market, you have a better understanding in terms of how to market your product, you have a better understanding in terms of who your target audience is. And that stuff takes time. So that's been extremely important for our process because it really helps us identify where we need to spend most of our resources are and what people are actually attracted to, to our application.
0:09:30.0 Matt Waller: These business planning competitions, many times have investors there, other entrepreneurs, many times judges or just participants who have been through these phases of entrepreneurship. How valuable has that been, the feedback you receive from the judges and participants?
0:09:51.7 Robert Hatcher: I think it's been great. It's been a great primer for me, especially as a student entrepreneur to get a taste of the real world, being able to get in front of real investors, being able to get in front of judges who, and even if they weren't investors, they could provide some type of feedback from entrepreneur standpoint. I think all those things that you continue to just take it in. And I think what doesn't get talked about enough is that investors are very diverse in terms of preferences, likes, stage, industry. And I think going through a gauntlet of different business competitions and seeing that level of diversity from different investors will help me understand. It gave me a wider range in terms of expectations. I'm a little bit quicker to pick up on what type of investor I'm dealing with, what's important to them and how I need to present myself. It's a win-win for both of us.
0:10:48.0 Matt Waller: When you look to the future now, I would imagine you've got a lot of customers out there that could engage with you, but I imagine there's some companies will be interested in buying Aurign. And categorically speaking, what kinds of companies would gain the most from an acquisition of Aurign?
0:11:12.7 Robert Hatcher: One would be these streaming services themselves, the Apple Music or the Spotifys. So being, provide you some more context about our industry, I wanna say that I think two years ago, I believe Spotify was sued for $2 billion for their mismanagement of not paying artists and the mismanaging of collecting those royalties and paying the proper artists. For those who may not know, obviously, music generates revenue through streams. So the Apple Musics, the Spotifys of the world, they help us generate revenue. But in terms of the payment process, our solution could help them be a little bit more efficient in that part, which I think may create this vertical integration within the industry and the supply chain where they have a technology in us that's properly paying the music artist while they generate the revenue for the artist. I think it'll be a strong interest from those type of platforms, especially, to decrease their liability. When you ask that question in terms of who may be interested in the acquisition, I think about who do we decrease the most risk for? And I think the first thought that comes to mind are streaming services, as well as record labels. Record labels also deal with a lot of lawsuits every year, as well as corporations because the difficult part about...
0:12:34.8 Robert Hatcher: This industry is already democratized. As I said before, you may get on a song or you may want to license a song, and if you actually look at the publishing to the consumer, they may know that there may be three artists that are listed for that particular song. Let's use a song like Hotel California. And you know all the members that are in the band, but there might have been four, three other individuals who had a part for that specific song that might have played the piano, that might have played the guitar, etcetera, etcetera, or they might have sung a melody. And those individuals all have different publishers. If you license a song, sometimes, it can be difficult to find all the publishers and all the artists associated with ownership of that song, and it creates a sense of liability because it makes it difficult for you to pay them. If you don't pay them, then they have the right to come after you in a lawsuit. So we feel like our process can be extremely beneficial to record labels.
0:13:32.3 Matt Waller: So Robert, I understand that you started this business as an undergraduate. Now, you're a graduate student and you're continuing it. Graduate school, and undergraduate for that matter, is very time-consuming. How do you balance running your start-up and going to school?
0:13:52.3 Robert Hatcher: Great, great question. I got an MBA with a focus in Analytics Consulting. And the particular program here at Georgia State University was called the Flex program, and what that means is basically, it's flexible for you to curate your workload on a semester by semester basis, instead of just taking a cohort that already has pre-determined courses that you're gonna take every semester. And I was able to use that to my advantage because with the Flex program, I was able to take my required courses, but I also had a lot of leeway with my concentration. And essentially, I took courses that had a direct correlation to what I was doing during that time with my start-up. So whether that's me taking a project management course, whether that's me taking a machine learning course, whether that's a business analyst course or a marketing course to analyze the landscape in the competitive market. All the courses that I was taking, directly affected what I was doing on a day-to-day basis. So that way, my start-up life and my school life were intertwined with each other.
0:15:00.4 Matt Waller: So Robert, there's a lot of students listening to this who... Some of them have ideas for businesses they'd like to start. Any advice you could give them would be good, but also, I would imagine they're wondering how did you get funding to start a business where you really didn't have a product yet. How did you pull that off?
0:15:24.8 Robert Hatcher: So I'll start with the first question about giving advice in terms of where to start. Where I would start is, I would treat your business idea like a hypothesis and test for the demand for that. For example, say you wanna start a bakery. You can even do something where you're baking cookies out of your home and you're selling orders online, or it could just be word of mouth. Create some type of small test to test the demand for whatever your business idea is. And that actually leads into the second question in terms of how I was able to win a lot of competitions before actually having a product out there in the market. I would say I think most of the competitions, most start-ups, most student entrepreneurs don't have a fully functional product in the market, or they're in biotech where what they're working on is gonna take some years. So that played a part into it in terms of where we are in relationship to some of the other start-ups that we were competing against.
0:16:27.3 Robert Hatcher: I think the second biggest thing that you can do for yourself is create traction, create traction and create pipelines where you have a clear path to generate revenue. I think one of the things that I did early was I started going to customers, I started going to businesses, I started going to different organizations that I felt could use our product often. And before I knew it, we had a really, really strong customer base, we had a really, really strong partnerships that been with us every step of the way, and waiting for us to present them with the product. So by the time I was able to do these competitions, I can tell, I can update the investors or the judges in terms of where we were in the product development. But I think what gave us an advantage was we've already done a lot of due diligence in terms of developing the sales pipeline or developing partnerships. You garner some interest from organizations that want to use the product as well.
0:17:26.4 Matt Waller: Well, Robert, congratulations on your great progress on this new company, and on winning so many planning competitions. Really impressive what you've done.
0:17:40.4 Robert Hatcher: Thank you.
0:17:43.3 Matt Waller: Thanks for listening to today's episode of the Be EPIC Podcast from the Walton College. You can find us on Google, SoundCloud, iTunes, or look for us wherever you find your podcasts. Be sure to subscribe and rate us. You can find current and past episodes by searching "BeEPIC Podcast", one word, that's B-E-E-P-I-C podcast. And now, Be EPIC.