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Any company on the hunt for capital knows how hard it is to find the right investor. For underground dance music and nightlife-based businesses, it's extra tough. The sector isn't exactly ideal for massive scale or revenue growth–areas that traditional venture capitalists (VCs) and angel investors typically focus on. Promoters, venues, festivals and the various other entities that make up leftfield rave infrastructure typically cater to a niche audience, not the general public. It can be a struggle to find financiers who understand subcultures and electronic music, so start-ups in the space typically resort to friends, family, crowdfunding and grants.

As the global dance music economy clocks blockbuster growth in the years following the pandemic, more institutional players are paying attention. The industry was valued at $11.8 billion last year, with festivals and clubs driving momentum. With private equity funds swooping in, there's an urgent need for alternative investors who are culture-focused, not profit-driven.

Best Nights VC, Jägermeister's VC arm, aims to fill this gap. Formed in 2018, the Berlin-based firm calls itself an impact investor, which means it seeks to achieve social and cultural goals before getting returns on its investment (ROIs). Providing between $300,000 to $1 million per funding round, it backs ventures that serve the communities they operate in–a formula that could improve nightlife's long-term sustainability. It is also extremely selective–this year, the team has screened more than 1,000 companies and only invested in four so far. The chosen few gain access to Jägermeister's distribution system, which spans 150 markets–a major opportunity for startups to make their products and services globally available.

"We're looking out for mission-driven entrepreneurs, not people who are setting up a business because they want to build a unicorn," managing director Lorrain De Silva told Resident Advisor.

So far, Best Nights VC's portfolio spans eleven companies. They include Soundboks (a Danish brand that builds portable, wireless speakers that are targeted at DJs and DIY promoters), Togather (an online booking platform that connects UK event organisers with photographers, beverage distributors and other suppliers), plus festival app Woov.

Best Nights measures a start-ups impact by the number of physical interactions, or "best nights," their service can create. "For example, if a festival app sells tickets, each sold ticket represents one person having a best night," De Silva said. In 2023, his team recorded nearly 22 million best nights for consumers.

Boosting face time, not screen time

Conventional VCs aren't always a good fit for start-ups focused on creative communities, Jesper Theil Thomsen, cofounder of nine year-old Soundboks, told RA. These investors "usually want to grow your company super fast," he described, explaining that it wasn't easy to secure the first funding round. "A lot of private equity and venture capital funds are mostly interested in larger-scale businesses that have very established revenues but are way more risk-averse," echoed Digby Vollrath, cofounder of London-based Togather. Initially, he said, "lots of traditional investors were really hesitant."

Both Soundboks and Togather were historically categorised as tech businesses because most investors didn't recognise their experiential value. Institutional investors have long focused on disruptive tech platforms, said De Silva, but Best Nights' priority is boosting face time, not screen time. "After a decade of VC-funded technological innovations to digitally optimise our social lives, we feel an urgent call to finally bring people back together in real life," he explained.

Still, many creatives don't welcome corporate involvement. Concerns of commercial entities exploiting subcultures for financial gain are persistent, and many start-ups remain wary of just how much control parent companies want. "The general risk with corporate venture capital is that it gets linked to the parent company and then the parent company starts controlling so the recipient of investment often becomes a daughter company," said Thomsen of Soundboks.

De Silva is well-aware of these risks. Jägermeister maintains a hands-off approach with Best Nights, he insisted. "Just because we are Jägermeister's investment vehicle does not mean that the startups have to fear an over-commercialisation of their startup as a result of our investment," he said. The alcohol giant "merely acts as a financial backer and enabler but not as an active shareholder that wants to influence the startup's operational business." Jägermeister also runs the Save The Night fund, which offers grants to projects that promote safer, more inclusive and more sustainable nightlife.

Best Nights, which has been featured on ADE, hopes to pave a way for more well-intentioned nightlife investment. Since its launch, activity in the sector has been on the rise. MUSIC, a holding company for music-related investments, set up shop in 2019–its portfolio includes Splice and ticketing platform DICE. In April this year, Worldwide FM and Monkey Shoulder announced a fund for grassroots music communities. Perhaps more will soon follow suit.

Article Originally Found At: www.ra.com