Alleged Investment Pitch Reveals PledgeMusic’s Bad, Bad Numbers

Embattled music crowdfunding website PledgeMusic was burning through an average loss of $4.5 million per year leading up to its demise, figures obtained by 5 Mag show.

5 Mag obtained these figures from a confidential presentation deck (top image is the cover) prepared for potential investors in or around May 2018. They show PledgeMusic earned an average of just $3.5 million per year from revenue. The expenses averaged more than $8 million per year.

The document was obtained by 5 Mag after floating around among a group of investors for over a year; an identical copy was later found via Google search. Co-founder Benji Rogers declined to comment on the authenticity or accuracy of figures from a presentation he says he is not familiar with. Multiple emails sent to PledgeMusic addresses were returned as undeliverable.

The financial numbers in the document suggest PledgeMusic was spending an average of twice what it earned, but claimed it would be paring their losses from $4 million down to $1.7 million in 2018. PledgeMusic anticipated a surge in revenue in 2018, according to the “budget amounts” projected for that year, while also planning to slash expenses by 11%.

The 2018 projections also anticipated explosive growth in categories where PledgeMusic had never earned any money before, including $1.6 million from a new PledgeMusic “ad platform.” This ad platform was modeled on Amazon and Etsy, and would charge money from artist campaigns if they wanted promotion for their campaign on PledgeMusic itself (something previously offered for free).

The document also states PledgeMusic had “approved and will be implementing” a new pricing strategy that would have taken 20% of all crowdfunded revenue from artists, an increase over the previous 15%.

Despite this, the 2018 revenue from PledgeMusic’s percentage cut of crowdfunding by artists was actually projected to decline, from $3.8 to $3.5 million.

The latter is a rare concession to reality in the presentation deck. PledgeMusic began a death spiral after this pitch was sent out, unable to fully transfer funds raised by crowdfunding campaigns to the artists who had raised them. It was alleged that PledgeMusic had dipped into these funds to pay for their own administrative expenses; the company admitted it was behind in funds and unable to pay.

The deck concludes by noting the board had approved the company to seek $7 million in this funding round – roughly equal to the projected expenses for 2018.

The front page of the investor deck lists Dominic Pandiscia as CEO (he left in September 2018 with most of the finance team as the scope of PledgeMusic’s troubles became known) along with board members and key executives.

The company froze all fundraising campaigns in February and maintained radio silence. Rogers returned to the company to try to salvage it, but conceded last week that PledgeMusic was headed toward bankruptcy.

Here are the key numbers from the investment deck (2015 numbers are estimates based upon 2016’s year-to-year growth figures). Our reference to “Overall Revenue” below includes funds raised on behalf of artists and (well, theoretically) disbursed back to them. “PledgeMusic Revenue” includes their 15% cut of this revenue and brand sponsorship fees from PledgeMusic subsidiary NoiseTrade (which never exceeded $451,000). 5 Mag was unable to confirm the authenticity of figures presented in the document.

PLEDGEMUSIC PROFIT/LOSS STATEMENTS

2015 (estimated):
Overall Revenue: $15.2 million
PledgeMusic Revenue: $2.6 million
Overall Expenses: $7.5 million
Profit/Loss (EBITDA): -$4.9 million

2016:
Overall Revenue: $20.4 million
PledgeMusic Revenue: $3.2 million
Overall Expenses: $8.4 million
Profit/Loss (EBITDA): -$5.2 million

2017:
Overall Revenue: $25.9 million
PledgeMusic Revenue: $4.4 million
Overall Expenses: $8.4 million
Profit/Loss (EBITDA): -$4 million