Discotheque: Music mogul Matt Gudinski joins investors sinking $10 million into start-up

Mushroom Group chief executive Matt Gudinski has joined a chorus of investors collectively tipping $10 million into Australian technology start-up Disco, as music labels search for efficiencies in the face of revenue challenges and a highly competitive global streaming landscape.

Australia’s music industry is under pressure given the recent wave of festival cancellations, venues closures and new difficulties in reaching audiences amid the rise of TikTok.

Enter Disco, a technology platform born out of the country’s largest music supervision agency Level Two Music, which selects and licenses music for advertisements, TV shows and films.

Traditional solutions such as Dropbox and iTunes are not fit for purpose when dealing with hundreds of thousands of songs, according to Level Two boss Karl Richter, who dreamed up an answer that would act as a one-stop shop for managing and sharing music files.

He says his result, Disco, has since become the music industry standard for file management, and has racked up 300,000 monthly users with almost 100 million files on the platform. Its major clients – including Amazon and Netflix – use Disco to find the right music to fit their films and TV shows, and then easily manage those music files.

Matt Gudinski was an early Disco user who has now come on board as an investor. He took over as Mushroom Group chief executive in April 2021, following the shock passing of his father Michael, who founded the company in 1972.

“We own and manage the rights to tens of thousands of different copyrights,” Gudinski said.

“Everyone has seen there’s a real gap and a real need for this. Everyone was using different systems, we might have had the same file saved 30 times across people’s computers. This is a centralised location that everyone can access, it’s a better way to do it.

“The main benefit with Disco is definitely in the efficiency. It’s saving people’s time, it’s more cost-effective, and investing in start-ups like Disco is definitely part of Mushroom’s strategy going forward.”

Mushroom is Australia’s largest independent music business and comprises more than two dozen companies, including Frontier Touring, Love Police and I Oh You, alongside marketing, music publishing and booking agency arms.

Ed Sheeran with Michael Gudinski.

Matt Gudinski, who has worked at Mushroom since he was 17, hinted at plans to soon launch a division of the business that would invest in technology start-ups such as Disco. “We may in the near future launch a new division of the group that is focused a lot more specifically on this space,” he said.

Other investors in Disco include New York-based investment firm Richmond Hill Investment Co, which led the round, along with Bridford Group, Stephen Cook, Future Classic founder Nathan McLay, Tunde Balogun and Neil Jacobsen.

Disco founder and CEO Karl Richter said the start-up had posted revenue growth of about 30 per cent year-on-year since its inception. He did not disclose Disco’s valuation but said the funding would be used towards amping up its suite of artificial intelligence discovery features.

“We’ve long been champions of using AI responsibly to help with the grunt work around tagging and discovery, to free up our users’ time to do more creative work,” Richter said.

“We’ve been in AI and machine learning for years, so we sort of got in before it was topic du jour. And it’s something that we’ve built out internally ourselves.”

Linktree co-founders (L-R): Anthony Zaccaria, Alex Zaccaria and Nick Humphreys.

The company’s chief operating officer, Pete Nicholson, said that while there was a lot of anxiety in the music industry about how AI will be used, in Disco’s case, it could be used to automatically identify characteristics of songs that would otherwise take humans hours. A team making a Netflix show could, for example, use AI to more easily find the perfect song to fit a particular scene.

Disco is not the only tech start-up turbocharging the local creative sector and helping artists and labels withstand ongoing market turbulence.

Melbourne-based social media outfit Linktree has pioneered a “link in bio” platform that has 40 million users and now receives about two billion visits a month. It has just launched new social commerce features to help creators – including musicians and influencers – make money online.

Linktree has been widely viewed as a future Canva, or Atlassian, in waiting, having racked up a valuation of more than $1 billion.

After laying off 27 per cent of its workforce, or “Linkies”, last year amid a start-up downturn, it recently went on a hiring spree to land US-based senior executives, poaching Snap’s former vice president of engineering, Farnaz Azmoodeh, to serve as chief technology officer, plus former Airbnb executive Jiaona “JZ” Zhang to serve as its chief product officer.

Linktree is now testing affiliate marketing functionality – initially with Sephora and Urban Outfitters – that gives creators a commission of between 12 per cent and 15 per cent from purchases originating from their Linktree page. For Linktree CEO Alex Zaccaria, the new features will help creatives make money that they should have already been making.

“Gen Z are very influenced by creators. Why would brands pay for massive billboards or TV ads when they can instead pay modern-day celebrities who influence those purchasing decisions?” Zaccaria said.

“We’re creating that space for creators to monetise, and frankly get the share of value that they’re creating, which they deserve. We think we can be the single go-to place for brands to reach audiences online, and help the tens of thousands of small creators start monetising and getting the share of revenue they deserve.”

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