For a long time, I’ve been a proponent of startups that maintain a myopic focus, despite the opportunity to grow their businesses in countless different directions. The more you stay true to your core competency and follow the hedgehog concept, described by Jim Collins in his excellent business book, Good to Great, the better chance you have to succeed.

With Rank ‘em, the wording has evolved, but the mission has remained the same:

To optimally organize the entire catalog of every artist of all-time.

It’s an ambitious goal, but one that we should always be able to strive towards (and in this case, the fact that we’ll never be able to 100% satisfy that criteria is not a terrible thing with new music being released every week).

In case you didn’t figure it out, we named our startup Rank ‘em for a reason. We could have easily called it Rank Music, but we always knew the premise could be replicated across a number of similar verticals. Don’t be surprised if you see a Rank ‘em branch for TV Shows soon enough…but not before we feel comfortable with our music solution.

Peter Kafka, Ned Sherman & David Pakman (Credit: mynameisrico)

One of my personal highlights from Digital Music Forum East included the animated keynote conversation Peter Kafka of AllThingsD had with Venrock Partner, David Pakman. Ironically enough, David was two years removed from giving a keynote while running the show at eMusic, one of the three affiliate retailers offered on Rank ‘em at the moment.  He’s since moved on to the venture capital, but it was great to hear from someone who has experienced both sides of the table (indirect shoutout to one of my favorite reads, ex-entrepreneur-turned-VC Marc Suster’s aptly titled blog)

David started the conversation by explaining how few “digital music startups” have led to positive returns for their investors. In fact, David explained he could only count five of 109!

In a subsequent email, David named the five companies he had in mind:

• Last.fm
• eMusic
• Pandora
• Spinner
• Winamp (never took VC funding)

David went on to mention that there are probably a couple more, but they pail in comparison to all the failures.

Having met Peter during my trip to NYC two years prior and knowing about Rank ‘em, he encouraged me to ask David a question when the time came. When it finally did, I still couldn’t get over that statistic that he had put out at the beginning.

As I explained in my comment for David, I completely understand that “success rate” if it implies startups that require unreasonably high royalty rates (AKA music streaming sites). Yet, I have had a problem with the phrase “digital music startups” becoming synonymous with streaming startups even though there’s countless examples of innovative & unique digital music startups that have no part of that issue. Consider the variety of great services that are being built by the likes of Songkick to The Echo Nest to Indaba.

In Rank ‘em’s case, I specifically set out to avoid that problem because I was well-aware of the messy complications that could arise from licensing content from labels. I didn’t want to initiate a startup that had to start the “illegal” path before negotiating to a “legal” foundation like iMeem, which was picked up by MySpace for peanuts in Late-2009. I always saw Rank ‘em as a resource, and considering we’re trying to highlight the entire catalog, 30-second clips of each song are more appropriate anyways!

As a fitting signoff, it was great to hear an ex-entrepreneur (is that even appropriate?) like David mention “there’s never been a better time to be an entrepreneur.” Now, the only entrepreneurial thoughts I had when David was getting his start came from my monthly subscription to Beckett magazine and maximizing the value of my baseball & basketball cards…but I know what he’s saying. The barriers to “change the world” like Guy Kawasaki loves to say have never been lower!

P.S. Another interesting statistic that David mentioned regarded iTunes’ revenue position. Despite raking in approximately $2.5 billion in sales, it is still a break-even proposition! I’ve known for a while that Apple makes very little money from each sale after factoring in the licensing fees, transaction costs, etc., but I never realized it was like that!

P.P.S. Did you hear about their 10 billionth download on 2.25.10? A 71-year old man from Georgia purchased Johnny Cash’s “Guess Things Happen That Way”)