Audimated.com: Helping Musicians Make Money The 25-year-old founder talks about his startup challenges, including finding capital and managing growth.

Name: Lucas Sommer, 25
Founded: Audimated Corp., 2010
Business: A web service providing independent musicians and their fans the tools to make money with music.
Location: Miami, Fla.

Lucas Sommer of Audimated Corp.

Until this summer, longtime guitarist and songwriter Lucas Sommer had been operating a music studio in Miami assisting fellow independent musicians with writing and producing songs. Sommer spotted a business opportunity after a number of the artists began picking his brain about how to get exposure and sell their music. Sommer wanted to find a way to build an online business that would help musicians become more successful.

The concept struck a chord. In June, Sommer launched Audimated, an online marketplace for artists and their fans to discover and promote their music. The company helps artists by selling promotional services and digital distribution of music to online sellers such as iTunes, Rhapsody and eMusic. Aside from those standard offerings, artists can also create profiles on the site so fans can discover their music and help spread the word. The site also allows fans to set up an online storefront promoting their favorite artists, and when their friends buy the promoted music, fans receive a commission.

While his business is designed to solve the challenges facing musicians, Sommer grappled with his own start-up issues. Here, Sommer shares his three toughest obstacles and how he overcame them.

Challenge No. 1: Assembling the right team. We originally outsourced Audimated's web development team but that proved to be a huge mistake. The interface lacked the features and functionality we needed. As a result, people didn't know how to use the system and the website loaded slowly because of inferior and unorganized code. Quality control was an issue because the contractor was motivated to deliver quickly instead of delivering the best product possible.

Solution: We opted to bring on a long-term engineering team to manage web and product development and offered them incentives. For example, we offered them a few percentage points of equity in Audimated based on milestones tied to company growth. The result has been a highly motivated core team.

Challenge No. 2: Landing startup capital. After finalizing what I felt was a strong business plan, the next step was to begin pitching investors. I didn't personally have the capital or development skills needed to get the project going. I estimated that I would need about $50,000 to get the website developed and our legal needs satisfied.

But the investors I was speaking with weren't interested. I realized my presentation was too detailed and that I was pitching people who weren't in the right social or financial situation to invest in an online start-up.

Solution: I continued to network and meet new people, targeting investors whose vision aligned with Audimated's mission. I also kept refining my pitch and attended local entrepreneurship events. Before and after these events, I made it a point to approach potential investors who identified themselves as being in the entertainment or music businesses. Instead of pitching Audimated up front, I'd request a more formal follow-up meeting at a later time. Eventually I met an individual who was willing to give us the startup capital in exchange for a minority ownership stake.

Challenge No. 3: Scaling the business. Scaling Audimated is a constant challenge because the majority of our users are not paying to use the service. We spend marketing dollars on Facebook and Google advertisements as well as search-engine optimization to drive users to the site, but those users do not provide enough revenue to offset those costs. This makes it difficult to scale in the short term because the more users we get the more money we lose.

Solution: Audimated started small and is growing slowly by allocating limited marketing dollars to social media and search engines, and to deliberately controlling user growth. We decided not to over-spend on marketing and drive millions of people to our business in an effort to control the quality of our service. For example, during our first month we experienced a traffic surge that crashed our servers. We had to migrate our data to a host that could handle our increasing traffic and allow us to grow.

The lesson we learned is to stay focused on providing a valuable service to a small number of customers that we can manage, measure and serve properly. Once the resources are in place and the service is perfected, we will start to scale business growth with the knowledge and confidence to do it successfully.