This Norwegian DJ could be a surprise billionaire

Welcome to this week’s edition of CROWDSCALE, where we bring Shark Tank to your inbox. We’ve got 3 great stories this week:

• 🏌️‍♂️ Hit The Links: surf the best of the web

• 📸 Stole the Show: How Kygo is owning the festival industry

• 🤕 That’ll Leave a Welt: automated investment platform in South America

Some interesting links from around the web:

• How to read a company’s balance sheet, explained like you’re 5 (link)

• Users report that Angels + Entrepreneurs is no longer sending startup investment picks….but users are still getting charged (link)

• 15 bills introduced to congress to reform startup investing - most notable are the proposal to increase Reg A+ maximum from $75M → $150M and allowing consumers to become accredited by taking a test (link)

• Arrived is raising funds on Wefunder. A VC walks you through the Arrived platform and gives his take (link) 

Kygo is giving an absolute masterclass on vertical integration, and it just might make him a billionaire.

For those unfamiliar, Kygo is a really popular DJ - his hit song Firestone has over 1B+ plays on Spotify. I saw him perform live in the Hamptons a few weeks back and I was in awe… of both his musical performance and the financials behind it.

Kygo has set up his business empire to revolve around his greatest strengths with each piece helping the other. For starters, Kygo didn’t just play at the festival I attended… he owns it. It’s called Palm Tree Festival and he built it up by performing at the festival each of the 3 years that it’s existed.

The Palm Tree brand is now strong enough where he no longer needs to perform, and he’ll likely remain able to attract great talent and strong crowds. Since the first festival, attendance at the Hamptons location has tripled in size. They’ve also expanded to locations in Europe and the Caribbean.

Kygo hasn’t stopped there - one unique element of his festivals is that they’re open bars. And one of the most prominent drinks served at the festival is a Finnish alcohol called Long Drink. And of course, Kygo happens to be part owner of Long Drink.

I’ve got to hand it to him, he’s built this really smartly from the ground up. He used his musical talents to both save on costs and add immediate legitimacy to the festival brand. He then uses the festival to heavily promote the drink he has an ownership stake in.

What he’s doing is referred to as vertical integration. It’s when you own all points of the business. So if you were a breakfast place, it would mean also owning the chicken coop where the eggs come from. Owning the process from start to finish eliminates middlemen and subsequently makes your costs go down.

Kygo is only a millionaire now, but if he continues to build his empire like this he could have a real shot at becoming a billionaire.

This week’s startup spotlight is a company called Weltio - I was actually asked on Twitter to give my take on their funding round.

Weltio is an automated investment platform that’s attempting to scale in Latin America. You deposit funds, and can either actively or passively invest in global assets like stocks + crypto.

I kicked the tires, checked it out, and realized that I hate this opportunity. Here’s why:

1. For starters, the barrier to entry for these kind of investing platforms is fairly low. As a result there’s a lot of competition and very little differentiation between all the available options.

2. Weltio does not even mention how they generate revenue from their platform, which is a red flag to me. These investment platforms typically charge a transaction or management fee on the assets they manage. It’s usually a really small amount, so Weltio would need to really scale to $100M+ in assets under management to become profitable.

3. On the topic of revenue, they’ve made less than $5k last year. In my opinion, that is not nearly enough to support their valuation of $15M.

All in all, I don’t think there’s a lot of upside here and I think they’ll struggle immensely with revenue + profitability. Shark tank… I’m out!

Please note that this is not financial advice, nor a recommendation to invest in any of the startups mentioned. Readers should conduct their own due diligence and understand that startup investing is a risky asset class.