Music Funding 101
Why Sponsors, And Not Investors?
When going for outside money, bands usually use the word "investor" or "backer." I believe that this is a big cause of most bands not receiving any money. Investors, by definition, give money so that they can (hopefully) be paid back with interest. A backer is also an investor, just with a less commercially sounding name. And since investors and backers will both want their money back, plus some, bands have to deal with them in a business like manner.
That's the beauty of sponsors: they don't want their money back, and they don't want to be dealt with strictly like business people. Matter of fact, it's the feel-good music scene factor that attracts them in the first place. So bands don't have to be worried about being overly technical or business-like with sponsors, at least at the lower sponsorship levels. TalentFunding.com goes directly after these types of sponsors.
Another problem with investors: it's very tricky trying to find them on the web, since advertising for investors is regulated by the Securities and Exchange Commission (the idea being, investors need to be protected so they will invest in only real opportunities.) It's hard enough finding people that will give money to bands, but with investors it becomes just too difficult for a band to handle on their own.
Yet another big problem with investors: since they are expecting to be paid back, bands are going to have a never-ending nagging feeling of debt bothering them. Sponsors, on the other hand, only want their agreed-to involvement in the band's music scene and marketing materials. This is the scene that bands have going already, so bands don't have to do a whole lot extra...just add sponsors to it.
Investors (or those who start out by using the term "investment") are generally going to come more from the financial world, and are therefore going to be more financially demanding than sponsors. Plus, the investment world has long been schooled that any music-related business is a bad choice, as far as a place to put money. At least with sponsors, bands don't have this working against them from the beginning.
Then there is the thought process that bands must go through if they are going to try to pay back investors. Bands are generally known as being the least capable of dealing with money, and if a band does have to deal with these payback issues, they are not going to have the energy or the frame of mind to put on good shows. Thus with sponsorships, all the band's energy and thought process can go into doing good shows and attracting more fans, which means more awareness for the sponsor.
So, let bands do what they do best: attract fans (not payback money).
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