As one of the individuals that expressed interest in the Pono equity offering through Crowdfunder.net, I filled out the forms and requested the documents from the company. I “committed” the minimum of $5000 dollars to the raise in exchange for the information that investors want prior to making any investment. I read the Executive Summary and other PDFs that were made available to me and listened to an hour-long conference call between other investors and the principals at the company. I didn’t realize that the amount shown on the Crowdfunder/Pono site included all of those potential investors like me that wanted to kick the tires prior to forking over $5K. When you see $5,973,000 in commitments and realize that it takes into account money that hasn’t made it through the entire process…you can understand why Pono is pushing hard through the last weeks of the raise. It represents the total of all of the “I might be willing to invest” money. This is fundamentally different than the Kickstarter campaign that totals all of the money committed by supporters.
I was little surprised to receive an email from Rick Cohen, the President and Chief Operating officer of PonoMusic.com and Neil Young’s “long-time attorney” (according to a congratulatory online notice from the law firm of BuchalterNemer). The subject line of the email was, “Neil Young and His PonoMusic Need Your Help NOW!” The gist of the email is a plea to those “hundreds of individuals” that expressed some level of interest in the equity opportunity to complete the process.
The KS campaign raised $6.225 million, the third largest KS campaign in history. However, KS gets 5% of that money and 60-70% of the remaining funds is going to pay for the development and production of the Pono player. And I know for a fact that the licensing deals with the major labels run north of $600,000. Then there’s the cost of employees, offices, other expenses for the infrastructure of the site, the development of the front and back end of the PonoMusic site etc. Getting into this business is a challenge and expensive.
It’s pretty obvious why Neil and his board are seeking additional funds. The Crowdfunder raise was hoping to bring in another $4 million but if a substantial number of “interested” parties don’t complete the process, they may come up short. What sort of options will they have? Of course, they have some pretty rich friends…and some of them got in on the ground floor when the company was valued at $7 million (the Crowdfunder places the value at $50 Million!).
What I found very compelling was the final paragraph of the email in which Rick Cohen offers to provide additional information via email or phone to get potential investors in the game. “If there is ANYTHING I can do to get you in this thing, call or email me.”
So I emailed him. I wanted to know about the some of their strategies for handling new high-resolution content vs. the inclusion of ripped CDs from Omnifone. It’s been 4 days and I have not received a response. Rick may have been clued in that I am disappointed in the overall plan and have posted articles with serious and real questions. Or perhaps he’s been swamped with emails and phone calls about Pono and the upside potential.
Pono lost me when they decided to go mass market. I was excited and very engaged with John Hamm was at the helm and all of their efforts were about better sound. The audiophile community is a relatively small group of serious music listeners. The market is equally small for a dedicated high-resolution audio player. Even 15,000 purchasers/supporters of the KS campaign is very small. If Neil Young had kept his focus on offering new high-resolution albums at 192 kHz/24-bit FLAC, used his artist contacts to prime the pump with more quality transfers, and been more transparent about the inclusion of CD rips, I might still be on board. Getting back to the soul of the music is the right goal…staying on track is the challenging part when money and business take over.