Would have worked Rayneer only internationally

WW: The music industry is considered a tough place. Where were the challenges for you?
Oliver Flueckiger: A start-up in the music sector is not only competing with every radio station or with streaming services like Spotify, but above all with illegal MP3 sites. These are hardly punished in Switzerland, are free of advertising and free of charge. Today, most consumers are no longer willing to pay for music. With content that is available everywhere for free, the labels still have to generate sales. This leads to high label costs and correspondingly low profit margins. Complex licensing agreements have to be negotiated, often under American law. In our case, these negotiations took several months: Time that a start-up doesn't really have.

Isn't it reckless to launch an ad-supported music television program?
We had found a niche that I still believe has promise for the future. As part of the business plan, we identified three types of TV consumption. On the one hand, there's classic linear television, which is steadily losing importance and will probably only function in the future during major life events such as a soccer World Cup. On the other hand, there are various on-demand services. Such services as Spotify or Netflix offer a huge selection and can be used flexibly in terms of time. But they have left a gap open. Sometimes you come home and feel the need to just turn on the TV. Still, you want to watch something you personally like. Rayneer was supposed to cover this third area. We were in the process of supplementing the music program with series and feature films.

At the end of 2013, Rayneer received two million francs in a financing round from investors such as ZKB, Wilmaa and various business angels. What were the reasons for the shutdown that took place just under a year later?
Short-term liquidity problems. Two million sounds like a lot of money, but it's not, given the wages, advertising expenses and, above all, the high licensing costs. We were planning another round of financing, where we would have sought a much higher amount. When the liquid funds ran out early on, we wanted to call in a loan that had been planned especially for this case. However, it was unexpectedly not made available to us. Suddenly, we could no longer pay wages and outstanding bills. I had one day to inform the employees about this. In terms of user numbers, we were doing well. 100,000 unique users is not bad for a small country like Switzerland.

The same fate befell the personalized music TV service QTom from Germany in January 2014. The company was unable to find investors to further develop the service.
We were optimistic about the next round of financing. Most of the investors would have been in on it again.

So everything else went well? You must have been aware of the high costs to some extent.
On the revenue side, we were not as strong as we had hoped. We did get 100,000 users a month, but a large proportion of them didn't stay on the channel for long. We reached many of them via Wilmaa. There, for example, we had an extremely large number of users on Sunday evenings at 8:13 p.m., who switched to Tatort two minutes later. They only caused costs for us. One mistake was that we didn't think hard enough about how we could retain them. Instead, we felt compelled to monetize them. Looking back, if I had a bigger budget, I would do it differently. Facebook didn't show ads for years until the platform became indispensable. You have to have staying power.

Did investors put pressure on you regarding monetization?
The marketer, Goldbach Audience, invested indirectly in us with Wilmaa. As a result, we had the ambition to generate revenue quickly. But it would also be insane to go on such a big platform without monetizing the licensing costs. At some point, you also have to try out after how many music videos you can show a spot. We discussed such decisions intensively in the board of directors (which also included Wilmaa founder Thomas Gabathuler, editor's note) and made them together. I supported them. However, we probably would have been better off investing in Facebook advertising instead of TV and not having a media break. That wasn't possible because Media for Equity was part of the agreement with Goldbach.

How should it have continued?
Like Spotify, Rayneer would only have worked internationally. We developed the complex technology ourselves. For the next round of financing, we were looking for ten million to be able to expand into other countries. Not many Swiss start-ups have been able to close such a high financing round in the Internet sector. But in international comparison, it is a relatively low sum. Perhaps the crucial mistake was that we didn't seek more money right from the start. In Switzerland, it is difficult to raise such amounts. People are wealthy, but risk-averse. That's a difficult starting position for a start-up in the high-risk sector.

Interview: Simone Isliker

Rayneer - a three-year success story with an abrupt end

Rayneer was a free personalized music television. After the user logged in via Facebook, Rayneer analyzed his musical taste and automatically created a personal music program for him. Rayneer could be used on a wide variety of devices. The start-up rayneer entertailorment AG was founded in November 2011 by Oliver Flueckiger (CEO, Master of Arts in Business Administration, University of Zurich), Yannick Koechlin (CTO, Software Engineer University of Zurich) and Ronny Nenniger. The internet music channel went live on April 10, 2012. In May 2012, Rayneer won the Venture business plan competition organized by ETH Zurich and McKinsey, and in the following year attracted the Zürcher Kantonalbank (ZKB) and Wilmaa as investors. In June 2013, Rayneer was awarded the CTI start-up label by the Federal Commission for Technology and Innovation (CTI). As of December 2013, Rayneer had its own channel on the internet streaming platform Wilmaa and was marketed exclusively by Goldbach Audience. At the end of September 2014, Rayneer had to lay off all eight employees. Despite the setback, CEO Oliver Flueckiger does not rule out the possibility of founding another start-up in the music sector one day..