What happens when an artist raises money a second time. Two approaches. Which protects you.
Scenario: You invest $100 in an emerging artist's debut EP, owning 1% of the EP's royalty stream. The EP does well. Six months later, the same artist launches a second project (a new album) and raises $20,000 from new investors.
Does this new raise dilute your ownership? And if so, by how much?
Each project is its own separate security. Your 1% stake in the EP is locked to that specific EP's revenue stream. When the artist raises for a new album, new investors own a share of the album, not the EP. Your piece of the original project stays the same.
Example: You own 1% of Debut EP revenue forever. New investors in the Album own 1% of Album revenue. You are not diluted. Both projects pay you separately.
Advantages
Trade-offs
All of an artist's future projects are pooled under one umbrella. You own 1% of the 'artist as a whole,' and new raises dilute that stake. When the artist raises for a new album, they sell more shares of the overall entity, and each previous shareholder's percentage goes down.
Example: You own 1% of 'Maya Okafor' (all her projects, all revenue streams). When Maya raises again, the pool expands and your share drops to 0.9%. But the pool is larger, so maybe it is still more valuable.
Advantages
Trade-offs
Model A: Project-isolated raises
Artist Exchange uses the project-isolated model. Each offering is a separate security. Your ownership percentage in a project never dilutes. New investors in future projects own a separate stake.
Why we chose this: Early investors take outsized risk backing unknown artists. Protecting them from dilution is how we reward that risk. It also makes the math simpler, clearer contracts, and better security law compliance under Reg CF.
You invest $100 in Solene's debut EP. You own 1% of EP royalties.
EP is a hit. 50k streams/month generating $150 in royalties. Your share: $1.50/month.
Solene's secondary market opens. EP value has grown. Your shares (still 1% of EP) are worth $250. You could sell now, but you hold.
Solene announces her sophomore album. She raises $30k from new investors for the album only.
You still own 1% of the original EP. This new raise does not change that. Your monthly payout from the EP stays the same.
Album drops. New investors in the album start receiving their quarterly distributions. You receive distributions from the EP (unchanged).
Both EP and Album are streaming well. Your EP payout is up to $2.10/month (more streams). You have the option to invest in the album too at its current share price.
No. Each project is its own security. Your stake in Project A is never affected by Project B. However, if an artist runs into financial trouble and cannot pay out any project, that affects all investors. This is why artist quality matters.
Your shares are still worth the present value of future earnings on that project. If streaming drops to zero, your share is worth close to zero. There is no guarantee or buyback. This is the risk.
No. Your 1% stake is fixed. However, if the label takes over future projects, you only get paid on the one you invested in (if the contract allows it). This is why understanding the project scope and contract terms matters at purchase time.
Legally, no. Your share count and percentage are set at issuance and locked in the contract. They cannot increase without a new investment from you.
You can. You will own separate stakes in each (1% of Project A, 1% of Project B, etc.). They are tracked independently and distributed to you separately.