Music credits database company Jaxsta says WiseTech chief executive Richard White has become a substantial shareholder in the business.

The company confirmed that White joined last week as part of its $3 million capital raise.

Jaxsta also announced that chief strategy officer Josh Simons has been appointed CEO.

Hi B5350H, great comments mate.

I like the concept of Jaxsta, but I haven't been able to get my head around the cashburn rate - $1.3 and $1.5 million last two quarters alone, with said cashburn increasing by a whopping 20% in 4Q. They have around 3 million in cash reserves. What are your thoughts on this? 

It looks like they are starting to market pretty aggressively. There has been reasonably steady to slow growth in users from Q to Q in FY21 (organic), so marketing sounds necessary to really try and drive more membership. 3 million won't go very far in this regard I wouldn't think, so I imagine capital raising/s will occur in the near future? 

My last concern - I am going to keep a very close eye on membership numbers following the company rolling out their premium pricing (was obviously previously free for these members). This will provide insight into how many of those members value the platform - putting their money where their mouth is so to speak. It is yet to be seen if member numbers, including growth, can be replicated once the company starts charging users. 

This risk, in addition to how quickly the company are burning through cash, make me want to sit on the sidelines and see how some of these risks are addressed. The risk/reward is not in my favour in my opinion, as it stands. 

Jaxta has been on my watch list for some time. After seeing the CEO present at a ASX smal & mid cap investors day. Slide deck 

video of presentation on YouTube here

Three things I liked about the business 

1. Founder Led and insider ownership is quite high
2. Simple to understand problem - solved by Jaxta and at the time a reasonable level of competitive advantage and control (credits for all thing music have been lost or disjointed, think record labels with credits written on the back compared to an mp3 with no credits listed at all! Jaxta pull this data into one place - more on this below)
3. Simple way to onboard new customers and make a significant difference for them - every person in the industry that Jaxta had credits for has a profile on Jaxta - all they need to do is log in and claim their profile (or even have their manager do this for them) - it couldn't be more simple. 

The stats from the latest release is in the attached pic (I couldn't copy paste for some reason).

Where is the value add? (What is wrong with just having a resume...) The data is Supplied by the recording studios - Jaxta has lincensing agreements with the recording houses to ensure they get and keep the data pure and accurate. In the slide deck above they note agreements in place with the top four incumbents (~80% of the credits generating studios and ~90% of all credits) with discussions underway with the remaining studios. 

In terms of revenue -

Jaxta have just launched (today 12/08/2021) the paid version for members which is a conservatively priced option (IMO) - my valuation has the details on this. I estimate an initial Rev from paid to range from $1.5m (30% of current platform users) up to $4m (80% of current platform users). IMO based on price point the higher number will be more likely - if it isn't I think the value proposition to users has been overestimated and the business model / platform will need serious review. 

Jaxta currently have ~23k profile claims (of potential profile claims TAM 3.8mil profiles but Jaxta suggest a more conservative Serviceable Available Market (SAM) figure of 1.9mil profiles) even at 10% of the SAM Paying for the Pro experience will give Rev of ~$9mil)

Jaxta have API deals with major business partners (currently 5 signed deals all to begin contributing Rev in the next half results) this should drive significant revenue over time and the release today eluded to more deals in the pipeline. Some of these deals will organically grow with the business partner in the deal (Songtrader is one example where I expect the business deal will grow in time). 

• 60 deals in imediate pipeline (potential for 30 to be complete and contributing Rev by December 31 2021) on the back of past performance I would suggest this is more likely 10 rather then 30 (management have a tendency to mid targets like this - I think it speaks to there experience with this kind of deal making and should improve as the business evolves)
• 100 deals in entire pipeline at present

Advertising revenue doesn't seem to be on the radar just yet - but it is planned - I would imagine a site of this size and scalability it is only a mater of time - the potential for significant uplift of Rev here seems a no brainer. 
With current subscribers at ~104k and orgnainc growth of 286% on previous year the story is starting to unfold... engagement is increasing as well which is up 42% from previous year. As more profiles are claimed and more FANs figure out what's going on, the network effect should take off.

In terms of competitive advantage - Jaxta noted in July 2019 they had 29 licensing agreements with which represents the TOP four recording studios (~80% of market player) these are the largest of incumbents and this represents  “90 percent of the global recorded music industry”. (As per slide deck above).

DISC- I hold in RL and on Strawman. I like the business. 
please poke holes in my thesis!

Essentially a Linkedin for the music indsutry. A freeminum offering - a free teir and a Pro tier. A user has to sign up to "claim" a profile. Since the Covid lockdowns began, Jaxsta has offered their Pro teir for free - which has resulted in a phenomenal user growth. By the end of 2020 they have had 80000+ members on their platform "claim" a profile. 

Big name users who have "claimed" their profile include:

• Adele
• Mariah Carey 
• and more...screenshot from company presentation attached. 

Headwinds

• With Covid lockdowns ongoing and live music being battered - would artists be wanting to pay for essentially what is a 'Linkedin-premium'-esque product? 

Tailwinds:

• Integration with Songtradr - an additional revenue stream. 
• Jaxsta to start charging Pro members from August 2021
• Partnerships with music industry orgnisations likely to drive revenue

Disclosure: Currently held. JXT has been one of my thorns in my portfolio. In the height of the Covid-19 Crash I was at 99.98% capital loss on this stock but I've kept on holding. Still sitting at a 40% capital loss today.