OurStage says it intends to double the amount of financing for the Series B round, which would bring the total investment put into the company to $23 million by the end of 2009.

Since launching publicly back in April 2007 the company has been steadily attracting users to join its service, which enables people to discover new independent artists, rank and share music with others and communicate directly with upcoming singer/songwriters and bands. Thanks to viral growth in combination with dozens of partnerships with music festivals, radio networks and media companies like AOL/WinAmp, OurStage is currently nearing 1 million registered users. The company has also managed to sway 95,000 artists into joining the platform, and in combination with the strong user base they currently receive about 3 million unique visitors on the site every month.

So how do they monetize the service? By focusing on three good old revenue streams that seem to work well for them: sponsoring, advertising and data services. The latter I think is interesting: OurStage is beta testing a service called TRAViS (shorts for Track Validation Services) that is currently being trialled by divisions of four major record labels and will be publicly launched in Q4 2009, and expects to add some more services targeted at industry professionals soon.

Somehow OurStage has also found a way to get close to running a cash-flow positive business with classic advertising (powered by ad platforms like MTV Tribe, AOL’s Platform A and IndieClick) and sponsorships from major corporations like MTV2, JetBlue, Radio One as well as notable artists like Bow Wow, Busta Rhymes and John Legend. According to the company, ad revenues alone have grown tenfold year-over-year compared to the same period in 2008.

Not enough to impress you? Maybe the startup’s board of directors will convince you the company is onto something great here: it includes a former CMO of Yahoo!, David Moore (founder and Chairman of 24/7 RealMedia), the founder and CTO of Maven Networks, the former Chairman and CEO of Interpublic and since last month, former Chairman and CEO of Sony Music Don Ienner.

Refreshing to hear this type of update from an Internet startup these days.

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The bomb-shelter mentality among startups is now so severe that even companies raising money are announcing layoffs in response to diminished economic prospects. Boston-based Helium just closed a $17 million series A financing about ten days ago, and then cut 30 percent of the organization (18 people) last week. CEO Mark Ranalli tells me:

We expect a deterioration of overall ad rates, and a slowing of the economy in general. Our approach was to take a third of every group across engineering, customer service, and sales.

Ranalli has been raising the $17 million piecemeal over the past year from hedge funds, family trusts, and wealthy individuals. The last $2 million came in two weeks ago. Combined with the current cuts, Ranalli believes he has enough to make it to profitability.

Helium is a reference site filled with general-information and how-to articles. It competes with About.com, but instead of hiring professional writers, Helium’s articles are written by members of its community. The best articles are voted to the top by the community, but in a way that makes it difficult to game the system. Instead of being able to vote up your own articles or those written by your friends, readers are given a random sample of articles and asked to compare them in pairs. This A-B approach filters the best articles to the homepage. (Helium spinoff OurStage applies this same system to finding the best raw musical talent.)

Since it launched two years ago, Helium has attracted 130,000 writers who have contributed 1.2 million articles. Most of those people only write once or twice and then go away, but Helium has managed to cultivate a core of about 10,000 active writers. And it has pared down that 1.2 million articles to 800,000. About a quarter of the submissions are just not even worth keeping. The writers get a split of ad revenues on their pages, which isn’t a lot given that the site gets on average $2 for every thousand pageviews. Ranalli plans on rewarding top-rated writers a little bit more by paying star-rated writers a token amount up front (50 cents to $2.50 per article), in addition to the revenue split.

According to comScore, Helium attracts only 859,000 unique visitors per month in the U.S. (Ranalli says the internal number is closer to three million a month). Traffic flattened for a few months when Ranalli decided to let the site grow organically instead of pumping up the numbers with marketing dollars. Now, he says, October looks like it is going to be Helium’ strongest month ever.

But advertising is not the only way Helium makes money. It also hosts a marketplace for freelance writers where publishers, newsletters, and even offline newspapers and magazines can bid for talent. Helium members can go there and offer their writing services and typically get anywhere from $30 to $300 per article, with Helium collecting a 20 percent fee. Says Ranalli:

It is only about six months old, and it just eclipsed our ad revenue.

These days, every penny counts.

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Under the deal, OurStage will offer four channels on Joost: Best of OurStage Shorts, Best of OurStage Comedy, OurStage Music Videos and OurStage Artist Access. The channels will give Joost users access to 10 OurStage Artists on each channel and exclusive content including music festival coverage & advice from established musicians & filmmakers.

OurStage launched in March 2007 and lets users rank and buy Inide songs and video. Artists upload their content, which users then judge – two snippets are heard/ watched and the user votes for which one he or she likes the best. The result are constantly updated in to top lists of songs. The top songs overall or by category are then listed on the site, and prizes are given to the top artists each month.

See our November 2007 review of their iPhone offering here.

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But Amazon may be doing more than anyone else to change the way music is discovered, promoted and sold. Not only do they have a music store that only sells DRM-free music, but they are experimenting with startups who are trying to break the stranglehold that labels have on discovering, promoting and marketing new artists. These startups are giving artists a different path to find their fans. And Amazon is helping them.

Today Amazon announced that it is partnering with a European startup called SellABand and will sell music from SellABand artists. We first covered SellABand in August 2006 – unknown artists upload music to the site and ask fans to chip in $10 if they like what they hear. Once the band gets to $50,000 they’ve proven themselves, and they get to record a CD in a professional studio. Each fan gets a limited edition CD. If the artist doesn’t reach $50,000, the fans can get their money back or give it to another artist.

Earlier this year we noted that the model seems to work. Today, more than 6,000 artists have uploaded music to the site, and a lucky few have been picked by fans to record albums. The top artists will now have their music sold on Amazon UK as well, making the model even more attractive.

See our coverage of Strayform, a different startup with a variation on the SellABand business model.

Amazon also invested in a different startup in the music space – Amie Street. Amie Street is a company I have long admired – we first covered it in July 2006, and last year I added it to my list of “web 2.0 companies I couldn’t live without.”

Amie Street has a model for selling non-DRM music that simultaneously earns artists money and ranks artists by popularity of downloads. All songs start at free. As users begin to download a song, the price rises steadily until it reaches $0.99. So the more a song costs, the more popular it is. Most of the muck is filtered out by $0.25 or so, and the site has some really excellent music. Even some well known artists have tried it out.

Amie street says that the average first time purchase on the site is close to $10. Members spend an average of nearly 8 minutes on the site each visit, listening to some of the 850,000 songs available for download. They also recently inked a deal with CDBaby, where those artists can get their music ranked on Amie Street. And they just opened a Japanese version of the site that is selling anime as well as music.

OurStage, a Boston based startup we recently covered, has yet another way of ranking indie bands.

What’s similar about SellABand and Amie Street is that both startups remove the need for a label to “discover” new artists and promote them in the hope that they sell CDs. Instead, the crowd is deciding what they like and showing it by donating to the artist (SellABand) or downloading songs (Amie Street). If either succeeds, they’ll have Amazon at least partially to thank.

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Ourstage, which launched in March 2007, is a site that lets users rank and buy Indie songs. Artists upload the songs, which users then judge – two song snippets are heard and the user votes for which one he or she likes the best. The result is are constantly updated top lists of songs. The top songs overall or by category are then listed on the site, and two $5,000 prizes are given to the top artists each month.

Users can also purchase any song in unrestricted MP3 format for $.99. Currently the artists receive 100% of proceeds, but starting in 2008 OurStage will begin to take a 30% cut.

Now iPhone users can visit the site and stream any of the top songs – just visit ourstage.com from your iPhone to access the custom user interface, which uses Quicktime to stream the music.

OurStage is taking a different approach to ranking Indie music from other startups we’ve covered. Amie Street, by comparison, simply sets the price of every news song at zero and then begins raising the price as the number of downloads increases. Amie Street was recently funded by Amazon. Also see our coverage of Strayform and SellaBand.

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