Investors evaluating BARS Fund consistently ask the same question: how exactly does music IP become Bitcoin? The mechanism isn’t complicated, but it’s worth explaining carefully because the details are what make it work.
There are two ways to invest in BARS Fund, corresponding to two ways we acquire music royalty cash flows. Both share the same fundamental structure; they differ in who owns the IP and how the upside is split.
The Core Mechanism: Royalty Yield → Debt Service → Bitcoin Appreciation
Regardless of structure, the mechanics are the same:
- Acquire or secure music royalty cash flow (either through outright acquisition or an artist pledging assets as collateral)
- Use the royalty-secured IP as collateral for senior debt at 50–60% of appraised catalog value
- Deploy the debt proceeds to purchase Bitcoin
- Service the debt (interest-only) from ongoing royalty income — the cash flow covers the carry
- Allow Bitcoin to appreciate over the loan term (3–7 years)
- At maturity: debt is repaid from accumulated royalties or Bitcoin proceeds; remaining Bitcoin value is investor upside
The royalties pay for the position. Bitcoin is the alpha.
Investment Option 1: Senior Debt (Artist Pledges Assets into SPV)
In this structure, an artist with an established royalty-generating catalog pledges their music rights into a Special Purpose Vehicle (SPV) rather than selling them outright. The artist retains ownership of their catalog; the SPV holds it as collateral for the senior loan.
Structure example:
- Catalog royalties: $2M/year recurring
- Catalog valuation: $20M (10x revenue multiple)
- Senior debt at 60% LTV: $12M
- Interest rate: 10%, interest-only for 3–7 years
- Annual debt service: $1.2M (covered by royalty income with cash remaining)
Bitcoin deployment:
- $12M → Bitcoin purchase at current market price
- At 20% annual appreciation over 5 years: ~$29M value
- Less principal repayment of $12M: ~$17M net Bitcoin profit
- Artist receives 80% of net upside (they didn’t sell their catalog)
- BARS Fund receives 20% of net upside
The artist benefits from Bitcoin appreciation on their existing catalog — without selling it. BARS Fund earns its share for structuring the deal. The lender (the institutional investor in this structure) earns the interest rate (10%) with music IP as collateral.
This structure is infinitely scalable based on how many artists we bring in.
Investment Option 2: Venture Debt (Full Acquisition)
In this structure, BARS Fund acquires full ownership of the music rights in perpetuity. This is the traditional catalog acquisition model — but deployed to a radically different purpose.
Structure example:
- $100M equity investment by BARS Fund
- Catalog acquisition at 2–3x below recognized value (our advantage as a non-competing buyer)
- Royalty income: ~$10M/year from acquired portfolio
- Senior debt at 60% LTV on $300M catalog value: $180M
- Annual debt service: $18M (covered by royalties with margin)
Bitcoin deployment:
- $180M → Bitcoin purchase
- At 20% annual appreciation over 5 years: ~$436M value
- Staking yield (4% compounding): additional $17.4M/year by Year 5
- Estimated company valuation at exit: $685M
The investor in Option 2 becomes a majority owner of BARS Fund, with access to both the royalty income stream and the Bitcoin treasury appreciation — plus the optionality of a publicly traded exit as BARS Fund pursues a SPAC or direct listing.
The Overhead Advantage
One structural advantage that institutional investors consistently appreciate: BARS Fund’s operating costs are minimal compared to traditional fund managers.
Music royalties are administered by third parties (record labels, music publishers, PROs like ASCAP and BMI). The artist simply directs their label or publisher — via a letter of direction and assignment of rights — to pay BARS Fund directly. We don’t need a royalty collection infrastructure. We don’t need A&R staff or music executives managing artist relationships on a day-to-day basis.
OPEX is modeled at approximately 2% of gross assets — significantly below typical alternative asset management fee structures.
What BARS Fund Is Actually Selling
We are not selling Bitcoin speculation. We are not selling music fund exposure. We are selling the structural combination of a contractually obligated income asset and a historically appreciating store of value — engineered so that one pays for the other.
That’s a category that didn’t exist before BARS Fund. It exists now.
Erik Mendelson is the founder and CEO of BARS Fund. Contact: erik@recordgram.com