From Pop Star To Startup Boss: The Story of Stageit’s Evan Lowenstein

Senior Editor, Media & Entertainment  Opinions expressed by Forbes Contributors are their own.

This story appears in the December 25, 2012 issue of Forbes.Subscribe

On the screen of his MacBook, Evan Lowenstein watches singer-songwriter Jason Manns strumming an acoustic guitar in his apartment, where the only audience member is a snoozing dog. Yet out in the ether, thousands of humans are tuning in–as you can see by the comments cascading down the right side of the screen and by the real donations clattering into a virtual tip jar. “That’s $100 right there. There’s another $20,” says Lowenstein, 38. Manns has already earned $1,800. “The cool thing is he’s just some guy. But he’s got a fan base.”

Tan, lean and still pop-star cute, Lowenstein hasn’t changed much in the dozen years since his one-hit sensation (“Crazy for This Girl,” made with identical twin brother Jaron) rocketed near the top of the charts. Today he is wrestling with a startup, still trying to get it off the ground after spending five years and $500,000 of his and his family’s money., a concert-streaming site that generously rewards musicians, isn’t profitable. Given the long string of Lowenstein’s mistakes, it probably shouldn’t exist at all. But through charm and tenacity–and dumb luck–he has built a growing audience and an impressive, if credulous, group of investors.

They include Sean Parker and Jimmy Buffett, who have contributed to the $3.5 million in total venture funding. “As a business model that thing really works,” says Buffett, who recently used Stageit to raise $20,000 for charity in a 20-minute performance from his dressing room before a show at Detroit’s Comerica Park.

With Stageit artists set ticket prices (starting at 50 cents), often on a pay-what-you-can model. They keep 60% of that, twice what most mainstream arena acts take home; the rest covers Stageit’s setup costs and licensing fees, leaving gross margins of 25% to 30%. Concerts can be held anywhere there’s an Internet connection and a videocamera.

“The back of a car, the back of a bus, the kitchen counter,” says Lowenstein. “Pretty much anywhere you can have sex.”

The roster of musicians has swelled with the likes of aging stars (Bonnie Raitt, Rick Springfield, Jackson Browne) and newer faces like Jason Mraz and Pomplamoose. On average fans now spend $12 per show, twice as much as a year ago, and each show generates $375 in ticket sales, a threefold increase. More than half of all revenue comes from the tip jar. Stageit’s sales reached $340,000 in the third quarter, up from $60,000 a year earlier. The company will probably lose $700,000 on revenue of $1.3 million this year.

Evan and Jaron were discovered by Buffett back in 1996, when they were playing bars in Atlanta. He helped them land a deal with Universal’s Island Records. One potential roadblock: religious observance. “I knew they were Orthodox Jews who wouldn’t work on Saturdays,” Buffett recalls. No problem. “Crazy for This Girl” climbed to 15 on the Billboard Hot 100 in 2000. After their third album flopped, the brothers formed a production company and shot pilots for TV shows, becoming hosts of USA Network’s Character Road Trip for four seasons.

Life as a Web entrepreneur has been more challenging. “I’ve had a lot of success in my past from trusting people,” says Lowenstein. “In tech I didn’t know the rules of the game. I didn’t have a good bullsh*t detector.”

That proved costly.

The first developer he approached wanted $1,200 to create Stageit’s site. He took the $600 advance and seven pages of diagrams, then stopped returning calls. When Lowenstein caught up with him, he claimed he’d tossed the plans and dared him to sue (he was broke).

Developer number two seemed more legit, with a price tag to match: $57,500. After a few months, though, Lowenstein still hadn’t seen any progress. The prototype site he wheedled from the group crashed whenever more than 20 people logged on.

Third time wasn’t much of a charm, either. A firm that had done projects for Boeing claimed it could salvage the existing site and have it running in two months–for $88,000. But it soon ran into “unforeseeable problems,” and Lowenstein was in the hole yet again.

By 2010 he’d blown through his savings and hadn’t paid himself in nine months. His 18-hour days left him no time for his wife and kids. He’d had two hospitalizations for mysterious stomach ailments. Still, he decided he had to work on the Sabbath and “broke up with God.” Says Buffett: “Sometimes you gotta go, ‘Hey, take a battery out.'”

Lowenstein simply recharged. In January he found four programmers who rebuilt the site for $240,000 of the cash he had raised from early investors. By March he had something usable and took Stageit live. “We were still a plane flying at 500 feet,” he says. “One bounce of turbulence would put us on the ground.”

Indeed, when Crosby Stills & Nash performed a Stageit charity show that summer, the site went down. Lowenstein offered to refund his customers’ cash–and while many declined, he nearly couldn’t pay his staff. He convinced his brother to write a check for $175,000. That bought him new servers, a cloud-hosted chat program and much-needed respiration room.

Buffett helped sign musical acts. With Stageit’s numbers on the rise, Lowenstein scored his best-known investor–Sean Parker–thanks to Justin Bieber’s manager, Scooter Braun (whom he knew from Atlanta).

“He was passionate,” Braun says. “I felt comfortable making the introduction.” By the end of 2011 Lowenstein had raised $2.5 million and decided to take a vacation.

Not for long, thanks to bigger and more established rivals. Livestream and Ustream broadcast everything from concerts to local TV, charging premium users upfront monthly fees of $49 to $999 (that’s for a terabyte’s worth of video storage). Both sites let users archive videos. Lowenstein thinks that cheapens the product, and others agree. “The music industry does itself a disservice by commoditizing its craft,” says Mark Lieberman, founder of Artists Den, which films big names in tiny historic venues and sells the DVDs online.

With a paper valuation last pegged at $16 million, half of it his, Lowenstein has no thoughts of retiring to Margaritaville. As an entrepreneur, he says, “you’re an idiot that doesn’t know when to quit–until you have a breakthrough. Then everyone calls you a genius. I’m no genius, and the future of our business remains to be seen. But I’m still holding on.”

Not a bad title for a song.

For more on the business of entertainment, check out my Jay-Z biography Empire State of Mind and my upcoming book on Michael JacksonYou can also follow me on Twitter and Facebook.

About The Author samuelbiks