Back in 1998, Gene Hoffman founded eMusic. No doubt, it was smart timing. However, with the emergence of Napster, Hoffman realized he needed to provide users with a better option. "Our approach was to allow full access to our music library for a fee," said Hoffman, in an interview with me.

It was certainly a smart move. In fact, it became the basis of his next venture: Vindicia, which has announced a venture round of $5.6 million. The investors include Leader Ventures and DCM.

Over the past few years, Vindicia has built a robust platform to allow for on-demand payment management, especially for digital goods. The system helps with credit card breakage, fraud, compliance and various currencies.
Some of the customers include Symantec (NASDAQ: SYMC) and Reunion.com.

As seen with the success of companies like Salesforce.com (NYSE: CRM), the subscription business model definitely has a lot of power. Yet, it requires a sophisticated infrastructure, which can be expensive. "Billing is not a core competency," said Hoffman. "It's something that should be outsourced so a company can focus on what it does the best."

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Vindicia: music to VCs ears originally appeared on BloggingStocks on Mon, 31 Mar 2008 16:19:00 EST. Please see our terms for use of feeds.