SoundCloud has only closed that the essential financing round to keep the struggling music service afloat. CEO Alex Ljung will step aside though remain chairman as former Vimeo CEO Kerry Trainor simplifies him. Mike Weissman will become COO as SoundCloud co-founder and CTO Eric Wahlforss stays as chief product officer. New York investment bank Raine Group and Singapores autonomous wealth fund Temasek have stepped in to lead the new Series F financing round of $169.5 million.
SoundCloud laid off 40 percent of its employees last month, with 173 employees departing in an attempt to cut costs. The company just had enough runway made to continue into Q4, and todays investor conclusion was regarded as a do-or-die moment for the company. It will have the chance to attempt to correct the ship, or sail into an established port via acquisition.
SoundCloud declined to share the evaluation or quantity of their new financing round. Yesterday, Axiosreported the company was raising $169.5 million in a $150 million pre-money valuation. Thats a steep decrease in value from the $700 million it had been valued at in previous financing rounds. The new Series F around allegedly gives Raine and Temasek liquidation preferences that override all previous investors, along with the Series E investors are getting their tastes reduced by 40 percent. Theyre surely happy about that, but its greater than their investment vaporizing.
Raine will get two board seats for bailing out SoundCloud, with spouse and former music business lawyer Fred Davis, along with the vice president who directs music investments, Joe Puthenveetil, taking those seats.
While abdicating that the CEO role probably wasnt exactly what Ljung had hoped for, at least he gets to remain on with the firm as chairman of the board. This funding means SoundCloud stays powerful, independent and here to stay, he wrote.
SoundCloud says its total revenue is currently at a $100 million yearly run-rate. When it can keep prices low and grow this amount, it may eventually get to break even and no more need infusions of investor capital.
TechCrunch broke news regarding the size of the SoundCloud crisis last month. Sources from the firm told us that the layoffs had been planned for decades, but SoundCloud nevertheless reluctantly hired employees up until the final minute, with some being let go within weeks of starting. Employees told TechCrunch that the firm was a shitshow with inconsistent product management and dwindling cash. Ljung was seen as reluctant to tell the truth with all the group, and unfocused as he partied across the world like a rock star.
Our report led to a flurry of follow-on coverage, prompting musicians and fans to talk in favor of their ceremony. The rally was reminiscent of the love revealed to Vine after Twitter announced it would shut down. Popular musician Chance The Rapper tried to get involved to save the company. He, like many other indie hip-hop musicians, made their name on the stage as part of a genre which came to be known as SoundCloud Rap. Ultimately, SoundCloud was stored when Vine wasnt.
For the time being, music and other sound stored on SoundCloud is safe. But the company will need to find a means to make its subscription tiers more appealing and scale up its advertising despite having much less employees to push the changes. When it cant, SoundCloud might be back begging for cash in one year.
The new management should offer some additional confidence. Ive interviewed both Ljung and Wahlforss in the past, and neither had answers to the big questions confronting SoundCloud regarding its product direction, business model and the spurious copyright takedowns which have eroded its trust with musicians.
Trainor might be able to institute a bit more subject in the startup. He had been the CEO of Vimeo from 2012 to 2016, and contains poached his former COO there to help run SoundCloud. They aided Vimeo fend off larger rivals such as YouTube by reducing on what was special about the ceremony: a focus on high quality artful film rather than amateur viral videos. That experience makes Trainor a excellent fit to lead SoundCloud, which is fending off larger rivals such as Spotify and Apple Music.
SoundClouds best bet isnt to battle them directly, but double down on the user-uploaded indie music scene, such as garage demos, DJ sets, unofficial remixes and miscellaneous sound you cant locate elsewhere. Whether it stays independent long term or attempts to seduce an acquirer, SoundCloud will gain from spotlighting its own unique community of creators and hardcore listeners.
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