SoundCloud gets $170m to keep it afloat
SoundCloud, the popular but financially-strapped digital music service, is getting a lifeline from new investors who have agreed to pump $170m (€143m) into the company.
The investment keeps the Berlin-based company alive - but comes with strings attached.
SoundCloud chief executive Alex Ljung is being replaced by Kerry Trainor, the former head of the online video service Vimeo. The company is also shifting its business strategy, to focus on selling more tools for artists, podcasters and other content creators to share material online.
Trainor said the company will compete less directly with larger rivals Spotify and Apple Music, an acknowledgment that the company's costly years-long effort to build a rival subscription service wasn't successful.
Raine Group and Singapore's Temasek Holdings have agreed to inject the new money; however, SoundCloud had to accept a steep drop in its valuation. The new funding round valued the music streaming company at $150m, compared with the $700m valuation it was said to have received last year. SoundCloud's earlier backers had to accept a mark down on those earlier investments as part of the deal.
"We see an incredible opportunity for growth in this business," said Fred Davis, a partner at Raine who is joining SoundCloud's board of directors. Raine, a boutique investment bank, has also backed Vice Media, DraftKings and Imagine Entertainment.
SoundCloud will refocus its business around selling tools for musicians and other content creators. The company already has a service - called SoundCloud Pro - that allows people to pay to upload content to the site, while offering analytics tools and data about who's listening. It's a similar business model to that which Trainor built at Vimeo.
SoundCloud spent years negotiating with record labels to build a $9.99 per month subscription service to match Spotify and Apple, but the resulting product hasn't gained traction.