SoundCloud saved by emergency funding as CEO steps aside
SoundCloud has just closed the necessary funding round to keep the struggling music service afloat. CEO Alex Ljung will step aside though remain chairman as former Vimeo CEO Kerry Trainor replaces him. Mike Weissman will become COO as co-founder and CTO Eric Wahlforss becomes chief product officer. Raine Group and Temasek have stepped in to lead the new Series F funding round of $169.5 million.
SoundCloud laid off 40% of its stock last month, with 173 employees departing in an effort to cut costs. The company only had enough runway left to last into Q4, and today’s investor decision was viewed as a do-or-die moment for the company. Now it will have the opportunity to try to right the ship, or sail into an established port via acquisition.
SoundCloud declined to share the valuation or quantity of the new funding round. Yesterday, Axios reported the company was raising $169.5 million at a $150 million pre-money valuation. That’s a steep decline in value from the $700 million it was valued at in last previous funding rounds. The new Series F round supposedly gives Raine and Temasek liquidation preferences that override all previous investors, and the Series E investors are getting their preferences reduced by 40%.
SoundCloud says its total revenue is now at a $100 million annual run-rate. If it can keep costs low and grow that number, it may eventually get to break even and no longer need infusions of investor capital.
For now, music and other audio saved on SoundCloud is safe. But the company will need to find a way to make its subscription tiers more appealing and scale up its advertising despite having much less staff to drive the changes. If it can’t, SoundCloud could be back begging for cash in a year.
The new management should provide some additional confidence. I’d interviewed both Ljung and Wahlforss in the past, and neither had answers to the big questions facing SoundCloud about its product direction, business model, and the spurious copyright takedowns that have eroded its trust with musicians.
Trainor may be able to institute some more discipline at the startup. He was the CEO of Vimeo from 2012 to 2016, helping it to fend off bigger rivals like YouTube by doubling down on what was special about the service: a focus on high-quality artful film rather than amateur viral videos. That experience makes him a great fit to lead SoundCloud, which is fending off bigger rivals like Spotify and Apple Music. SoundCloud’s best bet isn’t to battle them directly, but double down on the user uploaded indie music scene including garage demos, DJ sets, unofficial remixes, and miscellaneous audio you can’t find elsewhere.
Featured Image: TechCrunch
