If you want big money, you go to big investors, right? Not if you’re 8tracks, which is raising big money from smaller investors.
Last time we checked in with 8tracks in mid-2015, they were claiming profitability and proudly announcing a string of indie licensing deals. They also found a way to loosen their attachment to SoundCloud, quite the risky partner these days.
But maybe things weren’t so rosy: the playlisting company also secured a $2.5 million in debt financing from Silicon Valley Bank, after burning through $1.5 million in funding from heavyweights like Andreessen Horowitz and Index Ventures (who apparently aren’t coming back).
But regardless of what that information says about the 8tracks financial situation, the company is now courting a giant pile of investment cash. And the best part is that that the nibbles aren’t coming from a giant investor.
Instead, 8tracks is tapping smaller lenders through SeedInvest, a Kickstarter-meets-financing hub for accredited investors that want to diversify smaller bets. Also known as ‘equity crowdfunding,’ SeedInvest is trying to open investment from ‘regular people’ while pre-clearing and vetting startups (and managing tricky SEC regulations designed to protect average Joes). This space is all about enabling ‘ordinary, individual investors’ to connect with ‘high quality startups,’ and getting a piece of the huge upside typically reserved for massive investment houses.
The whole idea seems to be going well, potentially as much as $30 million well. According to details reported this morning by TechCrunch, 8tracks has now attracted 30,000 initial commitments for $1,000 each. Those haven’t yet cleared or received approval from the SEC, though even a fraction offers serious cash for this company.
Part of the reason for the early commitments is that 8tracks has always attracted a super-involved, core audience that creates and curates playlists, then shares them with others. According to 8tracks founder David Porter, that made giving a piece to die-hard users a natural next step, so let’s see how this proceeds.
But $30 million? It’s not that outrageous an amount, as competing with the likes of Pandora, SoundCloud, and YouTube is extremely expensive. So far, 8tracks has licensed a litany of indie catalogs, but lacks the rights to major labels. That is holding back 8tracks from meeting the masses, not to mention expanding beyond US borders.
In terms of happy endings, investors may be drawing a parallel to Songza, now part of Google. But the biggest potential path may have been paved by Playlist, a concept that reached roughly 60 million users before getting crushed by licensing problems several years ago. Perhaps Songza is the pioneer that doesn’t catch an arrow in its back.