SoundCloud’s Investors May Terminate the Company In 24 Hours

SoundCloud CEO Alex Ljung is fighting to keep the company alive.

SoundCloud CEO Alex Ljung is fighting to keep the company alive.

On Friday, SoundCloud’s existing investors will determine if the company lives or dies.  So you might want to back up your catalog.

Updated, Friday AM: SoundCloud’s investors have just approved a $170 million funding round — but the CEO has been replaced.  Here are all the details.

And here’s our original story from Thursday:

The walls are caving in on SoundCloud.  And its entire future is now hinging upon one vote.

Earlier, Digital Music News reported that the beleaguered streaming service was entertaining rescue investment from two groups.  But according to a just-published report, those newer investors need to be approved by a bunch of older investors.  And that’s not guaranteed.

The vote to rescue (or not) comes on Friday, August 11th, according to Axios writer Dan Primack.  Citing a memo leaked to Axios, Primak notes that the incoming ‘rescue’ investors Raine Group and Temasek would receive preferential treatment. Which basically means that other investors would be de-prioritized, receive worsened terms, and have a harder time recovering their cash.

Ljung has warned that if the rescue package isn’t approved, the company won’t have enough money to survive.  It would introduce a dangerous tailspin as employees jumped ship and the money dwindled to zero.

So essentially, a ‘no’ vote terminates the company.  Or at least drastically reduces its chances of survival.

Existing investors would face some raw deal terms.  In the case of an eventual fire-sale or liquidation, Raine and Temasek would get to recover their funds first, along with any other investors participating in this ‘Series F’.  Sounds like a bad deal, except that the alternative is destroying SoundCloud forever.

SoundCloud is asking for an additional $170 million.  The Series F sharply plunges SoundCloud’s pre-money valuation to $150 million.

One option for existing investors is to keep the company afloat and accept the bad terms.  Then, work like hell to either liquidate or sell the company, a move that Ljung has previously resisted.

Others investors participating in this ‘Series F’ round include Union Square Ventures, Doughty Hanson and Atlantic Technology.  So that complicates the analysis and decision matrix a bit.

Existing SoundCloud CEO Alex Ljung is obviously urging investors to vote yes.  But here’s the kicker: ReCode has just reported that if the rescue round is approved, Ljung will probably be fired.  In fact, a massive leadership shakeup is almost a certainty.

Accordingly, Vimeo CEO Kerry Trainor would assume the CEO helm, according to the Recode report.  Whether Ljung would fight to remain CEO is another question.

Earlier, we’d heard that investors loved Ljung.  But love has a funny way of turning into hate.

Over its multi-year history, SoundCloud has burned through more than $230 million.  That doesn’t even include an additional $70 million in loans, undoubtedly accruing massive interest.

Meanwhile, attempts to launch a premium tier have floundered.  SoundCloud Go has largely underwhelmed and failed to amass any subscribers.  Spotify, meanwhile, has 60 million paying subscribers.

Spotify Walks Away From SoundCloud Acquisition

Incidentally, Spotify apparently passed on a deal to acquire SoundCloud.  That could play into the current decision, especially the analysis of whether SoundCloud is actually sellable or not.

 


32 Responses

  1. Lee Bryan

    I think it’s dead no matter what to be honest… It’s only really used as a way to share music to social media, not many people activity search SoundCloud for music anymore, Spotify has taken over that roll.

    Reply
    • Frank Westwood

      SoundCloud will live on. Far more people search and discover new music on SC than you think.

      Reply
      • Young Cade is an Idiot

        “Young Motherfuckin Cade”, grow up. You type like an idiot and clearly don’t understand why SoundCloud is simply not a big player in the online music industry.

        Reply
        • Bob

          What? Soundcloud is still relevant, especially for Hip-Hop and DJs. Podcasts as well.

          Spotify, tidal, etc.’s curated lists don’t compare to what you can find on soundcloud.

          You underestimate soundcloud’s influence, especially in Hip-Hop.

          Reply
          • UR2ghetto4US

            That influence isn’t making SoundCloud any money. That’s what this is about, not cultural impact. It’s a different conversation at the grownup’s table.

    • Askari AbdulShakur

      Being a hip hop artist I think and truly believe SoundCloud has not reach it peak and I truly believe SoundCloud can make a turn on for even more investments better music expanding in this business you sound cloud a chance take networking with other business entrepreneur ventures I can say that sound cloud has passed a lot of great music after it continues to be one of the greatest outlet for music in the music industry

      Reply
    • Yung Bin

      It sounds like your taking your own experience and generalizing. That is not the case at all, people are very active on Soundcloud still, a lot of new music breaks on Soundcloud first.

      Reply
      • Gemma

        Yeah for free you fucking imbecile. That doesn’t make money. Go the fuck back to school. retard.

        Reply
    • EM Dog

      These music apps are only loved until somebody new comes along. The bottom line is they all suck because they dont pay the writers a fair spin rate. .005 cents a play is a joke!
      No pay=no play. Boycott all streaming services till Spotify or Apple leads the way with a fair payment agreement to the writers. Why should CEOs get rich off our music, while we’re still struggling. Bullshit. I hope they all go out of business, and then the CEOs can go back to bartending.

      Reply
  2. Remi Swierczek

    I would not call them investors.
    Old ones and new ones are business ZOMBIES with easy cash on hands!

    Only Shazam beats SoundCloud in business model STUPIDITY!
    Both MUSIC pimps with no compensation for services!

    Reply
  3. Ron Zabrocki

    I think it’s already dead. Time to lay down and open the way for the services that matter.

    Reply
  4. Phil de Mont

    What is the likely outcome for user? There has been a link to allow you to migrate your tracks onto Mix-cloud. As far as your annual Sub is concerned kiss it goodbye but migrating us a good option. Phil de Mont

    Reply
  5. BOB

    I don’t understand all this fake news about soundcloud.
    Even a fuckin useless platform like MySpace it’s still online after years even if apparently no one uses it. Why should soundcloud with million of active users suddenly close?

    Reply
    • Benny

      It costs a ton of money to host all that music and those 1 million people. Thats why it will inevitably shut down

      Reply
  6. Vitale

    Crying shame they won’t listen to folks like me, because their Business Model is flawed and has been for years, Bit late now but if I could put in the 170 Million I would because I have a few idea’s I’ would implement that might generate the cash flow Soundcloud needs to survive

    Reply
    • MusicHunter

      Couldn’t agree with you more on this statement. I love Soundcloud and hope they bounce back. But I think it’s time to set egos aside and implement software development 101 – give the consumer what they want, rather than giving them what the Soundcloud product managers THINK the consumer would want. It would make a world of difference in the evolution of their product offering and profitability. The only way to do that is to provide a place for feedback and ideas. I can’t find one for Soundcloud. I checked Spotify, and guess what? They have a feedback and ideas form right on their website. Hmmmm….

      Hey Soundcloud!! I have a feature idea that yes, I would pay for!! Where do I send to you????

      Reply
  7. Erixon

    I think they need to purge all the bots and any accounts that have been inactive for more than 2 years. Would probably free up a huge amount of storage. Then they could look at redesigning the interface and the way SoundCloud integrates with other platforms. It really needs a re work from the ground up. I’ve been on Soundcloud since 2009 and I still get notifications that never clear. The mobile app sucks and always has been a pain in the arse. Then there’s the issue of monetisation. Spotify offers full back catalogues of artists albums and being able to create your own mega playlist is part of the appeal. So in order to compete they have to allow artists to release albums with the same amount of reach and streaming income. Just some criticisms from a long time user. I hope they don’t shut it down!

    Reply

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