SoundCloud Reportedly Sets Floor Price for Potential Buyers (Updated)
Can SoundCloud weather this storm? The Berlin-based streaming audio platform is reportedly running out of money, and with recent efforts to raise capital coming up short, may consider selling for far less than what it was valued at just three years ago.
According to Recode, SoundCloud has been trying to raise more than $100 million since last summer, meaning right after it launched an on-demand streaming service to compete with Spotify and others. Sources say the company "may sell for less than the $700 million investors thought it was worth a few years ago" and that it will consider bids "as long as they’re above the total investment it has raised to date -- about $250 million."
That a startup like SoundCloud is seeking funds should come as no surprise to anyone familiar with the company -- in January, one of its co-founders warned in a filing that "risks and uncertainties may cause the company to run out of cash" before the end of the year, opening the possibility of new funding rounds at any time.
The new report's detail regarding SoundCloud's money-raising difficulties appears to back up, at least slightly, a Financial Times story from Feb. 13 that quoted an anonymous "financier" as saying they "wouldn't give [SoundCloud] any [money] right now... they need to rethink their valuation and settle for a [lower valued] round." SoundCloud quickly hit back, calling FT's report "disappointing and surprising for a newspaper of record."
*SoundCloud issued the following statement to Billboard following the initial publication of this article: "While we do not comment on rumors or speculation, we can say the latest Recode article doesn't accurately portray the current state of the SoundCloud business. We are actively speaking with a variety of potential investors and other strategic partners. These conversations, led by our recently appointed CFO Holly Lim, reflect the market interest in our differentiated platform, unmatched user reach and strong outlook for 2017 and beyond. We expect to see 2.5x year-over-year revenue growth in 2017, driven in part by SoundCloud Go, our just-launched mid-priced consumer subscription."
Founded in 2007 by Alexander Ljung and Eric Wahlforss, SoundCloud has raised over $193 million in six funding rounds, the latest led by Twitter, according to CrunchBase. The company claims to have 175 million monthly unique visitors, but that figure dates back to 2014 and has not been updated since. SoundCloud launched its premium on-demand streaming service Go in March of last year, and a few months later was rumored to be seeking prospective buyers (Spotify and Google were mentioned). In late February of this year, it added a third tier that gives users ad-free access to millions of tracks for $4.99 a month.
*This story was updated with SoundCloud's response at 5:00 p.m ET on 3/13/2017.