SoundCloud's $700M valuation melted to $150M in two years

SoundCloud launched in 2007 as a place where anyone could upload and share audio, and it grew into the internet's unofficial home for new music: unsigned artists, DJ mixes and remixes lived there long before streaming paid for anything. By early 2016 the company claimed over 175 million monthly users. But unlike Spotify, which had built its business on licensed catalogues and paid subscriptions, SoundCloud had operated for a decade on free uploads and advertising — a beloved platform with no answer to the question of who paid for the music.

In 2016 SoundCloud signed the licensing deals that should have closed that gap — Universal in January, Sony in March — gaining the major labels' catalogues and launching a paid subscription later that year. But the same agreements added royalty costs to a service most of whose listeners had never paid, and the money to fund the transition did not come: from mid-2016 the company tried to raise more than $100 million without success, talks with possible acquirers including Spotify went nowhere, and in March 2017 it took $70 million in debt from specialist lenders instead.

On 6 July 2017 SoundCloud laid off 40 per cent of its staff — 173 people — and closed its San Francisco and London offices, with significant cuts in New York. At the all-hands meeting founder and CEO Alex Ljung insisted the company would stay independent, with no intention to sell. TechCrunch reported a week later that the layoffs bought little time: leaks said the company was funded only until the fourth quarter, roughly 80 days away. SoundCloud's PR called the report inaccurate and repeated that it was 'fully funded into Q4'.

The rescue, when it came, reset the numbers. On 11 August 2017 SoundCloud announced a $169.5 million round led by the Raine Group and Singapore's sovereign wealth fund Temasek; Axios reported the round priced the company at about $150 million pre-money, down from its $700 million 2014 valuation. Ljung stepped aside as CEO — he stayed on as chairman — and Kerry Trainor, former CEO of Vimeo, took over. 'This financing means SoundCloud remains strong, independent and here to stay,' Ljung wrote. The company lived on; the price of independence was four-fifths of its reported worth.