EDMC News Features

New Investments Place Online Audio Platform SoundCloud at $700M



February 19th, 2014

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SoundCloud is prepared to shoot through the stratosphere and continue to redefine the way we discover, listen, and distribute music. The open audio platform just received a huge boost following a new stream of investments that now place the value of this Berlin-based Internet start-up at over $700 million.

 

Alex Ljung and Eric Wahlforss, co-founders of SoundCloud

Alex Ljung and Eric Wahlforss, co-founders of SoundCloud


 

There is no denying that SoundCloud has risen to the top of electronic audio distribution among other internet-based music providers, like streaming services Spotify and Pandora, social media platform MySpace, and video service YouTube. Yet what makes SoundCloud different from other providers is also its greatest strength – its open platform centered culture. While users may not be able to delve through archives of industry-owned classics as with Spotify or YouTube, SoundCloud provides users with the unique options that focus more on the user experience rather than acting as a media catch-all. Even without being a member, visitors to SoundCloud are able to search for both artists and music; registered membership offers numerous benefits like the ability to follow and message other artists and users, curate personalized mixes, comment at specific times within audio upload, and – its most defining trait – the ability to upload one’s own audio with a unique URL address allowing one to share their sounds with the world.

 

Soundcloud Homepage

 

In an attempt to further their services and membership, SoundCloud’s most recent Series D round of funding attracted a whopping $60M in new investments, in turn attracting major financial players like American venture capitalists IVP and the Cherchin Groups. Specializing on capital investments focused within technology and media growth, these organizations hold equities in a portfolio that includes some of the largest e-service providers such as Netflix, Snapchat, Living Social, Kayak, Dropbox, LegalZoom, and Vonage. This has been the largest acquisition of funding SoundCloud has received since its founding in 2007 (SoundCloud’s first Series A funding brought in $3.5M). International growth, the redefining of the music discovery experience, a strong internal structure and operations team, and the belief SoundCloud will become the dominating platform in audio distribution are just a few of the supporting factors investment firms cite as reasons behind their exponential funding of the online audio company. From start to close, both parties applaud this deal took only three weeks to complete, translating into an exchange of funds that had SoundCloud earning nearly $120,000 per hour in investments – not exactly a horrible batting average.

 

 

Not even a decade old, things are just getting started for SoundCloud as it continues its climb to become a global entity. Current business statistics find SoundCloud reaches users from over 200 countries within a mere hour. 250 million users upload 12+ hours of audio to the site every minute and, while a majority hails from North America and Europe, growing membership in other areas such as the Middle East continue to expand both the company’s reach as well as the influx of available uploaded audio. Read here how the country of Turkey has already banned SoundCloud from its citizens.

 

 

So what lies in the future for SoundCloud? In addition to promised site, system, and mobile improvements, many options lie on the horizon. Earlier this month the company revealed a redesigned visual player that allows creators to import photos directly from an Instagram account to provide the background artwork for an embedded player. The design is meant to be simplistic without overwhelming the music experience- drawing root and enhancing the connection of medias from which SoundCloud propels. The redesigned player is also an example of SoundCloud’s technological advances – part of the redesign serves to make embedding sounds not only simple, but also attractive enough to use on any site.

 

 

Often joked that SoundCloud is a record executive’s nightmare because it replaces labels in the role as middleman between artists and fans, this new capital also opens doors for SoundCloud to possibly foster deals with major record companies. This would give SoundCloud unprecedented access to copyrighted material previously unavailable from record labels for streaming exclusively to its users. Similar attempts were previously made to foster the gray area that exists between the online user and recording companies when SoundCloud was supposed to partner with Twitter for a new Twitter music app, yet the company withdrew after major labels stated they would not cooperate with such a project. However following the recent trends like the viral growth of artists within SoundCloud, such Grammy award winning Lorde, and the ability for musicians to personally discover and instantly collaborate with global population of users, such as how Snoop Lion found Polish electro influenced Iza, both establish SoundCloud as an audio medium that cannot be ostracized within the music industry.
This biggest challenge the company forecasts in their future is how to convert the millions of visitors into registered users. Most of SoundCloud’s visitors are simply browsing the site to stream audio and not participating in the other social media-like features. In order to continue funding and growth, SoundCloud has debated various strategies such as introducing commercial ads- which would likely appear in conjunction with copyrighted materials. The company has also simplified its premium member options, eliminating numerous conflicting services and streamlining perks into two easy-to-understand levels.
While other music services, such as Beatport, have sought out global investors in an attempt to further embed within the music market, it is inarguable that SoundCloud continues to earn its place as a fan an artists favorite thanks to its focus not around the industry itself, but rather the connection and creativity that is fostered from within audio culture.

 

Social Sound from SoundCloud on Vimeo.

 

 

 

 
Written by contributor Seth Hiravy. Find him on Twitter here.



A hybrid child of the 203 & 860, Seth would save up any allowance money he had and raid the dance section of his local CD store for anything with a 4X4 beat. By high school, he organized his area’s first electronic event. While this proved to be a disaster, he wrote a killer college acceptance letter about it - thus a music journalist was born. Today he continues to document from behind the keyboard. When he’s not searching for the perfect emoji or making festival posters/totems, he enjoys long walks into parallel universes, pulling off shameless dance moves, and leading the fight against kids from CT who feel wearing cowboy hats is okay.