UPDATE/Fri Aug 12: SoundCloud has just closed the necessary funding round to keep the struggling music service afloat, TechCrunch reports.
As part of the deal, co-founder and chief executive Alex Ljung will step aside, though remain chairman. He will be replaced by former Vimeo chief executive Kerry Trainor, who is now an adviser with private equity outfit KKR – indicating another round of cost-cutting or a possible sale lies ahead.
The $US169.5 million series F funding round brings onboard two new investors: the New York-based Raine Group and (subject to regulatory approval), the Singapore government's sovereign wealth fund, Temasek.
SoundCloud, which lost $US54 million last year and laid off 40% of its staff last month, claims to be the world's largest audio platform with 173 million users.
Curtains for SoundCloud if capital raise fails by Friday deadline, CEO says
EARLIER/Fri Aug 11: A leaked memo to shareholders suggests SoundCloud will go bust if it fails to raise funds by the end of Friday (Saturday, New Zealand time).
The memo was sent on Tuesday and spilled by Axios this morning.
The good news: SoundCloud has lined up a potential $US169.5 million in new investment at a pre-money valuation of $US150 million.
A mooted series F funding round would bring on two new investors.
One is Raine Group, a New York private equity outfit that specialises in music and entertainment investments.
The other is the Temasek, the Singapore government's sovereign wealth fund.
The bad news: The memo says Temasek's participation is conditional on anti-trust clearance. And that series E investors would see their holdings diluted by 40%.
That would be painful but shareholders really have no choice but to lump it.
In the memo, Soundcloud chief executive Alexander Ljung suggests his company would not be able "to continue as a going concern" if the series F proposal is rejected (if accepted, the money will be used to pay-down debt).
SoundCloud claims 173 million users for its audio hosting service, and its SoundCloud Go music streaming service, which offers access to more than 150 million tracks.
This time last year, Bloomberg reported SoundCloud was "mulling" a $US1 billion offer.
In March this year, after revealing a $US54 million annual loss, the asking price had reportedly fallen to $US250 million.
In July, it announced plans to lay off 173 employees — just over 40% of its 420 staff.
Media reports variously said it had enough cash to last 50 or 100 days (in a statement, SoundCloud said it could remain liquid until the fourth quarter on current funding).
At that point, NBR noted the cost of a monthly sub to SoundCloud Go was $US9.99. At some point since, that's been slashed to $US1.99.
But like struggling rivals Pandora and Spotify, Go faces strong and growing competition from Amazon, Apple and Google, all of whom have deep pockets.
Unlike streaming video, where exclusive rights to content and original series set the different services apart, streaming music services offer pretty much the same content as each other worldwide, and the cost of entry is relatively low.
Read a backgrounder on problems faced by Pandora, iHeart Radio, Spotifiy and others here.
Sorry, SoundCloud — we wish you luck but NBR is stopped putting most of its audio content free on your platform.
The company's woes sparked a rethink, and we've decided make our own site the home for the individual NBR Radio audio tracks that go with stories (the audio is only available to paid member-subscribers. Check out the Most Listen To box on our home page for the latest).
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