SoundCloud future at risk waiting on new investment decision

[joshdavies]

Source: https://www.digitalmusicnews.com/2017/08/10/soundcloud-investors-24-hours/

Source 2: https://www.theverge.com/2017/8/10/16121386/soundcloud-shareholder-memo-reorganization-proposal-raine-group-temasek

 

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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.

It appears that SoundCloud may have new investors, but that is at the fate of it's current investors. The approval will be decided by a vote today (11th August 2017). If the majority is 'no' as in to not approve the rescue package, there is very little chance that the company will survive, and may be terminated during or after this result. There is also a large chance that the existing CEO would be fired, if investors approve the rescue package

 

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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.

 

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Axios says CEO Alexander Ljung infers in the memo that if the proposal is rejected, SoundCloud’s ability to continue would “not be a going concern.”

However, The Verge (source 2) state that the CEO is quoted to say that the ability for SoundCloud to continue would "not be a going concern".

To round it up, the future of SoundCloud is looking very uncertain right now.

[Me1z]

I have always wondered how Soundcloud was able to afford the service they provide. With no ads and free music, how is their financial model even close to stable? And I guess the answer is that its not. How did they even get the financial backing to become a company without a bulletproof financial model? The lack of common sense in this world is astounding

[Taf the Ghost]

31 minutes ago, Me1z said:

I have always wondered how Soundcloud was able to afford the service they provide. With no ads and free music, how is their financial model even close to stable? And I guess the answer is that its not. How did they even get the financial backing to become a company without a bulletproof financial model? The lack of common sense in this world is astounding

VC model: you keep the VCs happy and you can keep doing whatever stupid thing you're up to.

 

The fascinating part about the VC model is that it actually doesn't work. The exceptions were either companies that were profitable almost instantly or could produce something of massive value to another company in a year. At that point, they weren't really VC-funded companies. There were just early outside investors. The real VC Model is to fund a company enough to get them to go to IPO, then cash out there.

 

Soundcloud is in the last group of the final VC Model companies. The age of the "Free" Internet is over. YouTube still doesn't seem to be profitable, Twitter is massively unprofitable, Whatsapp will never be worth the money Facebook paid for it and the list goes on. Uber is also a massive money sink.  All Hail the Freemium Model, as that is what works and people will pay for things they find valuable.