Funding

What SoundCloud's Latest $35 Million in Debt Financing Could Mean for the Social Streamer

What SoundCloud's Latest $35 Million in Debt Financing Could Mean for the Social Streamer
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SoundCloud, the Berlin-based music streaming startup that also serves as an audio social network of sorts, announced this morning that it had raised $35 million in debt financing.

In addition to the loan from Tennenbaum Capital Partners, SoundCloud also has the option to borrow an additional $70 million in convertible bonds, according to Swedish tech site DiGITAL, which was first to report the filings.

DiGITAL noted that the loan implied “SoundCloud had trouble getting new financing otherwise” and that the company could be seeking a sale -- and thus does not want to further dilute its shares. (Rumors swirled in 2014 that Twitter was hemming a purchase, but subsequently bowed out.)

“We can confirm that we secured a flexible credit line with Tennenbaum Capital Partners (TCP) early in 2015,” a SoundClound spokesperson told Entrepreneur. “It’s an attractive option for companies like SoundCloud that have a solid credit rating, and offers an appropriate funding option for a company at our growth stage.”

Nine-year-old SoundCloud previously raised $123 million in equity financing, with its last round in 2013 valuing the company at $700 million. In 2014, the Wall Street Journal reported a rumored $150 million round at a $1.2 billion valuation that never materialized.

Related: SoundCloud Wants 1 Billion Users a Day

Though SoundCloud has gotten somewhat lost in the shuffle of an increasingly crowded music-streaming landscape and continues to grapple with monetization, the platform has an enormous base of 250 million active monthly users -- an audience that skews younger and has substantially outpaced competing platforms such as Pandora (80 million active monthly users) and Spotify (75 million.)

SoundCloud differs from these services in that it was built as a means for aspiring musicians and entertainers to share their work -- be it remixes, original music or podcasts. Users navigate the platform like a social network, searching for content using hashtags or following their favorite artists with the ability to comment, like and share.

While major artists are also on SoundCloud and the company inked a licensing agreement with Warner Music Group in 2014, it has yet to sign any deals with the two other major music labels, Sony and Universal.

The company makes money via ad revenues (which it splits with certain creators à la YouTube) and by selling monthly subscription packages to creators that enables them to upload unlimited quantities of content at faster speeds and also provides tools that break down listener analytics. SoundCloud last reported earnings in 2013, when it said it had revenues of $14 million amid losses of $29 million.

The service, which is currently free for all listeners, is reportedly poised to launch a long-rumored ad-free subscription service early this year.

Related: Financing Face-Off: Debt vs. Equity

Edition: December 2016

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