SoundCloud is eyeing a sale — and is actively pursuing internal initiatives “that would increase the company's valuation” — by the second half of 2022, according to two former employees who spoke to Advertising sign under the condition of anonymity. Meanwhile, COO and CFO Drew Wilson is preparing to leave the company after nearly three years in the role, according to a staff memo he received Advertising sign.
Sky News mentionted on Sunday that SoundCloud planned to go on sale in 2024. That's been in the works “for quite some time,” says a former employee Advertising sign. “A lot of decisions have been based on that.”
SoundCloud announced it was cutting 8% of its workforce last May — less than a year after cutting 20% — to achieve “profitability this year,” CEO Eliah Seton wrote in an email to staff at the time . “The ambition to achieve profitability was not just for the obvious reason of profitability,” the former employee continues. “The biggest need was for that, to sell the company. Stakeholders have significant investments. it's time.” (SoundCloud previously secured a $170 million investment led by The Raine Group and Temasek in 2017 and an additional $75 million from SiriusXM in February 2020.)
A spokesperson for SoundCloud declined to comment. The Raine Group also declined to comment.
SoundCloud's leadership had previously tossed around the idea — best case scenario — of reaching a $2.5 billion valuation for the company, sources said. (The company wants to aim big: In internal meetings, executives also expressed hope that one of the artists SoundCloud signed to deals in 2022 would be a big hit, one of the employees said; that didn't happen.)
The most commonly cited valuation target, the sources said, was about $1 billion. “There's a billion-dollar-plus opportunity in front of us,” Tracy Chan, who joined SoundCloud as senior vice president of creator in 2022, said at an all-hands meeting that year. One of SoundCloud's former employees said most of the interest in the company came from private equity firms rather than music companies.
For comparison, when Square acquired TIDAL in 2021, the streaming service was valued at around $375 million. Although SoundCloud isn't just a streaming service — it also provides tools for creators to help them distribute, market, and monetize music. Creator tools and services generated more than $26 million for the platform in the first quarter of 2023, according to screenshots from a plenary session shared with Advertising signalmost as much as subscriptions ($29.9 million).
These screenshots show that SoundCloud had a gross profit of about $22 million in the first quarter of the year. But it spent about $4 million on marketing and another $23 million on staff and general and administrative expenses, leaving about $5 million to break even.
In May 2023, SoundCloud aimed to reduce these employee costs through a second round of cuts. (Profitability is a goal from 2022, if not before: “Investors are looking for companies that are a little more stable right now,” former CEO Michael Weisman he told staff during an all-hands meeting following the first round of layoffs in 2022. “Investors are looking for companies that are very profitable.”) The company he finally said it it reached profitability in December.
“Now that we have achieved profitability and are making progress on our strategic plan, we have nothing but opportunities ahead of us,” Seton wrote in an email to staff on Monday (Jan. 8), obtained by Advertising sign. “As we have mentioned in the previous All Hands [meetings] and AMAs, we will explore a number of options for our capital structure, but there is nothing to report at this time, nor will there be any time soon.”
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