The current owners of SoundCloud are reportedly preparing to sell the company in a deal that could top $1 billion. That is according to sources who have spoken to Sky News.
According to those sources, Raine Group and Temasek Holdings have started talks with various investment banks about them working on a possible sale. Though any actual sales process isn't likely to get underway for at least a few months.
Raine Group and Temasek Holdings - the latter the Singaporean state investment fund - basically rescued SoundCloud when it was on the brink of collapse back in 2017.
Having originally launched to provide hosting and other services to independent creators, SoundCloud also became a licensed subscription streaming service in the mid-2010s. That was mainly to placate a music industry that had become increasingly tetchy about the amount of unlicensed music being uploaded by users to the SoundCloud platform.
By becoming a licensed subscription service, SoundCloud could provide record labels and music publishers with a new revenue stream. However, running a licensed music service is a risky business, and by 2017 SoundCloud seemed to be running out of cash, resulting in significant job losses.
The cash injection from Raine Group and Temasek Holdings was accompanied by a change in senior management, who subsequently began putting the focus of the business back on providing services for independent creators, although with the subscription streaming service still operating.
SoundCloud has enjoyed some success in growing that creator services business, although there were still financial challenges to deal with. In August 2022 it cut its workforce by about 20%, with another round of downsizing following in May 2023, impacting approximately 8% of employees.
When confirming those cutbacks to staff, CEO Eliah Seton said that the job cuts were necessary to “ensure the health of our business and get SoundCloud to profitability this year”.
That seemed to work, with the company reportedly making a small profit last year for the first time in its sixteen year history. With a slimmed down business that may have a track to onward profitability and growth, it would not be a surprise if Raine Group and Temasek Holdings feel the time is now right to recoup their investment via a sale after holding the company for six years.
Assuming a sale does indeed go ahead, it will be interesting to see who ends up owning SoundCloud in the future - and what that means for the future focus of the platform. With a billion dollar price tag for the company, the list of potential acquirers may be somewhat limited.
At the time of the 2017 investment, Axios - citing a circular sent to existing shareholders - said that the new investment totalled “$169.5 million at a $150 million pre-money enterprise valuation”. In February 2020, Sirius XM pumped another $75 million into the company, taking a minority stake.
