After unexpected layoffs, reports of its impending demise due to a lack of funding and the attempted heroics of Chance The Rapper, the fate of SoundCloud will be determined by one vote on Friday (Aug. 11). The folks at Axios reported the news yesterday (Aug. 10).
SoundCloud needs new investors in order to survive, and while the streaming service, which was co-founded by Alex Ljung and Eric Wahlforss, is entertaining rescue investments from two parties, those potential investors have to be approved by some of the older ones. But that is in no way guaranteed, because the entrance of new investors could alter the picture significantly for the ones that had already put their money into the struggling streaming service.
According to Axios, the incoming “rescue investors,” Raine Group and Temasek, would receive “preferential treatment,” which potentially means worsened terms for older SoundCloud investors, making it more difficult to recover the money they’ve invested.
Ljung says if the SoundCloud rescue package isn’t approved, more of his employees will leave and the company won’t have enough money to survive. In other words, if the older investors don’t approve of the new ones—or in other words, vote “yes”—SoundCloud is probably done for.
As we said before, the existing SoundCloud investors aren’t in the best of situations. If SoundCloud is sold or liquidated, Raine Group and Temasek would be the first investors allowed to recover their funds, along with other investors involved in what’s called a “Series F.” That group also includes Union Square Ventures, Doughty Hanson and Atlantic Technology. Apparently, SoundCloud is asking for $170 million, but the Series F sends the company’s pre-money valuation to $150 million.
Ljung wants the older SoundCloud investors to vote “yes,” but ReCode reports that if they do, he will be fired before Vimeo CEO Kerry Trainor takes his place. And that might just be the beginning of a significant change to SoundCloud leadership.
Any way you look at it, SoundCloud as we know it will either change forever or cease to exist altogether. We’ll just have to wait and see.