hello everyone welcome back to key
studies with the biz doc this week it’s
SoundCloud many of you asked about it
this is about a company that’s a great
company with a great product that didn’t
make it and we’re going to see why many
of you have asked about that so I’m
going to show you and in the coming
weeks some of you also asked about
flameouts and I’m going to cover do an
episode the coming weeks
about several flameouts right out of the
gate but this week it’s SoundCloud
SoundCloud was born in Berlin way back
in 2009 when streaming music was in its
infancy and they did it with about a two
and a half million dollar seed round
that they had gotten together there in
Berlin they quickly moved over the US
had an office in San Francisco office in
London and got going a year later they
go out and they raise ten million
dollars actually was more like two years
later in 2011 Series B they attracted
people like kleiner perkins the
legendary kleiner perkins they were in a
Serie C 50 million dollars in 2012
chugging along opening offices 200
employees and we come to really
appreciate SoundCloud for one reason it
was a streaming service but it created
this open kind of um stage where we
could all see highly professional
artists bringing their music directly to
us sort of like Kindle for aspiring
authors came to music they took down the
barriers so we could listen to great
music that we knew and loved and also
see really high-quality carefully
curated music from up-and-comers that
were carefully selected that were
fantastic we loved it I loved it they
follow up just a year later they raised
sixty million dollars series D then it
begins to slow down it was two full
years later they raised a seventy
million dollar series II and I’ll move
over here for a second that same year
2016 they also announced thirty five
million it’s in red because it was dead
why were they suddenly raising debt
because the venture guys had lost
confidence when the venture guys lose
confidence but you get this much money
that’s been banked and this many
eyeballs you go out and you get debt and
somewhere someplace someone’s going to
give you the venture debt it’s going to
be expensive but you’re going to get it
a year later they
talk about Oh what’s happening to them
they’re teetering they’re teetering and
when you hear sounds of teetering guess
what comes next
sharks in the water well who are the
Sharks going to be who’s going to gobble
up beloved SoundCloud and are they going
to keep having independent acts that we
love well there’s a rumor about Twitter
and then they said no but Twitter
ventures did make a little bit of
investment the numbers a rumor about
Spotify but spot if I said no there’s
too much risk because we’re getting
ready for our own IPO trying to get that
together and we’re going to pass so then
suddenly came news that they’re looking
for 70 million dollars in debt and then
this week it’s terrible SoundCloud
announces cuts of one hundred and
seventy three jobs closes San Francisco
and closes London but says we’re doing
this because we’re thriving thriving
that’s not the way you thrive it’s not
the way you thrive I think the issue for
SoundCloud is this if you look at
streaming there are three kings
there’s iTunes Spotify and Pandora
absolute kings pandora is doing well
they’ve also got the the ad supported I
get Pandora in my car and I don’t pay
for Pandora probably should but I don’t
because I’m content to listen to the
streaming with the commercials now and
then and that’s how the pays for the
music I listen to the commercials
Spotify iTunes and Pandora nonetheless
have like $10 streaming options you can
get their iTunes kind of cornered the
markets that’s right there on your
iPhone you just click yes you want to
take it and $9.99 you get iTunes radio
and you get all the unlimited streaming
on there well on the other side of life
you have go find the music and
SoundCloud you used to be able to listen
to soundcloud and find out what song it
was and Shazam was the long you know
founder of the the realm of listen to
the music and tell you what’s going on
and they were there so there’s really
like a place for SoundCloud do I
discover new music like Shazam identify
what musics playing or do I another
straining service in the meantime people
like serious at 20 bucks a month two
hundred and forty bucks a year I don’t
pay for it anymore and there’s Sirius
radio in my car I no longer pay for it
it’s off it’s also often my wife’s car
we’re both Pandora people so serious
goes away title comes up we will have
every hip-hop artist on the planet on
title well title is struggling and they
were rumored to get a rescue line for
spring of all people if I think it was
like a hundred million dollars coming to
rescue them but nonetheless this is a
shakeout and what’s happening is
SoundCloud failed to have a business
model that worked and I think that’s
really the message here if they got in
early in the game and it used this is a
lot of money to say hey for ten bucks a
month I will get you new artists I will
get you curated lists and I will do it
better than anybody else I think they
could have found a place there but
everybody got ahead of them and if you
look at these there’s really not a lot
of difference between iTunes and Spotify
amazing libraries you can buy it and you
can listen to the on demand that you
want on top of curated lists so I think
that at the end of the day it’s an
example of you got to have a business
model and you got to have a revenue
model on top of that early very very
early and I think SoundCloud I think
from right here if you go back and look
at it this was all about eyeballs and
the same thing happened to Twitter but
they went public now look at Twitter
they’re worth 14 billion dollars but you
go take a look at you know LinkedIn you
go take a look at snapchat go take a
look at any of the other socials they’re
like this someday Twitter will be bought
at a garage sale for a lot less than 14
million dollars there mark my words they
will go the way of Yahoo they will go
the way of AOL because Twitter who pays
for Twitter nobody pays for Twitter and
there’s ads and they’re trying to make
it work well the same thing here you
know you got to get people to pay for it
and that I think is a real lesson for
SoundCloud is something I’m really
really sad to see them go all the way
here to friggin oh and when is the music
going to stop because I like you am I
really sad when the music stops and I
can’t see some of the new and intriguing
bands I hope that SoundCloud gets bought
by somebody and maybe gets added to
these maybe that’s going to happen if
the price gets good enough who knows the
perfect example of a great company with
a great product that you’re not laughing
at you’re actually using and loving but
here they go down
that’s the SoundCloud story next week by
popular demand I’m going to do four
failures for startups that fail then are
not all technology startups so tune in
next week and come see that because you
asked for it until then I’m Tom Meltzer ‘litham I hope I left you better than
studies with the biz doc this week it’s
SoundCloud many of you asked about it
this is about a company that’s a great
company with a great product that didn’t
make it and we’re going to see why many
of you have asked about that so I’m
going to show you and in the coming
weeks some of you also asked about
flameouts and I’m going to cover do an
episode the coming weeks
about several flameouts right out of the
gate but this week it’s SoundCloud
SoundCloud was born in Berlin way back
in 2009 when streaming music was in its
infancy and they did it with about a two
and a half million dollar seed round
that they had gotten together there in
Berlin they quickly moved over the US
had an office in San Francisco office in
London and got going a year later they
go out and they raise ten million
dollars actually was more like two years
later in 2011 Series B they attracted
people like kleiner perkins the
legendary kleiner perkins they were in a
Serie C 50 million dollars in 2012
chugging along opening offices 200
employees and we come to really
appreciate SoundCloud for one reason it
was a streaming service but it created
this open kind of um stage where we
could all see highly professional
artists bringing their music directly to
us sort of like Kindle for aspiring
authors came to music they took down the
barriers so we could listen to great
music that we knew and loved and also
see really high-quality carefully
curated music from up-and-comers that
were carefully selected that were
fantastic we loved it I loved it they
follow up just a year later they raised
sixty million dollars series D then it
begins to slow down it was two full
years later they raised a seventy
million dollar series II and I’ll move
over here for a second that same year
2016 they also announced thirty five
million it’s in red because it was dead
why were they suddenly raising debt
because the venture guys had lost
confidence when the venture guys lose
confidence but you get this much money
that’s been banked and this many
eyeballs you go out and you get debt and
somewhere someplace someone’s going to
give you the venture debt it’s going to
be expensive but you’re going to get it
a year later they
talk about Oh what’s happening to them
they’re teetering they’re teetering and
when you hear sounds of teetering guess
what comes next
sharks in the water well who are the
Sharks going to be who’s going to gobble
up beloved SoundCloud and are they going
to keep having independent acts that we
love well there’s a rumor about Twitter
and then they said no but Twitter
ventures did make a little bit of
investment the numbers a rumor about
Spotify but spot if I said no there’s
too much risk because we’re getting
ready for our own IPO trying to get that
together and we’re going to pass so then
suddenly came news that they’re looking
for 70 million dollars in debt and then
this week it’s terrible SoundCloud
announces cuts of one hundred and
seventy three jobs closes San Francisco
and closes London but says we’re doing
this because we’re thriving thriving
that’s not the way you thrive it’s not
the way you thrive I think the issue for
SoundCloud is this if you look at
streaming there are three kings
there’s iTunes Spotify and Pandora
absolute kings pandora is doing well
they’ve also got the the ad supported I
get Pandora in my car and I don’t pay
for Pandora probably should but I don’t
because I’m content to listen to the
streaming with the commercials now and
then and that’s how the pays for the
music I listen to the commercials
Spotify iTunes and Pandora nonetheless
have like $10 streaming options you can
get their iTunes kind of cornered the
markets that’s right there on your
iPhone you just click yes you want to
take it and $9.99 you get iTunes radio
and you get all the unlimited streaming
on there well on the other side of life
you have go find the music and
SoundCloud you used to be able to listen
to soundcloud and find out what song it
was and Shazam was the long you know
founder of the the realm of listen to
the music and tell you what’s going on
and they were there so there’s really
like a place for SoundCloud do I
discover new music like Shazam identify
what musics playing or do I another
straining service in the meantime people
like serious at 20 bucks a month two
hundred and forty bucks a year I don’t
pay for it anymore and there’s Sirius
radio in my car I no longer pay for it
it’s off it’s also often my wife’s car
we’re both Pandora people so serious
goes away title comes up we will have
every hip-hop artist on the planet on
title well title is struggling and they
were rumored to get a rescue line for
spring of all people if I think it was
like a hundred million dollars coming to
rescue them but nonetheless this is a
shakeout and what’s happening is
SoundCloud failed to have a business
model that worked and I think that’s
really the message here if they got in
early in the game and it used this is a
lot of money to say hey for ten bucks a
month I will get you new artists I will
get you curated lists and I will do it
better than anybody else I think they
could have found a place there but
everybody got ahead of them and if you
look at these there’s really not a lot
of difference between iTunes and Spotify
amazing libraries you can buy it and you
can listen to the on demand that you
want on top of curated lists so I think
that at the end of the day it’s an
example of you got to have a business
model and you got to have a revenue
model on top of that early very very
early and I think SoundCloud I think
from right here if you go back and look
at it this was all about eyeballs and
the same thing happened to Twitter but
they went public now look at Twitter
they’re worth 14 billion dollars but you
go take a look at you know LinkedIn you
go take a look at snapchat go take a
look at any of the other socials they’re
like this someday Twitter will be bought
at a garage sale for a lot less than 14
million dollars there mark my words they
will go the way of Yahoo they will go
the way of AOL because Twitter who pays
for Twitter nobody pays for Twitter and
there’s ads and they’re trying to make
it work well the same thing here you
know you got to get people to pay for it
and that I think is a real lesson for
SoundCloud is something I’m really
really sad to see them go all the way
here to friggin oh and when is the music
going to stop because I like you am I
really sad when the music stops and I
can’t see some of the new and intriguing
bands I hope that SoundCloud gets bought
by somebody and maybe gets added to
these maybe that’s going to happen if
the price gets good enough who knows the
perfect example of a great company with
a great product that you’re not laughing
at you’re actually using and loving but
here they go down
that’s the SoundCloud story next week by
popular demand I’m going to do four
failures for startups that fail then are
not all technology startups so tune in
next week and come see that because you
asked for it until then I’m Tom Meltzer ‘litham I hope I left you better than
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