SoundCloud says its business enjoyed “solid growth” last year, but the publication of its accounts for 2015 is sparking renewed concerns about the company’s sustainability in 2017.
Those accounts revealed that SoundCloud’s revenues grew by 21.6% to €21.1m in 2015, but that its losses grew faster – by 30.9% to €51.2m. As MBW noted in its report, SoundCloud spent more on wages and salaries (€26.8m) than it earned in revenues.
The financials outline the risks to SoundCloud’s future, as they are obliged to do. CEO Alexander Ljung wrote that the risks in launching the SoundCloud Go subscription tier “threatens the ability of the group to grow further and could require additional liquidity funds which have not yet been agreed”, with the directors warning that SoundCloud could “run out of cash” later this year if it doesn’t raise more money.
A similar warning was delivered a year ago in SoundCloud’s accounts for 2014, with Twitter stepping in with a $70m investment a few months later. This time round, speculation has focused instead on a potential acquisition of SoundCloud. Spotify reportedly passed at a $1bn valuation, but recent reports have suggested Google may be interested in paying around half that to buy the company.
In its statement responding to MBW and the Financial Times’ reports on its financials, SoundCloud did not address its need for funding, focusing instead on the fact that its 2015 accounts included heavy investment in Go and its licensing deals, but do not include its performance in 2016.
“In 2016, we saw solid growth not only for the industry but for SoundCloud too. And we see this trend continuing throughout 2017,” a spokesperson told Hypebot.
It’s fair to note that SoundCloud’s public financials are playing catch-up with the development of its business: Go launched in the US in March 2016, before rolling out to several other markets later in the year. Yet the notes to those financials about running out of cash do relate to 2017, and make it crystal-clear that SoundCloud needs to either raise another significant funding round, or sell up.