Twitter Ventures invests in SoundCloud; sources say investment is $70M in a round valuing SoundCloud at about $700M
Twitter wanted to buy the company a couple years ago; now it has invested $70 million instead. — Two years ago Twitter thought about buying SoundCloud, but ended up walking away from the music service.
Context & Ripple Effects
Twitter had already circled SoundCloud once: around 2014 it weighed an outright acquisition of the audio service and walked away. Today's move converts that interest into a minority stake — sources peg the Twitter Ventures round at $70M against a roughly $700M valuation — making this the company's second music-adjacent bet of the year after investing in Muzik's social headphones.
The timing matters because SoundCloud was capital-hungry: it had raised a large round in June 2016 but would spend most of the following year unable to close a further $100M, per later reporting, before turning to debt. A strategic investor with distribution ambitions was exactly the kind of backer its fundraising hunt needed.
First-order effects
- SoundCloud banks $70M at a ~$700M valuation while staying independent, easing the cash crunch behind its stalled equity raise.
- Twitter buys influence over a major audio catalog without taking on the integration cost of the full acquisition it abandoned.
Second-order effects
- A fresh $70M and a set valuation reset the board for Spotify, which by September was reported in advanced talks to acquire SoundCloud after two earlier failed attempts — a funded target negotiates differently than a starving one.
- Rival platforms now face a Twitter that holds a financial stake in user-generated audio, raising the odds of exclusive sharing integrations like the ones planned for Muzik's hardware.
Third-order effects
- The arc that follows — SoundCloud failing to raise more equity, shifting to a $70M debt round, and Twitter writing off $66.4M of private-company investments in its 2018 annual report — shows how strategic minority stakes in struggling startups tend to end in write-downs rather than exits.
- If the pattern holds, big platforms will keep preferring optioned bets over acquisitions for content assets they can't digest, leaving mid-size services dependent on debt when the strategic check doesn't repeat.
The trend: Platform companies are replacing outright acquisition of audio and media startups with strategic minority investments that defer — and often don't avoid — eventual write-offs.