Last month there was a lot of news around the possibility of Soundcloud closing their doors. They were reported to loose tens of millions of dollars and at one point had only 50 days of capital to run on. They laid off 40% of their workforce and closed their San Francisco and London offices in order to remain an independent company. After so much worrying about financial losses and the possibility of shutting down, a private investment of 170 millions dollars allowed for them to keep the doors open. Soundcloud is not a publicly traded company as of right now, so they can’t just sell stocks on the open market to raise funds. The crazy part of this whole scenario is that Soundcloud is a 10 year old company.
In a time of venture capitalists, huge tech companies, and a great market, being profitable is not the first goal in many companies. So many companies are putting out so much money in ideas and new ventures hoping to gain some steam without actually profiting. Eventually companies will not have anymore money to burn. Investors want a return on the money they lend out or invest into companies. So the big question is how long will these companies keep going? Will they be able to generate enough profit to regain their investors money back with interest?
I personally think only a few will. I did notice that Soundcloud had added some sponsored material on their homepage right after they received that investment. The big lesson to take away from this is to make sure you have a strong business plan before you launch your business and invest so much time and money. I also recommend having a contingency plan in case the first plan falls through an unexpected loop, and that probably will happen. Be prepared to change things up and keep an eye on the marketplace to see how it is changing slowly and figure out how that can affect you. In short, always have a plan.
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