Music startup 8tracks has always had a strong sense of community. But the startup is taking this one step further by raising $30 million from its own community. Instead of asking money from venture capitalists, the company has started an equity crowdfunding campaign on SeedInvest and it’s been working well.
Around 30,000 community members have committed to invest $1,000 each to get a fraction of the company. So if everything goes as planned and the investment is cleared by the SEC, 8tracks should raise a $30 million Series A round. Under the JOBS Act, anyone can invest in private companies, not just people who make more than $200,000 a year.
“As you can imagine, it’s a particularly good fit for 8tracks as our community is our chief asset,” founder and CEO David Porter told me. “It’s our users who make the programming and our users who promote that programming, so it’s only natural that they should also be able to finance that programming and literally own a piece of 8tracks.”
8tracks is a laid-back radio service like Pandora, but with human-generated playlists. When you create a playlist, you associate it with various tags. These tags can be a mood (happy, love, etc.), an activity (workout, study, sleep) and of course a music genre. As a listener, you can then combine these tags together to find the perfect playlist. For example, you could do a search for “study + indie + summer.”
The company had previously raised a $1.5 million seed round from Andreessen Horowitz, Index Ventures, SoftTech VC and Ben Drury, as well as $2.5 million in debt financing. It now has 6 million monthly active users, slightly down compared to two years ago.
Today’s round is a huge step up compared to previous rounds, and it looks like the company is going to need it. The company has been signing direct deals with music labels in order to access their catalogs. It’s also pulling back on international streaming as the company doesn’t have proper licensing deals for countries outside of the U.S. and Canada.
Re-enabling international streaming as well as signing more music label deals are two cumbersome and expensive processes. But now that the company has enough money in the bank, it looks like 8tracks is going to do just that.