SoundCloud sinks as leaks say layoffs buy little time

SoundCloud sinks as leaks say layoffs buy little time
From TechCrunch - July 12, 2017

A tense scene unfolded yesterday as user-generated, music-streaming service SoundCloud held an all-hands meeting to explain to employees why it suddenly had to lay off 40 percent of its staff last week.

Exiting team members wanted to know why they werent warned, while those who survived the cuts wanted assurance that the cost reductions would keep the company afloat for the long-run.

But as security ominously filed into SoundClouds meeting rooms at its offices around the world during the all-hands video conference broadcast from its Berlin headquarters, the startups staff discovered they wouldnt be getting the answers they wanted. Instead, sources at SoundCloud tell TechCrunch that founders Alex Ljung and Eric Wahlforss confessed the layoffs only saved the company enough money to have runway until Q4which begins in just 50 days.

That seems to conflict with the statement Ljung released alongside the layoffs, which noted that, With more focus and a need to think about the long term, comes tough decisions. The company never mentioned how short its cash would still last.

We reached out to Ljung and SoundCloud for this story and PR responded to the request reiterating Ljung blog post. After being presented with the leaked information from the all-hands, SoundCloud PR admitted that, We are fully funded into Q4, though it says its in talks with potential investors.

But further funding would require faith in SoundCloud that its own staff lacks. When asked about morale of the remaining team, one employee who asked to remain anonymous told TechCrunch its prettys**tty. Pretty somber. I know people who didnt get the axe are actually quitting. The people saved from this are jumping ship. The morale is really low.

Another employee from a different office described the all-hands as as**tshow and said Idont believe that people will stay. The good people at SoundCloud will leave. Eric [Wahlforss] said something about the SoundCloud family, and there were laughs. You just fired 173 people of the family, how thef**k are you going to talk about family?

Hired just to be laid off

SoundCloud holds one of the most differentiated products in streaming music thanks to its repository of user-created songs uploaded by amateur and semi-professional musicians. That content, including unofficial remixes and hour-plus DJ sets, is missing from the top streaming competitors like Spotify and Apple. At the same time, this content comes with copyright problems and SoundCloud has had trouble monetizing it.

Despite the startups financial troubles, Ljung told those in attendance at the all-hands meeting he was adamant about SoundCloud staying independent and theres no intention to sell the company. That hesitation may have cost a lot of peoples jobs.

One of the facts that was most frustrating to SoundCloud staff was that the company continued hiring people into positions that would soon be eliminated, with some workers joining SoundCloud as little as two weeks before the layoffs. Several new hires had quit other jobs, sold their homes, abandoned rights to permanent residency and uprooted their lives in other countries to join SoundClouds Berlin office.

A new hire named Votja Stavik was slated to start July 17th, only to have his job cancelled on July 7th just before he moved to Berlin.So it means we are gonna act like my application to SoundCloud never happened? Stavik asked Wahlforss.Yes, Stavik said the co-founder replied. Stavik is now exploring legal action against SoundCloud because he says his signed job offer included four weeks notice of dismissal, yet SoundCloud claims they are not going to pay me my salary during those 4 weeks.

During the all-hands, both sources say it was revealed that SoundCloud had known for months that it had to lay off a large number of people, yet didnt properly inform the team that it should be cutting costs. The investors said [the wave of layoffs] was part of the conditions one source said were in reference to the $70 million debt funding SoundCloud received in March fromAres Capital, Kreos Capital and Davidson Technology after it failed to raise $100 million in venture funding.

Some of SoundClouds offices had catered lunches twice a week and had lavishly stocked kitchens and bathrooms, according to a source. When team members joined, they were given company swag, headphones and brand new Apple laptops. Employees were confused how the company was blowing through money, but now is saying they dont have any money.People would have made sacrifices, to be honest. Its a fun company to work at, but there was no indication.

A core question from staff during the all-hands was why there wasnt transparency into the finances or a strict hiring freeze. The message from management was that a hiring freeze would show weakness and lead to people asking questions. That wasnt satisfying when the company ended up shedding almost half its staff.

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