Music Sharing Service SoundCloud Raises $10 Million From Index, Union Square

Music start-ups have been a money incinerator for a long time, but that doesn’t stop investors from trying again. Here’s the latest example, which I first wrote about back in October: SoundCloud, a German-based file-sharing service, has raised $10 million in a funding round led by Index Ventures and Union Square Ventures.

While lots of music services are still trying to figure out how to make money by distributing copyrighted music you’ve heard of, SoundCloud is taking a different tack. As I wrote last fall:

It’s designed to let professional and amateur musicians share their own music with each other and the public, via cloud-based files that the company hosts.

Once the tunes are on SoundCloud’s servers, the service makes it easy to move the stuff around the Web, via its own widget and an API that’s showing up on lots of interesting sites, apps, services and devices, including Facebook and Apple’s iPad. You can load SoundCloud files into Spotify, the streaming music company that Index has also invested in.

The service uses the freemium model, offering most of its capabilities for free, and charging up to $700 a year for more storage and extra features.

You can also use SoundCloud for less enlightened purposes, like sharing music you don’t own. But the company has recently implemented an audible “fingerprinting” service, like the ones Google’s YouTube uses, which allows copyright owners to take down files they don’t want on the Web. And that should give the company legal cover, unless the YouTube/Viacom case takes a very different turn.

In a blog post announcing the funding, SoundCloud says it will use the money to scale faster and “be more present in the US.” It also posts short clips, using its service, from its new investors–Index’s Mike Volpi and Union Square’s Fred Wilson.

Here’s Wilson:
Thoughts on SoundCloud by fredwilson. Uploaded with SoundCloud Android

And Volpi:
Mike Volpi Audio Blog on Friday morning by mvolpi. Uploaded with SoundCloud iPhone

And if you’d like something more entertaining, here’s a very long mix of classic hip-hop, via Cut Chemist:

Cut Chemist – Hip Hop Lives (1985-1996) by Cut Chemist