8tracks, a San Francisco based renowned fan created playlist radio startup, on Thursday raised $2.5 million debt financing from Silicon Valley Bank. The startup has been profitable since 2012 but it needs new money to expand its personalized services to its users.
Founded in 2008, 8tracks runs an online radio service that allows its users to create and listen to playlists. It is more or less like a library of modern mixtapes. The startup recently got into direct licensing deals with music labels for being able to create its own song library for its playlist creators. It holds a wide range of genres from classical music to trance that includes Independent labels and aggregator INgrooves, CD Baby, Dim Mak and DashGo, TuneCore, Naxos, Black Hole Recordings and Armand Van Buuren’s Armada Records. The users are allowed to pick songs from 9 million varied tracks available or upload songs directly from their computer as a last resort.
“Our crowd curated programming model offers listeners greater depth and specificity than on any other lean-back listening service,” says the CEO of 8tracks David Porter. “However, to unlock the inherent value of the model, 8tracks must excel in surfacing the right content for a particular listener – to ‘matchmaker’ between listeners and DJs, in effect,” added Porter.
From its launch to till date, the startup has raised $3 million in funding. Last August, the company raised $1.4 million in a seed round from Index Ventures, Soft Tech, Craig Kallman and Steve Aoki. From recently raised $2.5 million debt financing, $2 million is a credit against receivables and $500,000 of ‘straight venture debt.’
The new funds allows 8tracks to expand its engineering and product teams. Last year, the 8tracks’ launched new ‘explore’ experience and personalizing tags. The new feature increased the likelihood of a listener favorite the playlist by 30% and complete the playlist in one listening session by 10%. With regard to the working team, former product executive at music subscription service Rhapsody, John Maples has already joined the team as vice president of product. Porter says that two sales members have already been added to the sales teams in Los Angeles and plans to recruit another for San Francisco. Currently, the team functions with 32 employees. The company has more than 8 million monthly listeners.
Porter said, “There is a large swath of consumers that will not pay or will pay very little,” while explaining 8tracks position in the digital music marketplace. Study by Edison Research and Triton Digital showed Internet radio services are the most popular streaming music brands of Americans 12 and over. 45% have used Pandora, 17% used iHeartRadio and 16% used iTunes Radio. This is followed by Spotify that holds the fourth position with 13%. He also added, “Most people most of the time – assuming there’s good programming – will opt for radio.”