Swedish sound sourcing platform Epidemic Sound is all set to join the list of European tech unicorns with a $1.4 billion IPO that will be launched early next year.

In its latest funding round, the Stockholm based startup has raised $450 million in a deal backed by investment firms such as Blackstone group, Creandum and EQT Growth. The deal values the company at a staggering $1.4 billion which makes it the most valuable Swedish company to go public in over 5 years. The company is currently in talks with unnamed advisors that are helping it explore listing options as it prepares for the IPO.

While a number of employees from the company claim that the plan is moving forward at a significant pace, the company itself has refused to offer a public comment as of now.

About Epidemic Sound

Founded in 2009, the Swedish music provider offers a royalty-free library of music and sound effects that can be used by content creators on the internet. The platform currently hosts just under 32,000 music tracks and 60,000 sound effects and has plans to extend the library to turn it into a comprehensive destination for all content creators.

The company billed over $42 million in revenue in 2019, which is a 66% increase from its previous year’s figures. Its operating losses however, more than doubled going from $9.61 million in 2018 to just over $23 million in 2019. The company was valued at $370 million as recently as July 2020. The company claims that its performance in the recent funding rounds is indicative of the investors’ avid interest in its business model. According to Oscar Hoglund, CEO of Epidemic Sound:

“It ties into the size of the vision. We are trying to soundtrack the internet. That’s what it comes down to.”

News media site Bloomberg recently published their exclusive report about the company under the title “Epidemic Sound Said to Consider Options For Online Music Vault.” This headline has given rise to speculations about the unorthodox listing method that the company plans to use. Usage of the term “Online Music Vault” suggests that the company might be looking to only list its online music catalog and not the entire operating company.

This would not be the first time a European music company has chosen to go public via this complex method as Hipgnosis Songs Fund and Round Hill Music currently operate on the London Stock Exchange under a similar structure. Companies operating as per this structure allow their shareholders to invest directly in their music rights assets while the company’s operations are handled by another subsidiary company.

In Sum

Epidemic’s current revenue figures (for the year 2020) have currently not been disclosed but are expected to be several times higher than its 2019 figures. This could be one of the several reasons for the company’s seemingly astronomical valuation. Overall, Epidemic has performed decently thus far considering the incredible traction that the company’s curated playlists (Deep Focus, Sleep, Peaceful Piano) have gained on streaming platforms like Spotify.

The company currently functions as a two sided marketplace where musicians can upload their songs in exchange for a reasonable payment, while customers can pay for subscriptions that offer them unlimited access to the platform’s library for both private ($15/ month) and commercial ($49/ month) use. The company however, does not allow artists to retain any performing rights over their music once it has been uploaded on the platform. According to Victor Englessen, partner and investment advisor at EQT Partners:

“At the core, Epidemic was and is about the restriction free experience for creators. That was one of the big pain points for user-generated content, and that has been true since its inception. Epidemic Sound controls 100% of the rights in its library.”

With a unique business model and a small yet seemingly confident group of investors by its side, Epidemic Sound is all set to revolutionise the next chapter in European music label history. With online companies making their terms of use more stringent, the line between streaming and distribution has been blurring. Companies like Epidemic will surely look to capitalise on this opportunity, finding multiple revenue streams that could improve profits.