iMeem Wipes The Slate Clean With $6 million Funding

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Daily Crunch: It Came From Burbank Edition

iMeem may go down in the history books as the little company that could. The service morphed from an instant-messaging centric social network into a widget service to a full on music streaming service (read an early post by us on iMeem here). Over the years they’ve been close to shutting down more than once. And yet, they’re still here, and still fighting.

In May news broke that iMeem may have found a lifeline with new funding and a new business plan, although there was still an issue of $4 million owed to Warner Music.

Now we’ve been able to confirm some of the rumors around that financing. As suspected it was a recapitalization, which means that earlier investors were mostly wiped out. A recap is a difficult pill to swallow, but once it’s completed a company can get a fresh start. And, importantly, current employees get refreshed stock options and an incentive to continue the fight.

The company raised around $6 million in fresh capital, we’ve heard from multiple sources. Most of the new cash came from existing investor Morgenthaler Ventures. Sequoia Capital and other early investors declined to participate, and so their ownership percentages dropped to miniscule levels. Warner Music also participated in the round, we’ve confirmed, likely by dropping in cash that was immediately returned to them for past debt or future royalty commitments.

The company was valued at around $6 million prior to the funding, meaning new investors took 50% or so of the company in the round. That’s a highly dilutive funding, but it gives iMeem a new lease on life. And if rumors are true, the company may have found a business model that works for them (we outlined that business model here). Profitability, albeit at a low burn rate, may hit sometime next year.

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