Although many investors are spinning for the chance to invest in Turntable.fm, the hot music startup has not yet picked a DJ, despite reports to the contrary. Business Insider claims that Turntable has raised $7.5 million at a $37.5 million valuation and “that term sheets were indeed signed yesterday.” But reached a few hours ago as he was boarding a plane, co-founder and chairman Seth Goldstein told me, “We have not closed any new financing.”
There is certainly a lot of interest in Turntable from VCs who want to fund its next round. The buzz among venture investors is that there is intense competition for the deal, particularly between Union Square's Fred Wilson, Accel, and Kleiner Perkins. Wilson is the clear favorite (Turntable is based in New York City), but he is being outbid by Accel and Kleiner.
The rumor is that Wilson offered Turntable a $25 million pre-money valuation, while Accel and Kleiner offered double. That could have easily been pushed up to $30 million pre-money, in which case the $37.5 million figure would pencil out as a post-money valuation. (Just remember, VCs send signed term sheets all the time. It doesn't mean the company has to accept the terms).
Not only are top-tier VCs excited about Turntable, there's even some potential acquirers sniffing around, including AOL, Facebook, and Sony. As far as I can tell, no formal offers were ever made because co-founders Goldstein and Billy Chasen just got this started and don't want to sell. Plus, they obviously aren't having any problems raising money.
Why is everyone going gaga over a startup that launched with a completely different product, Stickybits, that never went anywhere? Turntable is a social music site where you enter different listening rooms in which players can become DJs and spin music while chatting with each other's avatars. Chris Sacca likes to hang out there a lot (he is a previous investor, along with First Round and Polaris). It's been gaining some impressive early traction, even though you still need to know someone to get in.
It is social music discovery at its best. You can listen to hours of full-length songs selected by other players in a variety of different themed music rooms. The better the DJ, the more points everyone else rewards him with. And if you like a song you can add it to your playlist, or buy it through Amazon or iTunes.
But the business is not a slam dunk. Turntable pays per-stream fees just like Pandora or other “Internet radio” services. The music labels could decide to crack down on Turntable and try to extract higher fees. But Turntable's early growth and engagement numbers are too high to ignore. People spend hours in these rooms. Maybe this time, the labels won't kill it before trying to work out a deal. Even then, though, Turntable will have to find other ways to make money-perhaps through digital goods or better avatars, sponsored rooms, or some people might be willing to pay to be a featured DJ.