While the legal paperwork is still being finished, Betabeat has learned from multiple sources that Union Square Venture is the big new investor in Turntable.fm.
Betabeat was the first to report the company was raising significant funds. It was later reported by Business Insider that the round had closed, which was not true at the time, and technically is still not the case. We have been told that BI was essentially correct on the numbers, which were reported as a $7.5 million round at a $37.5 million valuation.
TechCrunch was the first to report that Turntable was choosing between USV, Kleiner Perkins and Accel. The choice of USV over West Coast heavyweights like Kleiner Perkins and Accel makes a lot of sense. Both Kleiner and Accel have deep ties with Facebook, which is reportedly building its own music service, so there is a potential for conflict of interest. USV, by contrast, has deep ties with Twitter, which is Turntable.fm’s most powerful distribution platform.
Turntable was less concerned about the amount of money than with finding a VC who could connect them to the best talent, and USV is undoubtedly one of the best connected and most visible firms on the East Coast. They also specialize in companies with highly-engaged networks of users and a somewhat murky path to revenue. UPDATE: as Scott Rafer and Rafat Ali both pointed out, Turntable.fm co-founder Seth Goldstein was an Entrepreneur in Residence at Fred Wilson’s first VC firm, Flatiron Partners, and the two have been close ever since.
Things are still in flux and it’s possible some music industry folks will be joining in on this round, along with original investors in Stickybits like First Round Capital, Polaris, Lowercase, Mitch Kapor and Chris Sacca.
Over the last few weeks, Turntable has secured licenses with ASCAP and BMI, which covers most of the performance rights needed when streaming music, although deals with SESAC and EMI still need to be worked out.
But one major question remains. Will Turntable.fm be able to qualify as a non-interactive streaming radio service, afforded DMCA protection by the Copyright Act of 1998? If it does, then all it needs are these relatively inexpensive performance rights. If, on the other hand, Turntable.fm is labeled an interactive streaming service like Spotify, then it would need to go about securing the rights from all the record labels, a much more daunting and expensive task.