Suno's $125M round highlights historic shift in music-tech investment

By:Cherie Hu

Published:2024-05-22

On Tuesday, May 21, 2024, music AI startup Suno announced a $125 million funding round — marking the largest investment ever in a music AI startup, and the biggest music-tech equity investment in over three years.

This news has generated significant buzz in the music industry, and for good reason. In addition to its rapid user adoption, Suno has demonstrated impressive technical capabilities and efficiency compared to its competitors. The company has been profiled by Bloomberg and Rolling Stone, and has grown its social following by over 200% since January 2024, according to SocialBlade.

On top of all this, Suno has been tight-lipped about the data used to train its AI models. Fairly Trained CEO Ed-Newton Rex has presented evidence suggesting that Suno’s training data may contain copyrighted music, while Billboard has reported that the startup has yet to secure licensing deals with major labels or the National Music Publishers’ Association. The music industry is closely monitoring the potential legal ramifications of Suno's growth, with rights holders potentially pursuing litigation.

Despite the lack of industry support, Suno's funding round represents a watershed moment in the history of both music AI and music-tech at large. It not only reflects peak hype around generative AI, but also speaks to a new era of music-tech investment — moving beyond mass-market streaming into new opportunities for disruption around fandom, creativity, and artistry altogether.

How Suno stands out in music AI

Capital: Suno’s $125 million round is the largest to date in music AI, surpassing notable investments in ElevenLabs ($80 million), Splash Music ($20 million), Podcastle ($13.5 million), and Udio ($10 million).

The size of Suno’s round demonstrates growing investor interest in standalone music AI products — which is perhaps surprising, given the potential competition from established tech giants like Google, Meta, and OpenAI.

User adoption: Suno's user growth has outpaced that of many established music streaming and creation platforms. While it took Spotify four years to reach 10 million users, Suno achieved this milestone in just eight months.

This may be because Suno’s target audience extends beyond self-identified “artists.” The company’s co-founders are Harvard physics and computer science grads who are excited at the opportunity to build for the general public, rather than for industry insiders.

On one of its job postings, they clarify that “​​we want to be known as a creative tool for everyone, not a piece of technology for some” ; similarly, the company’s funding announcement envisions “a future where anyone can make music.”

Hence, Suno’s target audience could be better understood as anyone who has ever learned an instrument, or wanted to learn one. In the U.S., this target audience comprises approximately 50% of the population.

Investors & partners: Suno’s lead investors and advisors consist primarily of veterans in technology, AI, media, and consumer software, such as Lightspeed Venture Partners, Nat Friedman and Daniel Gross, Matrix, and Founder Collective.

Aside from a few artists mentioned among its advisors (3LAU and Flosstradamus), there are no music-industry investors or partners. This is a stark contrast to many other music AI companies that have a more balanced mix of tech and music-industry investors on their cap tables (e.g. Udio with Common, will.i.am, Tay Keith, and UnitedMasters; Bronze with Disclosure, Method Music, and September Management; CreateSafe with Crush Ventures, Anthony Saleh, and Unified Music Group).

It remains to be seen if Suno can sustain its growth trajectory and maintain a positive brand image without the support of music industry partners, especially if legal challenges arise.

How Suno stands out in music-tech

Suno's funding round is a major milestone in the context of the music-tech industry's evolution over the past 15 years.

According to Crunchbase, the majority of the 20 biggest music-tech funding rounds in history occurred between 2010 and 2018 — primarily benefiting global music streaming platforms and music hardware manufacturers (see below):

First posted on Daily Music Data

The music-tech market has since cooled down significantly, due to a mix of factors such as the COVID pandemic, slowing growth in subscription streaming revenue, industry consolidation, costly music licensing fees, and uncertain macroeconomic conditions.

Suno’s latest round is one of only four music-tech mega-rounds since 2018 — signaling a new era of investment focused on areas ripe for disruption beyond traditional music streaming and consumption models.

Aside from Suno, the other three mega-rounds include:

Suno's high valuation can be attributed to its position at the intersection of the growing creator tools market and the highly hyped generative AI market. In recent years, private equity and institutional finance firms have increased their stakes in music creator tools, as evidenced by investments in Muse Group, Native Instruments, and Splice. Suno is likely to benefit from this trend if it continues to grow at its current pace.

What’s next for Suno?

Suno's funding round sends a clear signal that the music-tech industry is still ripe for innovation and disruption — just in places that are markedly different from before.

The company’s current job postings indicate a focus on community engagement, brand recognition, influencer partnerships, and mobile apps (both iOS and Android), all in service of further broadening the reach of its music AI products and differentiating itself from competitors.

Notably, despite music-industry concerns, Suno is not currently hiring legal staff.