SoundCloud, an audio file sharing site for music professionals, has raised €2.5 million ($3.3 million) in its first round of funding. The Berlin-based startup entered the crowded file-sharing market last year with a private beta, but its executives say the service has since grown to 100,000 registered users.

The site works by providing a web-based platform for storing and sharing uncompressed audio files. But, rather than focusing on the average file sharer, SoundCloud targets its service toward file transfers between musicians, producers, and record industry executives. Since these types often trade large, email-crashing audio files for collaboration, production, and promotional purposes, SoundCloud positions itself as a file size restriction-free alternative to its competitors.

The crux of SoundCloud’s platform is its proprietary servers. Once a user has uploaded a track to SoundCloud, its recipients can choose to download the track, or listen directly from the service. In addition to one-to-one file transfers, SoundCloud also enables group distribution options, while also offering a basic suite of analytics tools for tracking download activity. Using these tools, musicians can follow the popularity of a track with other SoundCloud users, or use the service’s embeddable player to publish stored tracks to the web. (See below)

SoundCloud even took a page from Flickr’s book on licensing. Rather than navigating the murky landscape of digital media licensing/collaboration, SoundCloud lets file owners choose the type of licensing attached to their uploads. So, if an independent artist wants to invite other musicians to remix/adapt their work, they can do so under the umbrella of creative commons licensing.

In spite of today’s news, there’s still the elephant in the room — SoundCloud’s numerous competitors. While the service’s free entrance fee is likely to appeal to independent artists (power users can pay a subscription fee for unlimited uploads), a portion of the record industry is already grandfathered into a similar service from Digidesign (makers of ProTools). On the amateur side of things, SoundCloud also faces opposition from myriad free file transfer services like YouSendIt, MediaFire, and Joggle. To be fair, SoundCloud was wise to differentiate itself a by focusing on audio files (and cloud-based playback) specifically, but its longevity will hinge on its ability to innovate within that niche.

SoundCloud’s recent round of funding was led by Doughty Hanson Technology Ventures. The company raised an angel round for an undisclosed amount prior to its launch in 2007.

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