Spotify provides on-demand streaming music and competes directly with Apple Music for subscribers. The company has focused on rapid customer acquisition, artist relationships, and potential exclusives to build network effects. It chose debt over equity to avoid signaling from a down-round after a $8.5 billion valuation set in June 2015. A source said Spotify still had €570 million in the bank prior to the raise, so the financing was not driven by an immediate cash shortfall. The new funding will be spent on growth and marketing and to enable potential acquisitions such as SoundCloud or Pandora. Spotify’s strategy is to secure capital now to sign up customers faster and monetize scale over time. Spotify is a Swedish music-streaming company offering on-demand streaming. The company is looking to expand into new content areas and is preparing to compete with Apple Music. It closed a $526 million financing round at an $8.5 billion valuation. The round included a $115 million investment from TeliaSonera, which acquired a 1.4% stake after more than five years of strategic partnership. Spotify now counts 23 investors and has raised over $1 billion in total. Martin Lorentzon, Spotify co-founder and chairman, has been a member of TeliaSonera’s board since 2013. Spotify offers on-demand streaming music and aims to be the default music service worldwide. The company is pursuing aggressive international expansion and needs marketing capital to acquire ad-supported users and paying subscribers. Spotify grew past €400 million in 2012 but still runs significant losses driven by high content licensing fees and expansion costs. The TechCrunch piece says the new funding is intended to fuel international growth and local marketing to lock in users as smartphones and faster networks spread. Spotify faces competition from incumbents and platform owners such as Apple’s iTunes Radio, Google’s All-Access, Deezer, and smaller rivals like Rdio. The company must also demonstrate to public-market investors that its upside is not overly constrained by record-label fees if it pursues an IPO or is acquired. Spotify is a streaming music service that offers on-demand music listening. The company was reported to have made $200 million in revenue in the first six months of 2012 and was projecting a $500 million annual revenue run rate in January. Despite growing revenue, the report says Spotify was still losing about $40 million a year. The company has been raising capital to cover large payments to record labels, marketing to attract listeners and paying subscribers, and development work including a browser-based player. The new funding is intended to provide the cash injection needed to scale toward profitability and potentially prepare the company for an eventual IPO. Spotify is a European music streaming service currently available in only some European countries. The company has been preparing a U.S. launch that has been broadly anticipated for months. Spotify has been in talks with Google over integration with Android for a U.S. launch and is expected to pursue a large U.S. partner; Google, Facebook and Microsoft were named as likely partners. Multiple U.S. venture funds were reported to have been interested in this fundraising, which was described as competitive. Sources say Spotify closed a venture investment from Founders Fund led by managing partner Sean Parker, which may have been a token amount and may have included a Parker board seat. The investment was likely done at the same €200 million valuation as Spotify's late-2009 round, and Founders Fund is the company's first U.S. investor.

Total raised

$1.8B

Funding rounds

7

Latest round

Convertible Note

Latest activity

Mar 2016