Spotify Raises $250 Million, Valued Above $4 Billion
Daniel Ek, chief executive officer of Spotify, speaks at a news conference in New York in 2011. Bloomberg News
Swedish music-streaming company Spotify AB has secured nearly $250 million in new financing led by Silicon Valley firm Technology Crossover Ventures, valuing the company somewhere "north" of $4 billion dollars, according to multiple people familiar with the deal.
The latest round of funding comes as Spotify is looking to fuel its global growth strategy. While already established in many Western markets, including the U.S., Spotify is aiming to launch its service in some of the world's highest-potential destinations for streaming music, including Japan.
Spotify competes with U.S.-based streaming music services, such as Pandora Media Inc., P +4.04% as well as bigger content providers like Apple Inc. Paris-based Deezer is among the Spotify's competitors in Europe.
The company's revenue has boomed in recent years, more than doubling in 2012 to €434.7 million. Spotify's losses have also widened amid expensive licensing agreements and hefty costs related to expansion into a bevy of new markets.
A year ago, for instance, Spotify was in 17 countries, and now it is available in 32 markets. Spotify has also done deals with 25 telecom operators world-wide.
In a recent interview, Spotify Chief Executive and co-founder Daniel Ek said his company is converting a relatively large number of people who try the service free into actual paying customers. The company has also widened the gap between the revenue it pulls in and the royalties it pays to record labels, artists and publishers.
With Technology Crossover Ventures, Spotify will also add an investor familiar with the content licensing business. The investment firm purchased $200 million in convertible bonds from Netflix Inc. NFLX +2.28% about two years ago, at a time when the video content company was shedding subscribers. Since the deal was struck in late November 2011, the stock has more than quadrupled.
TCV has in the past also invested in real estate website Zillow Inc., Z +1.81% Facebook Inc. FB +1.18% and GoDaddy Group Inc.
Officials with both Spotify and TCV declined to comment.
Spotify last year raised more than $100 million from multiple investors at a valuation of slightly more than $3 billion. In 2011, the company raised $100 million from Kleiner Perkins Caufield & Byers and Russian investment firm DST Global, at a $1 billion valuation.
Pandora is currently valued at about $5.7 billion. Its stock recently rose 3.8% to $29.53.
Spotify is privately held, and Mr. Ek said in August that at some point investors will likely want to get their money back, potentially through an initial public offering. "If we think that the goal is better aligned by going public, sure we'll contemplate it," he said. "But it's not something I spend any waking time thinking about."