Spotify Just Raised Another $350 Million…

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It wasn’t a rumor: according to details confirmed this morning by CNBC, Spotify has now successfully raised a Series F (yes, F) of approximately $350 million.  The round, led by Goldman Sachs, pushes Spotify’s total funding to roughly $900 million, and values the company north of $8 billion (yes, with a b).

Spotify has burned through hundreds of millions of dollars (see graph below).  More critically, Spotify does not have a concrete path towards profitability, has no known or interested buyers capable of paying $8 billion-plus, nor any published plan for a Wall Street IPO.   Spotify does, however, have 15 million paying subscribers, though that number is far too low to sustain the business on its own.

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The avalanche of funds comes just in the nick of time: according to sources, Spotify has already burned through its to-date tranche of $537.8 million, and desperately needed a new infusion.

The news comes right on the heels of a sudden Grooveshark death, though it’s unclear if this spells any benefit for Spotify.  Grooveshark catered to millions of freebie users, many of whom will undoubtedly migrate to Spotify.  But Spotify needs a higher-class crowd: over the past few months, major labels have been threatening to kill the freebie parade, and force Spotify to focus on premium-paying, ‘good customers’ instead.

That has sparked a cantankerous industry debate, with the very future of streaming at stake.  “The idea of ‘taking down Spotify,’ to trade with another big tech company, will guarantee that there will not be another $1 billion dollars in risk capital that will come in and try to build a music streaming service again,” Kobalt CEO Willard Ahdritz recently spewed to Billboard.

“And what happens then? Will kids go back to buying CDs? No.”

More as the story develops.

27 Responses

  1. Avatar
    Stan

    “does not have a concrete path towards profitability, has no known or interested buyers, or any plan for a Wall Street IPO.”

    Paul – you know all this as a fact?

      • Avatar
        Myles

        That’s all top secret. Because you wouldn’t want to go around showing everyone how your business can make money……….oh wait

        Hmmm, maybe Goldman Sachs has seen the golden MacGuffin but want to keep it secret, keep it safe my precious

        • Avatar
          Anonymous

          you say this as a joke but there’s a reason corporate espionage exists…because plenty of financial info/strategies/etc is secret. also NDAs, non-compete clauses, etc

          • Avatar
            Bandit

            Yes I was being sarcastic and yes I know what a non disclosure agreement is. I don’t think a non compete clause is applicable here.

            So what is it that’s so special that needs to be kept secret? The business model is not complicated. Just the details of the contracts they sign with the major labels is what must be kept in the dark and the bottom line of those is Majors will keep allowing Spotify to use their product for as long as the labels can keep screwing their artists under contract

            My guess is that Spotify conceded more of the company to the major labels for more time and cc’d Goldmans on that memo

            Or the alternative theory: Spotify has embarrassing photos of some of the top execs at Goldmans so That they keep pumping money into the machine

        • Avatar
          Chris H

          The path towards profitability part Paul has covered, since they have yet to demonstrate one..

      • Avatar
        Alex

        Paul – just because they haven’t shared their plans with you doesn’t mean they don’t exist.

        Getting all these investors to cough up all this cash indicates that clearly SOMETHING is planned in terms of an exit, sale, or profits.

      • Avatar
        danwriter

        Stating a hypothetical premise and then asserting its validity by further asserting no evidence to the contrary isn’t business journalism. It’s editorializing.

    • Avatar
      Ryan Hickman

      @Stan, there isn’t any information relative to a “money event” for Spotify but lets be certain key companies are watching from a close distance. Public opinion which drives stock would negate IPO. They are in the race of brand building as the streaming tech is simply commodity. Give it a few for these new entrants to show their cracks and that Spotify exit will materialize overnight.

  2. Avatar
    smg77

    It shouldn’t be a surprise (despite the luddites who lurk around this site) that investors realize that streaming is the future of music consumption.

    • Avatar
      Me2

      I don’t actually see many anti-streaming people here, most of the complaints seem to be just people wanting to get paid and/or not ripped off when companies are using their work.

      There is also a contingent that questions the economic viability of such models. Most of them have been around the block in digital world. They build websites, create on computers and use smart phones just like the rest of us.

      So where are the luddites?

    • Avatar
      Remi Swierczek

      To prevent evaporation of ORIGINAL INVESTMENT they tossing more wood into the fire so the fire can continue to burn with big hope for brilliant solution to come soon hopefully without more firewood.

      Dear GOLDMAN SACHS,
      Solution will not come from Daniel Ek or his Stockholm collection of “Brilliant Minds”.
      Propaganda is good in early stage then at some point you have to deliver the goods and there is no goods in all inclusive streaming!

      Premium subscription based streaming w/ or without Apple/dead-Beats has a global limit at $20B by 2025.

      The only hope is in conversion of Radio, TV, streaming, bars or elevators to primitive discovery based music store. $100B music industry by 2020 with total happiness for all!

    • Avatar
      Rickshaw

      I hope you were being sarcastic. Without a way to realize a return on investor money, the future looks short.

      • Avatar
        Remi Swierczek

        I am realistically sarcastic.

        They have to change Ek’s “proven business model” NOW!

        Apple will just accelerating industry march to very smelly cashless SWAMP!

  3. Avatar
    Ed Jennings

    Safe bet that Universal and Spotify have renegotiated their contract.

    • Avatar
      Nat

      If that is the case, then Spotify is going to be forced to go full subscription -paid, as Universal is wanting to do away with free streaming entirely.

      • Avatar
        Ed Jennings

        Chuckles as TIDAL HiFi costs me 0.67 or 67 cents a day. Why quibble? I mean really.

  4. Avatar
    chris

    Valuation and annual earnings are not the same thing, and are not comparable the way you’ve laid out in your primary chart.

  5. Avatar
    TcookE

    It’s hard to speculate what’s going on behind the boardroom door. It is a little unsettling to see Goldman so engaged, then again this is not a lot of money for them. G may just be hoping to score big with the underwriting business for the IPO and share dumps by initial investors.

  6. Avatar
    Bob

    Forget Spotify, we have Google, Apple, and Amazon building the next music services.

    And that was a low blow calling ex-grooveshark fans low class.

  7. Avatar
    Versus

    The graph is a bit misleading. At first glance, it looks like Spotify is double the size of the music recorded industry. Until you look at the y-axis. Best to use 0 as the starting value for graphs.

    Still, point taken. Tech makes the money, music takes the hit.

    • Avatar
      Anonymous

      He does that intentionally allllll the time. This blog tends to be intentionally terrible.

  8. Avatar
    Pat Harris

    With the amount of investor money they’ve already blow through, the decision must have been made to keep investing or lose EVERYTHING!

  9. Avatar
    Anon

    Valuation and revenue are different things. This graph is misleading at best and complete bullshit at worst.