Confirmed: Spotify Now Valued At €170 million
We've done more digging on the Spotify cap table story from yesterday, and have confirmed with one source that the company did close on at least part of the new round of financing the Financial Times reported they were negotiating earlier this week.
Context & Ripple Effects
Spotify's first year has been eventful: the service launched in January 2009 offering instant access to a large library through a lightweight desktop app, was quickly positioned as a mashup of iTunes and Last.fm, and by February was already being compared against Last.fm as the record industry hunted for a viable digital business model. A disclosed breach in March — hackers stole users' email addresses, dates of birth and billing addresses — briefly put the young company on the defensive.
The Financial Times reported earlier this week that Spotify was negotiating a new financing round; TechCrunch has now confirmed with a single source that at least part of that round has closed, putting the company's value at €170 million less than eight months after launch.
First-order effects
- Spotify enters the second half of 2009 with fresh capital behind its freemium streaming bet, giving it runway to expand licensing and product while the Last.fm comparison still frames how observers judge free streaming services.
Second-order effects
- Rivals in ad-supported and subscription streaming face a better-funded competitor just as labels weigh which digital partners deserve preferential terms; the round also validates the licensing-heavy cost structure that any would-be streaming entrant must now fund.
Third-order effects
- If investor appetite holds, consumer music services will keep raising successive private rounds whose valuations run well ahead of demonstrated revenue — widening the gap between paper marks and realizable liquidity for early backers.
The trend: Private-market enthusiasm for licensed music streaming is letting pre-revenue-scale consumer services raise large rounds within their first year, decoupling valuations from current cash flow.