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November 14, 2012

Spotify is Now Valued at About $3B, Company Raises $100M from Investors

By Ed Silverstein, TMCnet Contributor

Spotify (News - Alert) is now valued at about $3 billion, according to All Things D. Its latest funding round was led by Goldman Sachs. Also taking part were Coca-Cola and Fidelity Investments, TechCrunch said.

The Wall Street Journal reported that the total raised from investors in the recent round was $100 million. Previously, Spotify raised some $188 million.

The latest valuation for the streaming music company is about $1 billion less than what the company was valued at some six months ago. One reason for the drop is that valuations for other Web companies went down, with companies such as Facebook and Zynga (News - Alert) having challenges after IPOs. Another explanation relates to Netflix, which has some 27 million subscribers for about $8 a month. Spotify has four million paying subscribers at about $10 a month.

“So even at $3 billion, Spotify backers will need to work hard to explain why their digital subscription business is worth so much more than Netflix when it comes time to IPO,” All Things D said.

Also, Spotify may be “eyeing an IPO down the line,” TechCrunch added. “Because a big chunk of the money Spotify raises goes straight to the labels, they have to raise more than they necessarily need for development and marketing. And since it raised $100 million last time, it would probably want to raise at least a bit more than that so it doesn’t look like a down-round and a loss of momentum.”

In other recent news, Spotify may be interested in expanding more within the auto market.

“Spotify would look to use the car's connected technology and an inbuilt app to provide their radio service over the internet, allowing its users to listen to their favorite music on the road,” TMCnet quoted from a recent statement. “Spotify's movements reflects a growing interest in the automotive market as a platform for apps and a new way to engage with consumers.”

Edited by Jamie Epstein
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