Spotify Completes $100M Round Valuing Company at $3B


Spotify has closed on a $100 million round that values the company at $3 billion, All Things D  was the first to report. Coca-cola became a minority investor in the company, investing 10 percent of the round, according to the New York Times. Goldman Sachs contributed 50 percent, while another 15 percent came from Fidelity Investments. The remaining 25 percent came from existing investors.

The news follows the company’s revelation that it is on track to earn $500 million this year. Because of hefty royalty fees to the labels, the company still trails in the red, and is expected to lose $40 million. Though it has 15 million users, including 4 million paying subscribers, the company saw its losses widen 60 percent while revenue improved 150 percent last year, CNet reported. In 2010, the company bore earned $97 million in revenue, but had a net loss of $37.5 million. Last year, its losses widened to $57 million, despite increasing its revenue to $256 million, according to the New York Times.

The company’s valuation has gone down from the May 17 New York Times report that valued the company at $4 billion. Still, it’s worth noting the report was made the day before Facebook’s flawed IPO, which has dampened the value of tech stocks ever since. Groupon and Zynga have similarly tanked in price since going public, so investors are naturally skeptical.

Last year, the company raise $100 million in a deal that valued it at $1 billion from Kleiner Perkins Caufield & Byers and DST Global.

Spotify faces new competition from Microsoft, which recently released the streamable service Xbox Music. Spotify recently released a Windows 8 application to balance the competition.

As the company gets to scale, it could actually reap some profit from its enormous revenue as royalty fees are offset. This new round will give it the leverage to cash in on a long term model that is only beginning to reach its real potential.