Spotify rumoured to be closing hefty financing round

by Sarah Griffiths on 21 February 2011, 11:30

Tags: Spotify

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Music to our ears?

Spotify is rumoured to be in the final throes of bagging a large amount of cash via a fundraising round led by the venture firm that backed Facebook.

According to Tech Crunch, the venture capitalist company DST is pushing the deal forward, which values the music start-up at about $1bn. It is thought the fund raising round in progress aims to generate over $100m, the website's sources said.

Spotify has reportedly already raised €82.3m in its lifetime but this new round is at a higher valuation. A year ago, the firm is thought to have pulled in a small amount of financing from Founders Fund, at an estimated valuation of around €200m.

The music service, which makes money from offering subscriptions, is big news in Europe but has yet to launch in the US, yet it has been reported that necessary record label deals are being agreed.

While the valuation might seem a bit steep for a firm without global reach, DST has backed Facebook, Zynga and Groupon, suggesting it knows its stuff. The VC firm apparently spends a lot of time poring over growth metrics instead of just chucking cash at a project.

As Apple has launched a media subscription service and Google Music is rumoured to be aiming to launch alongside its eagerly anticipated tablet OS- Honeycomb, it will be interesting to see what the future holds for smaller musical players.

People have been waiting for Google Music for years and it was always unclear as to how Google would roll it out and make it popular; now it seems the answer is Honeycomb. With more tablets launching this year running Android OS, it seems Google has found just the platform, with Honeycomb expected to launch in the next couple of months.

So far smaller music subscription services like Spotify have not commented on how subscription services from the likes of Apple and now possibly Google will impact on their business. It will be interesting to see whether investors in Spotify are scared off by such high profile players entering the subscription music game, but Tech Crunch's source reportedly said it isn't a problem for this fund raising round at least.



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