Spotify has 150 employees in New York, up from a grand total of four a year ago. Co-founder Daniel Ek has been busy recruiting employees away from Google, which occupies the same building. (It’s a bit ironic, since Google turned him down when he applied there years ago.)
Ek and his company are long on New York, he says, for a lot of reasons. Not all of the young engineering talent is heading to Silicon Valley after they graduate from East Coast colleges. “We could have based the US center of Spotify in San Francisco, but we chose NY for a lot of reasons,” he said tonight at PandoMonthly New York.
The music scene helps. “It’s also a pretty fun city. If you’re into music, if you’re into arts, New York is the place to be,” he said.
But it goes beyond that. ”I had this discussion not too long ago with Mark Zuckerberg, and I’m not even sure he agrees anymore that we need to be in the Valley in order for this to happen,” he said. “I think that you have to want a connection to the Valley.”
Things happen fast in the Valley — it feels mercenary out there sometimes, he said — but the biggest success stories to come out of it have taken very long term approaches. “The truly great companies that I admire and have a consistency and philosphy thats ingrained by looking more long term at things,” he said. Being outside of Silicon Valley requires you to think more long term.
Proximity to Madison Avenue is certainly another big reason Spotify chose New York. Much of Spotify’s 150-person office is made up of sales professionals. Spotify is not just about its subscription business — a minority of its users are paying subscribers. The company’s ultimate goal is for music to be free and available to everyone, and it needs to monetize that with ads. The digital audio advertising market is still very young — around $800 million last year compared with around $16 billion for traditional radio advertising — and the company has to do some serious hand-holding to advertisers as it lures over those ad dollars. Spotify has paid out more than $250 million to labels since its inception.
Still, he wouldn’t start the company in New York if he could do it over again, because his initial early hires in Sweden were so important to the company. “There aren’t that many interesting technology companies out of Europe, so we still have amazing potential to attract that talent,” he said.