Spotify's Daniel Ek on fundraising: "There's never a value in getting the biggest valuation possible" (O RLY?)
There have been plenty of stories today about Spotify's new round of venture capital, raised at a heady $3 billion valuation. The company reportedly collected $100 million from the likes of Goldman Sachs, Fidelity, Coca-cola, and others. Plenty of people are remarking at the price, given how much the company still has to prove. Let's not forget publicly-traded Pandora, which has to trade off of fundamentals, is only valued at $1.23 billion.
But Spotify has always been one of the more aggressive companies when it comes to valuations – even in its earliest days when it wasn't live in the US and its future looked anything but assured.
It's a ballsy strategy in an industry that almost no one has succeeded in. It's worked so far, but the bigger your valuations get, the farther you have to fall. Taking a nosebleed valuation has repercussions. You price yourself out of certain acquisitions, and leave yourself at risk for a down round, which can be incredibly damaging for culture and employees.
Fittingly, I asked Ek last week at our PandoMonthly in New York why he'd always been so aggressive with valuations. His answer is below, along with his philosophy on fundraising and what he would have done differently next time.
For what it's worth, there is one key difference in the way Spotify has approached the music business from nearly everyone else who has tried. Unlike an Uber, Ek shies away from being a disrupter. He sees the labels as his partners, not his adversaries. That may sound like marketing, but it has deeply affected everything the company has done up until now, as he explains in this second clip.
We can debate whether he's the labels' bitch or savior. But it's clearly why he feels on safer ground than everyone who came before him -- even with a $3 billion price tag to grow into.
You can watch our entire interview with Ek here.