With around 45 million ad-supported free users and 15 million premium users, who pay $9.99/month, you would think that Spotify is rolling in cash right now. However, due to the fact that it has to fork over around 70% of its revenue in royalties, Spotify is actually losing cash and is relying on raising funds to continue operating. Don’t worry though, the Swedish company just raised a whopping $400 million in funding, with a valuation of $8.4 billion.
Spotify AB has headed back to the funding well for a seventh time, nearing a deal to raise $400 million in a round valuing the music-streaming service at $8.4 billion, according to people familiar with the matter. The deal would place Spotify in the upper ranks of the world’s most highly valued private tech companies. Goldman Sachs Group Inc. and an Abu Dhabi sovereign-wealth fund have agreed to invest in the round, and Spotify has held talks with a range of asset managers and venture-capital firms around the globe, the people said. The terms have been set and the funding round is expected to close in the coming weeks, one of the people said. Nine-year-old Spotify, which previously raised more than $500 million in equity funding, hasn’t established any timeline for a possible IPO. The money-losing company needs the cash to support its costly business model of paying nearly 70% of its revenue to rights holders as royalties. Spotify said in January it had about 45 million free users and 15 million who pay $9.99 a month for an ad-free version.
