Spotify Joins Rare Company, Raises $250 Million in Funding for a $4 Billion Valuation
Not bad for a start-up. In fact, Spotify is one of the most funded start-ups of all time, Reuters reports. Even though competition is stiff in the streaming music game, Spotify hasn't had much trouble raising money. The service raised $100 million a year ago from a group of investors that included Goldman Sachs, plus another $100 million during a separate round of funding.
All those dollars puts Spotify in rare company. Not many start-ups have been able to raise more than $400 million in funding, Pinterest being one of just a few notable exceptions. The question is, what will Spotify do with all of its cash?
Spotify is taking a multi-pronged approach to growing its business. Part of the funding will go towards beefing up its business in the U.S. At the same time, Spotify can launch in new territories, including Japan. At present, Spotify is home to around 24 million active music listeners, 6 million of which are paid subscribers.
The biggest challenge for Spotify is figuring out a way to make a sizable profit with what's left after royalties. In order to serve up so many songs for unlimited listening, around 70 percent of its revenue goes out the door and into the pockets of record labels.