European streaming music startup Spotify is in the process of closing a very large financing, say multiple sources. DST, the venture firm that has backed Facebook, Groupon and Zynga, is said to be leading the deal, which values Spotify at around $1 billion.
The size of the round will be $100 million or more, say our sources. The company has raised at least €82.3 million to date, including a relatively small round of financing a year ago from Founders Fund.
This new round, though, is at a much higher valuation. The Founders Fund round was rumored to be at a similar valuation as the previous round, a 2009 financing that valued the company at around €200 million.
Spotify has yet to launch in the U.S., although label deals are apparently, finally, coming together.
Unlike previous DST deals, we’ve heard, this will not be a secondary-type financing where founders are taking money off the table.
Is it a good investment?
DST is known for writing big checks at big valuations, but they aren’t known for throwing stupid money around. They spend a great deal of time, they’ve said in the past, looking at a company’s growth metrics and spreadsheeting out where they might end up. Often their projections end up being much more aggressive than even the company’s. And apparently DST is usually right – Facebook, Zynga and Groupon all look like brilliant investments.
No word on how much Apple’s new subscription pricing model, which particularly impacts music streaming services like Spotify, has freaked out the company or investors. It isn’t a problem with the new funding, we’ve heard from our sources.