Technology Crossover Ventures Funds All Of Spotify’s $250M International Growth Round

Technology Crossover
Ventures is making its biggest bet ever by
backing the entirety of Spotify’s new $250 million round, a source
tells TechCrunch. The
Wall Street Journal’s report of Spotify raising the round
at a valuation above $4 billion is right, and it will fuel
Spotify’s push to become the defacto streaming music service around
the world, our source says. This is likely TCV’s
biggest investment ever. It joined a crowd of VCs in
Groupon’s $950 million round in 2011, and led a few other firms
into Homeaway’s $250 million Series E in 2008. While it used to do
more early stage deals, TCV has been focused around the Series C
and D phase of startups’ lifecycles, with recent participation in
$40 million rounds for Minted and JustFab. Our source says TCV
stepped up with Spotify. It didn’t even just lead this Spotify
financing as the WSJ
wrote in its scoop. It put up all the money. The
round could be called Spotify’s Series F and brings the company to
$538 million in
total funding. It follows the $100 million round in 2012
led by Goldman Sachs, and that sources say included Fidelity
Ventures and Coca-Cola. That came after Spotify’s previous $100
million venture round in 2011 from Kleiner Perkins Caufield
& Byers, Accel Partners, and Digital Sky Technologies. TCV
is apparently willing to bet big on Spotify either getting acquired
or having a successful IPO. At this point, Spotify is getting too
expensive for most companies to buy. Unless perhaps Apple or Google
acquire it to bolster their own music streaming offerings, Spotify
will have to IPO. In the case it goes public, it will have to prove
to investors that its upside isn’t shackled by the huge content
licensing fees it pays to the record labels. Luckily, it will have
help from TCV, who has $200 million in Netflix – a company also in
the wheeling-and-dealing content distribution business. Spotify
seems to be doing better than some competitors. Rdio just had a
sizable round of layoffs, and I haven’t heard many people excited
about Google’s All-Access music service. However, Spotify needs to
be careful of Apple’s iTunes Radio which is free and comes bundled
into the music app pre-installed on all iPhones, as well as
European service Deezer. Spotify grew past €400 million in 2012,
but still has significant losses due to the big fees it pays record
labels for music and its international expansion efforts. The TCV
money could pay for the latter. In the short term, Spotify has to
fend off competition from both startups and deep-pocketed
smartphone platform owners, and therefore needs marketing capital.
Looking farther to the future, the logic seems to be that music is
a critical part of the mobile user experience. As more people
around the world upgrade to smartphones and gain access to faster
networks, Spotify expects demand for streaming music to grow. It
needs to have strong local mindshare as that transition happens to
lock in new ad-supported users and lucrative paying subscribers.
Spotify built a way to put
almost every song at our fingertips. Now it’s a matter of
trumpeting the magic of on-demand music around the globe.