"EXTRAORDINARY AND UNPRECEDENTED GROWTH" How Spotify Is Trying To Justify A $3.5 Billion Valuation

daniel ek spotify explaining

Photo: Ellis Hamburger, Business Insider

Spotify is trying to raise another round of funding at a $3.5 billion valuation, we just reported.So far, Silicon Valley moneymen are sceptical, wondering why they should give Spotify such a high valuation.

Spotify doesn’t own its content or even have exclusive rights to it, and a company in a similar position, Hulu, was going to be sold for just $4 billion last fall.

So what is Spotify telling investors?

We’re not privvy to the details of those conversations, but a Spotify executive did recently lay out the bull’s case for the company for us.

Here’s what he told us:

  • Spotify is seeing “extraordinary and unprecedented” growth – both in user adoption of its free products, and in conversion from those free products to its paid subscriptions.
  • Spotify is still introducing premium options in new geographic markets: “As Spotify introduces other premium offerings on more platforms in more countries I see no reason to believe that conversions won’t increase.”
  • Spotify benefits from network effects: “the best possible social sharing experience will occur on the largest social music platform, currently Spotify.  Until that changes (and Apple of course could be a threat in this regard) then by most new digital music users will gravitate towards Spotify where their friends’ have chosen to share their music collections.”

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