Spotify is seeking to raise money from private investors in a deal that would put a valuation of as much as $4 billion on the fast- growing online music service, according to people familiar with its plans.
The ambitious goal would mark a big leap from the $1.1 billion valuation it was accorded last summer when it raised money to back its long-awaited launch in the US.
If the company hits its target, it would exceed the $3.3 billion that Warner Music was sold for last year and mark the strongest validation that investors believe a digital "streaming" business can top the music industry's traditional revenue models.
Most users listen to a free, advertising-supported version of Spotify, although some three million pay a subscription for a premium service with extra features. The rapid adoption of the service on Facebook, which made a feature of Spotify when introducing an upgrade to its own site last September, has boosted the confidence of the company in gaining a much higher valuation.
According to one investor not involved with the company, Spotify is looking for "hundreds of millions of dollars" to build a financial war chest for future licensing negotiations with the music industry.
If the company is looking for money to pay licence fees rather than to back expansion in markets, it would mark "a troubling sign" for investors, said Mike McGuire, an analyst at Gartner. - Copyright The Financial Times Limited 2012
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