News Article

Spotify Acquired Music Tech Company The Echo Nest In A $100M Deal
Date: Mar 07, 2014
Author: Ingrid Lunden
Source: TechCrunch ( click here to go to the source)

Featured firm in this article: The Echo Nest Corporation of Somerville, MA

On the heels of the news yesterday that Spotify had acquired music discovery technology company Echo Nest, we now have a price for the deal: it was $100 million, with 90% of that in Spotify equity.

Spotify declined to comment on the figure, which comes from a reliable source close to the deal. We have reached out to others and will update this story as we learn more.

Earlier today, we'd heard from a source that the deal was valued at $125 million. That included $15 million in cash split between three people: the two founders — Brian Whitman and Tristan Jehan — and CEO Jim Lucchese; $20 million set aside for employee cash earn outs over four years for 70 or so employees and $90 million in deferred earn-outs. It was while asking around to confirm these figures that we heard the $100 million number.

The Echo Nest, which was founded in 2005, had raised some $25.6 million in funding from investors that included Commonwealth Capital Ventures, Matrix Partners, Norwest Venture Partners and Jim Pallotta.

In addition to Spotify, it had amassed a wide range of customers for its music personalization and discovery technology. Some of those, today, are direct competitors of Spotify's. They include Clear Channel's iHeartradio, Beats Music, Rdio and — as well as others like the BBC, Foursquare, MTV, Twitter, VEVO and Yahoo!, Nokia and brands like Coca-Cola, Intel, Microsoft and Reebok. Spotify has stated that The Echo Nest's free API, which is used by these companies to power their services, will remain free and open.

As Josh pointed out in his interview with Spotify CEO Daniel Ek and The Echo Nest's CEO Jim Lucchese, the deal is a smart move by Spotify — ahead of a reportedly planned IPO — further its ambition to be a music platform as well as a direct, branded provider in its own right — although whether competitors play ball with that strategy, or look elsewhere for competing technology, will remain to be seen.

At the time of a $250 million raise in November 2013, Spotify was valued at around $4 billion.