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May 17, 2007
Former Tradedoublers Create Spotify
We've got the scoop today on Spotify, a new digital music venture from Daniel Ek and Martin Lorentzon whose track record in online affiliate marketing offers up a couple of hundred million reasons to be dubbed famous founders in our book. 
Ek (pictured left) was founder and CEO of Swedish startup Advertigo, a contextual online advertising startup, which was acquired TradeDoubler, in 2006 (AOL recently tried to buy Tradedoubler for $900M in cash- the Swedish company's mkt cap is about €600M at the moment).
He also stepped into roles recently at Stardoll and Tradera (acquired by eBay in 2006), while Lorentzon (pictured right) was a co-founder of TradeDoubler. He also worked at Cell Ventures, AltaVista and Telia in the past.
We pursued the founders after hearing about Spotify and reading some early reviews by pre-beta launch users because it’s P2P, like Kazaa was, but it’s legal, aiming to pay its way with advertising.
Lorentzon told us via an email interview that Spotify is a streaming service with a client that delivers social and recommendation features.
It is not a competitor to iTunes, it’s “more about providing a compelling alternative to piracy”, he said.
The development work began in August 2006 and the two launched a private beta last month. Spotify is based in Luxembourg, the tax-friendly home of a growing number of European businesses, but most of its employees are in Sweden, the UK and Romania. “We plan on opening two additional offices in Europe this year,” said Lorentzon.
Spotify's R&D team in action -and the amazing coding gloves.
We wanted some skinny on the tech: compression algorithms, protocol wizardry, as well as features of the client software users are required to download (size, functions, OS compatibility etc), but Lorentzon would only say that the startup has developed a “number of proprietary technologies specifically focusing on making the streaming process cheaper, better and more secure”.
We also asked if Spotify sees attracting enough users as its biggest challenge, and Lorentzon’s response almost made us spill a cup of coffee: he said the biggest challenge his firm has is achieving its “goal of indexing all of the world's music”.
That's a towering ambition and we will keep an eye on it. In the meantime what about getting users: “We're confident that a well thought through product, with compelling user benefits will always reach high numbers of users - particularly as music has such wide appeal. We're actively sourcing content for the player.”
The date for a commercial launch is still open. “We would like to launch later this year, but have not yet set a firm date,” Lorentzon said.
The company is financed by the two founders. “We're not in a position where we need another round of financing as it is viable for us to continue to self-fund the company,” he said. But he is not rejecting outside investors totally. “Obviously though we're looking carefully at the market conditions and having relevant conversations where appropriate.”
We always ask entrepreneurs we interview about other startups they think are interesting. Lorentzon answered: “I'm 100% focused on Spotify right now. I'm really interested in the software and renewable energy sectors but have yet to find anything that catches my eye.”
That means that he’s joining the ranks of folks like the Samwer brothers (European Founders Fund) and the other famous founders we cover that invest at least some of their wealth in startups and tech. With venture capital fundraising in Europe occurring at a relatively low rate, that’s a bit of good news for founders in the region.
Posted on May 17, 2007 07:40 AM | Posted to Online services | Web 2.0 | Permalink
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