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Spotify says it paid $340M to buy Gimlet and Anchor

Posted by on Feb 15, 2019 in Accel, anchor, BetaWorks, ceo, CrunchBase, daniel ek, Lowercase Capital, Media, microsoft windows, operating systems, podcast, podcast networks, Software, Spotify, stripes group, U.S. Securities and Exchange Commission, WPP, xbox | 0 comments

Spotify doubled down on podcasts last week with a double deal to buy podcast networks Gimlet and Anchor. Those acquisitions were initially undisclosed, but Spotify has quietly confirmed that it spent €300 million, just shy of $340 million, to capture the companies.

That’s according to an SEC filing — hat tip Recode’s Peter Kafka — which reveals that the transactions which were “primarily in cash,” Spotify said. Kafka previously reported that Spotify paid around $200 million for Gimlet, which, if correct, would mean Anchor fetched the remaining $140 million.

Those numbers represent an impressive return for the investors involved, particularly those who backed the companies at seed stage.

Gimlet raised $28.5 million from investors that included Stripes Group, WPP, Betaworks and Lowercase Capital, according to Crunchbase.

Anchor, meanwhile, raised $14.4 million. Crunchbase data shows its backers included Accel, GV, Homebrew and (again) Betaworks.

Those deals represent a good chunk of change, but Spotify still has more fuel in the tanks.

As we reported last week, it plans to spend a total of up to $500 million this year “on multiple acquisitions” as it seeks to further its position on podcasting which, to date, has been an after-thought to its focus on music. Less these deals, Spotify has around $160 million left in its spending budget for 2019.

In a blog post announcing the deals published last week, Spotify CEO Daniel Ek admitted that he didn’t originally release that “audio — not just music — would be the future of Spotify” when he founded the business in 2006.

“This opportunity starts with the next phase of growth in audio — podcasting. There are endless ways to tell stories that serve to entertain, to educate, to challenge, to inspire, or to bring us together and break down cultural barriers. The format is really evolving and while podcasting is still a relatively small business today, I see incredible growth potential for the space and for Spotify in particular,” Ek explained.

Source: The Tech Crunch

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Startups Weekly: Spotify gets acquisitive and Instacart screws up

Posted by on Feb 9, 2019 in alex wilhelm, anchor, Bessemer Venture Partners, consumer reports, CrunchBase, funding, Fundings & Exits, Fusion Fund, gimlet, gimlet media, Instacart, josh constine, lime, Mark Suster, Megan Rose Dickey, Mike McNamara, Reddit, Sanjay Jha, Spotify, Startups, steve huffman, TC, Uber, upfront ventures, Venture Capital, web summit, Y Combinator | 0 comments

Did anyone else listen to season one of StartUp, Alex Blumberg’s OG Gimlet podcast? I did, and I felt like a proud mom this week reading stories of the major, first-of-its-kind Spotify acquisition of his podcast production company, Gimlet. Spotify also bought Anchor, a podcast monetization platform, signaling a new era for the podcasting industry.

On top of that, Himalaya Media, a free podcast app I’d never heard of until this week, raised a whopping $100 million in venture capital funding to “establish itself as a new force in the podcast distribution space,” per Variety.

The podcasting business definitely took center stage, but Lime and Bird made headlines, as usual, a new unicorn emerged in the mental health space and Instacart, it turns out, has been screwing its independent contractors.

As mentioned, Spotify, or shall we say Spodify, gobbled up Gimlet and Anchor. More on that here and a full analysis of the deal here. Key takeaway: it’s the dawn of podcasting; expect a whole lot more venture investment and M&A activity in the next few years.

This week’s biggest “yikes” moment was when reports emerged that Instacart was offsetting its wages with tips from customers. An independent contractor has filed a class-action lawsuit against the food delivery business, claiming it “intentionally and maliciously misappropriated gratuities in order to pay plaintiff’s wages even though Instacart maintained that 100 percent of customer tips went directly to shoppers.” TechCrunch’s Megan Rose Dickey has the full story here, as well as Instacart CEO’s apology here.

Slack confidentially filed to go public this week, its first public step toward either an IPO or a direct listing. If it chooses the latter, like Spotify did in 2018, it won’t issue any new shares. Instead, it will sell existing shares held by insiders, employees and investors, a move that will allow it to bypass a roadshow and some of Wall Street’s exorbitant IPO fees. Postmates confidentially filed, too. The 8-year-old company has tapped JPMorgan Chase and Bank of America to lead its upcoming float.

Reddit CEO Steve Huffman delivers remarks on “Redesigning Reddit” during the third day of Web Summit in Altice Arena on November 08, 2017 in Lisbon, Portugal. (Horacio Villalobos-Corbis/Contributor)

It was particularly tough to decide which deal was the most notable this week… But the winner is Reddit, the online platform for chit-chatting about niche topics — r/ProgMetal if you’re Crunchbase editor Alex Wilhelm . The company is raising up to $300 million at a $3 billion valuation, according to TechCrunch’s Josh Constine. Reddit has been around since 2005 and has raised a total of $250 million in equity funding. The forthcoming Series D round is said to be led by Chinese tech giant Tencent at a $2.7 billion pre-money valuation.

Runner up for deal of the week is Calm, the app that helps users reduce anxiety, sleep better and feel happier. The startup brought in an $88 million Series B at a $1 billion valuation. With 40 million downloads worldwide and more than one million paying subscribers, the company says it quadrupled revenue in 2018 from $20 million to $80 million and is now profitable — not a word you hear every day in Silicon Valley.

Here’s your weekly reminder to send me tips, suggestions and more to or @KateClarkTweets

I listened to the Bird CEO’s chat with Upfront Ventures’ Mark Suster last week and wrote down some key takeaways, including the challenges of seasonality and safety in the scooter business. I also wrote about an investigation by Consumer Reports that found electric scooters to be the cause of more than 1,500 accidents in the U.S. I’m also required to mention that e-scooter unicorn Lime finally closed its highly anticipated round at a $2.4 billion valuation. The news came just a few days after the company beefed up its executive team with a CTO and CMO hire.

Databricks raises $250M at a $2.75B valuation for its analytics platform
Retail technology platform Relex raises $200M from TCV
Raisin raises $114M for its pan-European marketplace for savings and investment products
Self-driving truck startup Ike raises $52M
Signal Sciences secures $35M to protect web apps
Ritual raises $25M for its subscription-based women’s daily vitamin
Little Spoon gets $7M for its organic baby food delivery service
By Humankind picks up $4M to rid your morning routine of single-use plastic

We don’t spend a ton of time talking about the growing, venture-funded, tech-enabled logistics sector, but one startup in the space garnered significant attention this week. Turvo poached three key Uber Freight employees, including two of the unit’s co-founders. What’s that mean for Uber Freight? Well, probably not a ton… Based on my conversation with Turvo’s newest employees, Uber Freight is a rocket ship waiting to take off.

Who knew that investing in female-focused brands could turn a profit for investors? Just kidding, I knew that and this week I have even more proof! This is L., a direct-to-consumer, subscription-based retailer of pads, tampons and condoms made with organic materials sold to P&G for $100 million. The company, founded by Talia Frenkel, launched out of Y Combinator in August 2015. According to PitchBook, it was backed by Halogen Ventures, 500 Startups, Fusion Fund and a few others.

Speaking of ladies getting stuff done, Bessemer Venture Partners promoted Talia Goldberg to partner this week, making the 28-year-old one of the youngest investing partners at the Silicon Valley venture fund. Plus, Palo Alto’s Eclipse Ventures, hot off the heels of a $500 million fundraise, added two general partners: former Flex CEO Mike McNamara and former Global Foundries CEO Sanjay Jha.

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase editor-in-chief Alex Wilhelm and I chat about the expanding podcast industry, Reddit’s big round and scooter accidents.

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Source: The Tech Crunch

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Why Spotify is betting big on podcasting

Posted by on Feb 6, 2019 in anchor, gimlet, Media, Podcasts, Spotify | 0 comments

Podcasting revenues hit $314 million in 2017, according to a third-party survey released last summer. It’s a large number for what’s been historically regarded as a niche and difficult to monetize medium, but still pales in comparison to the additional $400-$500 million Spotify says it’s willing to spend on the space this year alone.

Two major acquisitions announced early today already comprise a massive commitment to the category. The purchase of Gimlet was reported to have made up nearly half that figure, at $230 million. While no number has been revealed for the purchase of Anchor, Spotify no doubt paid a pretty penny for the buzzy creation/distribution platform, which has raised $14.4 million to date.

What, then, makes Spotify so confident that it will be able to get a return on such a massive investment? To hear the company talk about it, the service fell a bit ass backwards into the whole podcasting phenomenon. For one of the world’s largest audio platforms, Spotify was actually remarkably late to the game. Podcasting dates back at least until 2000, gaining popular momentum around 2004. A year later, Apple began supporting the technology with iTunes 4.9.

After a lengthy beta period, Spotify only opened its podcast submission program to all-comers last October. As Spotify struggles to stay ahead of Apple Music’s looming growth, however, the company is now apparently suddenly all-in on podcasting.

In an interview with TechCrunch, Spotify’s Chief R&D Officer Gustav Söderström admits that the company wasn’t doing a particularly good job serving up podcasting content. “The user experience was really poor,” he says. “There was no 15-second skip. In spite of that, we saw a lot of users listening to podcasts. It was kind of unexpected and we didn’t really understand why. It turned out people really wanted to have podcasts in Spotify with their music. If you look at radio, it’s not that surprising.”

What Spotify discovered was what many no doubt already suspected: Many users don’t necessarily need or want additional applications for all of their different audio types. Even more to the point, Spotify has excelled in one key place many other podcasting platforms have failed: discovery. It’s been a key piece in the company’s growth as the leading music streaming service and could serve to help resolve one of podcasting’s biggest pain points for most users.

Matt Hartman, partner at Betaworks — an early investor in both Gimlet and Anchor — says the massive acquisitions could help signal the beginning of a new wave of podcasting growth.

“This feels like a turning point to a third wave,” Hartman says. “Discovery is a big part of the structural issues that have been in podcasting in the past and with audio in general. And Spotify has a specific solution to that on the music side. Between discovery and monetization, I think that’s where it starts to go from niche to mainstream.”

The same firm that put podcasting revenue at $314 million for 2017 forecasts that the number will hit $659 million next year, marking a 110 percent increase. That’s a healthy bump, but still a ways away from returning Spotify’s investment in a category that’s currently split amongst countless different players — including, notably, Apple, whose iPod gave the medium its name.

Eventually, Spotify will monetize podcasts the same way it has music — through subscriptions and ad revenue. In the short term, Spotify will allow both Gimlet and Anchor to operate as they have. Gimlet in particular has demonstrated an ability to make money hand over fist. In addition to raising $28.5 million, the company has devoted a chunk of operations to created sponsored content — using its vast resources to create custom podcasts for brands looking to pay a pretty penny.

When I spoke to Gimlet’s founders following its last major round, they were happy to discuss what’s become a kind of intellectual property machine, having already licensed shows like Alex, Inc. and Homecoming to ABC and Amazon. But building companies and quality content take time. Acquiring them, on the other hand, just takes money — albeit a hell of a lot of it in this case. Spotify was late to the draw but is still hoping to ramp up quickly. So it bought one of the premier players in premium podcasting.

“The question is how much you want to invest, and only history decides if this is right or not,” says Söderström. “We think this is the right time to invest. We could have continued on our own, but we think this is a great acceleration of the strategy we already had […] This was a great chance for us to accelerate the amount of talent we have at Spotify.”

Spotify has long offered some exclusive content from Gimlet and other podcasting studios. It says it will continue to do so here, while making the majority of shows available on all platforms. Ditto for shows created through Anchor, which offers an easy method for pushing out to different services — the company recently claimed it was powering around 40 percent of new podcasts.

Even if these acquisitions do eventually make fiscal sense for Spotify, what does this “third wave” of podcasting ultimately mean for creators? The great promise of podcasting has always been a sort of democratization of content. Anyone with a computer and a microphone can create a podcast. But if the early days of the world wide web have taught us anything, it’s that all things trend toward the corporate in a capitalist society.

Anchor, a plucky startup out of New York, has offered a welcome respite, bringing novice podcasters the tools to build easy podcasts out of the box. Spotify tells me that the company will keep Anchor’s branding and products around as consumer-facing offerings to help on-board users (it wouldn’t offer the same promise for Gimlet’s brand). More recently, Anchor has also worked to make ad sales more accessible for budding podcasters).

How all of that trickles down to content creators, however, remains to be seen. Music streaming like Spotify and Apple Music have been notoriously stingy when it comes to actually paying out musicians. And premium content, the kind Spotify was after in its Gimlet purchase, takes time and money, both things that are harder and harder to come by in this digital age.

Hartman disputes the music comparison, noting that podcasting is a nascent field without the same kind of precedent for monetization. “Podcasting wasn’t this massive industry that got disrupted,” he says. “It’s an industry that is figuring out its way and growing. Creators go into podcasting trying to find a new way to connect to audiences.”

Source: The Tech Crunch

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