Spotify plans for Direct Listing as their next move.
Have a perfect pitch, aren’t getting the right attention from funders. Listen to what Spotify is setting the example as amidst high competition in the digital industry . They are on road to skip the traditional way of funding and want to show the business world that things can be done in different manner altogether. Spotify is planning for are ‘Direct listing’ approach.
What’s Direct listing ?
Direct listings is where a company starts selling its stock on the public markets without going through the whole process of pleasing the Investment Banks(which are considered to overpaid). Direct Listing are not new, but they’re extremely rare. Never heard of this terminology before its because direct listings have been limited to small-cap companies, mostly in biotech and life sciences as of now.
Direct IPO is where the business creates the stock and then sells it itself on its first trading day. This means the company can raise more money by paying less fees, however this also means that the company will be less hyped and therefore taking more time to raise funds.
What its Different ?
In regular ‘IPO’ model ,the company creates shares and then sells them in bulk lots to Brokerages, investment bankers, funds etc before the first trading day .The middlemen get these stocks at a lower price and then distribute them on the first day of trading. Doing this means the business is guaranteed to get the money they want and the middlemen get profit.
So in short they want to cut the middleman just how Apple did with the Mobile carrier monopoly market.
Launched in 2008 by entrepreneurs Daniel Ek and Martin Lorentzon Spotify Sweden based startup has some high hopes with Direct Listing. Just as any other Business Competition Spotify rival Apple Music has got lot of traction in spite starting late(in 2015). Just to stay ahead in the game Spotify has to keep reinventing, which can never happen without strong financial support.
Having 65 million monthly paying customers Spotify has surpassed the apple’s base. Spotify knows that it will eventually need to offer something unique and interesting video-wise if it wants to play big in Show Business and its certainly doing by teaming up watching TV with Hulu . A successful direct listing from Spotify could prompt a wave of startups following the company’s footsteps. Just how Snapchat IPO filing has given Spotify hopes to try their luck.
For sure we are going to see these trend to be followed in the Indian Startup paradigm too, It’s just matter of time before this starts happening. India has over 19,000 tech startups, by the government’s most recent count. But when it comes to exits – either through mergers and acquisitions (M&As) or initial public offerings (IPOs) – the numbers haven’t been at all impressive.
Will this IPO strategy help Spotify stay ahead of hefty rich apple to sustain itself in the game.
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