Tag: IPO

Welcoming Paul Vogel, Spotify’s New Chief Financial Officer

January 16, 2020

Paul Vogel is new to the role of Spotify CFO, but not to Spotify—or to the relationship between finance and the tech/media industry. For the last four years, he’s been at Spotify heading up Investor Relations and leading the FP&A (Financial Planning & Analysis) and Treasury teams. Prior to that, he spent 20 years in various positions on Wall Street. Investing wasn’t necessarily his primary passion, but the media and internet companies he was working with were.

“I loved having the ability to understand the changes and the strategies that were going on in those industries,” he said. “I was always excited to meet the executives who were running those companies and understand how they thought about growing their businesses and sharing my opinion on where things could go.”

So in 2016, after a stint as a CFO at a startup and then some time back on Wall Street, Paul found his way to Spotify, uniting his passion with his career. And as we recently announced, after nearly four years at Spotify, Paul has been appointed our new CFO. We sat down with Paul to welcome him into his new position. 

Spotify has gone through some significant changes since you joined in 2016. What have been the two to three biggest that you’ve noticed?

The most obvious change is the growth of both the platform and the number of people listening. When I started, we had just passed 30 million subscribers and 100 million users, so to turn around and end 2019 with more than 100 million subscribers and about 250 million users, that’s insane growth.

The second would obviously be the increase in the number of employees and offices within Spotify. That growth is just, again, amazing. I’m not sure I would have predicted we’d grow so quickly. I think we had about 1,500 employees across the globe when I started, and now we have more than tripled in size.

But although the company culture has evolved with its size, the ethos of the company hasn’t changed at all. When I came here, it was about empowering content creators to share their talent and creativity with the world and enabling billions of users to enjoy it. That hasn’t changed. But now it goes way beyond music. We are talking about all of audio, and so our opportunity is even bigger.

And of course, the IPO was a big change as well. What was notable about that, from your point of view?

With the IPO, we were doing something unprecedented by taking the company public in a way that had never been done before, and that was really exciting. Our ability to attempt this unique approach dovetails nicely into another one of our strengths, Spotify’s ability to think about things differently, take risks, and innovate. It stems from Daniel’s leadership and the way the company is set up. Of course, it would have never been possible without Barry McCarthy (Spotify’s prior CFO) and his vision for re-inventing the process of going public.

What I think was great about the way we went public was that we wanted to be fully transparent, giving all investors—not just the big investors, but all investors—the same access to information. It was having an investor day before we were public where we could share the company’s vision widely to everyone at once, and it was having that message delivered by the senior leadership team. This is quite different from a traditional IPO where only select investors can have that access to your senior management. So all of the transparency we talk about internally, we lived it. Going public via our direct listing was one of the most rewarding moments of my time at Spotify and also crystalized our commitment to transparency with our employees and investors.

Now it’s a new year, new decade, new role. What excites you most about the road ahead, whether it’s long term or short term?

The opportunity to expose even more artists and creators, and not just music, but now all of audio, to even more people is massive. The opportunity is even bigger now than I thought it was when I first stepped in the door. I think we’ve only just scratched the surface of our potential. There is still tremendous opportunity to expand our user base. There’s no reason why every smartphone in the world shouldn’t have a streaming music/audio service on it. And there’s no reason why that service shouldn’t be Spotify. 

What are some of the challenges or headwinds Spotify may face in the next 12 months or so?

Long term, as you get bigger as a company, being able to continually act as fast as you’d like is a challenge. I think it’s incumbent upon the leadership team to make sure we dedicate resources efficiently and effectively to allow us to innovate, grow, and take risks. That’s number one.

In the short term, we are making big investments in podcasting. We’re investing in the medium  and are confident that, over time, it will drive more value for users and increase subscribers and engagement on the platform. We believe the opportunity for us here is vast. Part of my job is giving proof points to Wall Street to help tell our story and provide context and clarity on our financial results, forecast, and priorities. 

What do you think our readers would find the most surprising about the general role of CFO?

While the role is obviously about understanding the finances of the company, it’s really about analyzing the numbers to help set strategy, allocate resources most effectively, and set up the business for long-term success. When done right, our jobs can really add a lot of value into the ecosystem. At Spotify, for example, our job is to make the engineer’s job easier and more efficient. It allows the creative team to go out and sign deals and have the resources to actually execute against the plan they have. While to some people what we do may seem like a black box or just about the numbers, it’s really about asset allocation, asset utilization, and analyzing how the business is performing. This actually allows the people who are creatives to be creative and enables engineers or data scientists to thrive in building new products, tools, and services.

If we were to take a look at your recently played music and podcasts, what would we see?

At a high level, I seem to be pretty aligned with the rest of Spotify listeners. My 2019 Wrapped most-listened-to artist was (drumroll) Post Malone, which I think is probably not what some people might expect from a 46-year-old CFO with three kids, but I love Post Malone.

I have been listening to a lot of country recently—Thomas Rhett, Luke Bryan, Luke Combs—and I love Andy Grammer. There’s something about Andy Grammer that just makes me happy. When I need to just kind of zone out, I listen to the things that I’m guessing a lot folks might expect of me: Grateful Dead and Springsteen—I’m a huge Bruce Springsteen fan.

On the podcast front … in the mornings it’s a lot of news-oriented stuff. I listen to The Journal., the Wall Street Journal/Gimlet podcast, which is great. I listen to The Daily from the New York Times. So I listen to those two every morning on my commute in, and that’s kind of my thing. I really like using my Daily Drive as well. Recently, I’ve been listening to Spittin Chiclets, a Barstool Sports one. As a huge hockey fan, it’s a fun escape listening to hockey players just talk about the sport for two hours. They actually interview current players, which can be quite entertaining.

 Stay up to date with one of Paul’s go-to morning podcasts, The Journal.

Spotify Celebrates 100 Million Premium Subscribers

April 29, 2019

Today in our Q1 2019 results we shared that Spotify has reached an important milestone: 100 million premium subscribers.

After more than 10 years since our launch and one year since we became a public company, we’re now in 79 markets—and infinitely proud to be bringing new podcasts, music, artists, and genres to listeners everywhere.

In celebration of this accomplishment and in thanks to you, our subscribers, we’ve put together a special playlist. Look closely and you’ll notice that each song title contains a number. When combined, they add up to 100 million—just like all of you.  

Thanks to all our premium subscribers for being one in a [100] million.

IPOs Are Too Expensive and Cumbersome

August 8, 2018

This article first appeared in the Financial Times.

The US initial public offering market is broken.

The process as we know it was born on October 13 1971, when Intel raised less than $10m from 64 underwriters. That valued the company at $58m after the fundraising. But IPOs haven’t changed much since 1971, and the process no longer works in many key areas. Among those areas are the quiet period, which limits what companies can tell investors ahead of the float, the lock-up rules that would have prevented our employees from selling their shares, and the size of the underwriting fees.

That is why Spotify, the streaming service where I serve as chief financial officer, opted for a direct listing instead.

But the real elephant in the room is the enormous discount that investors extract from newly-floated companies. Bankers told us that they try to price new listings so that they rise 36 per cent once trading starts.

That gain is what the institutional investors who buy IPO shares ahead of time insist on as their reward for taking the risk of buying into untested companies. With hits such as LinkedIn, the investors double their money in a day, while January’s flop ADT saw them lose 12 per cent. The economics makes sense for the investors, but the system penalises successful individual companies.

At Spotify, we chose more of a free market approach. A direct listing involves selling shares straight to the public, without paying an underwriter to line up investors at a set price.

Avoiding the lock-up period was a very important part of our decision to list Spotify directly, but there were also clear financial benefits. First, we saved on the underwriting fees, which range from 3.5 to 7 per cent of the money raised. But the bigger cost saving was avoiding the IPO discount.

Think of it this way: the bigger the first-day gain in the closing price of your newly-issued stock, the higher the “cost” of your IPO. The investors who bought shares before the market opened pocket the gain in the stock price, instead of the company.

Many news stories I have read about Spotify’s direct listing also emphasise the fact that, unlike a lot of newly-listed companies, we didn’t need to raise capital to fund our growth. That is true. We deliberately developed our company in a way that enabled us to go public without raising additional money.

Other companies might not have that luxury, but they can still benefit from a direct listing. Here’s why. Deciding whether a company needs to raise money is an important strategic question. So is the issue of whether it needs a public stock listing. But it is a mistake to conflate the two.

Raising money from an IPO is an entirely tactical decision and should be weighed against all the other funding alternatives for private and public companies. Many of the other choices are considerably less expensive than a traditional IPO. If you want to take your company public, that is a different question — one that should not be solely about raising capital.

At Spotify, for instance, if we needed to raise capital today, we believe we could sell additional shares in the public or private markets at a 2 to 4 per cent discount to fair market value and pay a 1 per cent advisory fee to our investment bankers.

We also could sell convertible bonds, or do both. So could any other company that chose a direct listing instead of a traditional IPO. There is no reason that going public has to be part of a company’s decision about how to finance its growth.

The IPO process may not have changed much since 1971, but the rest of the capital markets have. And that is the point. Companies have more flexibility than they may realise when it comes to raising capital. And the same is true when it comes to going public.

More People Than Ever Are Streaming on Spotify

May 2, 2018

A lot has happened recently here at Spotify. From going public on the NYSE, to announcing our newest partnership with Hulu, to unveiling our new and improved platform for free users, we’re constantly innovating our services to provide a better listening experience for users, and a more in-touch platform for artists.

Every year we grow as a company, which allows us to make unprecedented changes to our platform, and in turn, engage more users in the magic of music streaming. We’re excited to announce that this year is no different. Spotify now boasts 170 million monthly active users and 75 million premium subscribers.

We’re continuing to provide the best streaming music experience, for our artists, our employees, and our millions of users. Having the support of our global audience helps make it so.

Whether you’ve been streaming on Spotify for years, or downloaded the app just last week, we’re glad you’re with us. Happy listening!

Spotify Lists on NYSE as SPOT

April 2, 2018

This post was originally published on April 2.

Tomorrow, Spotify becomes a listed public company on the New York Stock Exchange. And it feels like the right time to pause and acknowledge the thousands of Spotify employees around the globe who helped build out the Spotify ecosystem while staying true to who we are and what we believe. You make me proud to come in and learn and work alongside all of you.

Lots of people have asked me how I feel about tomorrow’s listing. Of course, I am proud of what we’ve built over the last decade. But what’s even more important to me is that tomorrow does not become the most important day for Spotify.

It’s the day after, and the following day that matters — and all those days to come. Because that’s when we will continue the hard and important work of our mission: To unlock the potential of human creativity — by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by it.

Spotify is not raising capital, and our shareholders and employees have been free to buy and sell our stock for years. So while tomorrow puts us on a bigger stage, it doesn’t change who we are, what we are about, or how we operate.

This is why we are doing things a little differently.

Normally, companies ring bells. Normally, companies spend their day doing interviews on the trading floor touting why their stock is a good investment. Normally, companies don’t pursue a direct listing. While I appreciate that this path makes sense for most, Spotify has never been a normal kind of company. As I mentioned during our Investor Day, our focus isn’t on the initial splash. Instead, we will be working on trying to build, plan, and imagine for the long term.

Sometimes we succeed, sometimes we stumble. The constant is that we believe we are still early in our journey and we have room to learn and grow.

I have no doubt that there will be ups and downs as we continue to innovate and establish new capabilities. Nothing ever happens in a straight line — the past ten years have certainly taught me that. My job is to ensure that we keep our foot on the pedal during the ups, so that we don’t become complacent, and that we continue to stay the course with a firm grip on the wheel during the downs.

We have a lot to do — we are only in the second inning — and I’m more excited than ever for the future.

Remember, tomorrow is just another day in our journey to fulfill our mission.

Harder, better, faster, stronger.

Daniel

 

Spotify has filed a registration statement (including a prospectus) with the Securities and Exchange Commission (“SEC”) relating to its ordinary shares. Before you invest, you should read the prospectus in that registration statement and other documents Spotify has filed with the SEC for more complete information about Spotify and its ordinary shares. You may obtain these documents for free by visiting EDGAR on the SEC web site at www.sec.gov. The registration statement relating to Spotify’s ordinary shares was declared effective by the SEC. This communication shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction.