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- Daniel Ek's Grand Ambition
Daniel Ek's Grand Ambition
How He Built Spotify Into a $38 Billion Industry-Leader
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Daniel Ek, the Co-Founder and CEO of Spotify, helped revolutionize the music industry.
Today, Spotify is a company valued at nearly $38 billion, with 574 million users, and 226 million premium subscribers.
The path to get there?
It’s been anything but easy.
How did Daniel, in the world of music piracy in 2006, take an idea for a better music product, convince labels to work with him using a new business model, and create an industry disruptor?
And what lessons can we learn from his journey?
Let’s get to it.
Daniel grew up in Rågsved, a working-class suburb of Stockholm, Sweden.
In an interview with Tim Ferriss, he talked about his upbringing:
He also was heavily influenced by his grandfather who instilled in him the value of perseverance:
For Daniel, that struggle expanded beyond music.
While he got his first guitar at 4 years old, he got his first computer a year later and, not long after, asked a friend what the hardest language to learn was.
After discovering it was the programming language C++, Daniel took on the challenge of learning it.
He’d later say that he always loved learning and was driven by challenges.
In an interview in 2012, he said of taking on hard challenges:
By 1997, at age 14, Daniel was already a skilled programmer which came in handy as companies wanted to have websites built.
Starting by charging a few hundred dollars and raising prices with each new customer, Daniel was eventually making $5,000 per website he built. All as a teenager.
But he didn’t stop there.
Expanding on his budding empire, he started building a team:
At one point, Daniel was making almost $50,000 per month!
Over the next few years, Daniel:
Was rejected from a job at Google because he didn’t have a college degree
Dropped out of college after eight weeks because it was too theoretical
Continued creating companies
One of those companies, an online marketing company called Advertigo, sold to Tradedoubler, an ad network, in 2006 for around $1.25 million.
Over six months he sold four companies, making a life-changing amount of money.
It was a godsend for Daniel who at the time was on the verge of personal bankruptcy stemming from the Swedish version of the IRS saying he owed hundreds of thousands in taxes.
A year prior, after Skype was sold to eBay for $2.6 billion, acquiring companies in Europe was in favor, the markets opened up, and Daniel benefited.
At 22 years old, Daniel essentially retired and lived what he thought was the dream life, buying a red Ferrari, frequenting clubs, and hanging with pretty girls.
But it ended up being depressing.
He needed something different.
So he thought about what mattered to him:
He also had several conversations with Martin Lorentzon, the Co-Founder of Tradedoubler, which had acquired Daniel’s company. Martin was also looking for a new project, had sold his Tradedoubler stock options for $70 million after the company went public in 2005, and they decided to team up.
Daniel wanted an environment where he could have fun, learn from other smart people, and work on a big enough problem to change the world.
He’d soon have it.
Before committing to work on building Spotify, Daniel spent about 500 hours learning about the problems in the music industry.
The main one?
It was all over and a massive problem, but one Daniel thought he could solve:
That didn’t mean he was confident it would be a viable business.
Daniel described one conversation with his Co-Founder, Martin:
Unlike the music pirates, Daniel took a different approach:
And remember his depression after selling his last company and retiring?
Starting Spotify quickly made him feel happier:
Taking a massive risk, Daniel and Martin personally invested $10 million in total to get Spotify started and keep it alive in the early days.
They’d need it.
Closing deals with record labels turned out to be much more difficult than Daniel initially expected.
Teaming up with Fred Davis, a music industry dealmaker whom he met while briefly serving as CTO at an online fashion community, Stardoll, Daniel went big from the start, going after global music rights.
He was promptly rejected.
Think about it.
He’s 23 years old at this time, based in Sweden, and wants every major record label to license their music so he can give it away for free on the internet.
At the time, this was absurd.
Undeterred, Daniel pressed on, narrowing his focus, and pursuing the European licenses with the major labels:
It was a smart approach, but progress was slow.
During this time, Daniel said the company almost died four times. He repeatedly thought it wasn’t going to work, gained 30 pounds, and lost all his hair.
But he pressed on.
Martin was also an important factor in keeping him going:
They kept growing the team and working on the product even before they had the deals with the labels finalized.
They had to.
The product had to be fast and it’d take time to develop:
It took more than two years to convince the record labels in Europe to work with Spotify.
What finally got the deals done?
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