Spotify's €200m valuation and music label schmoozing is music to We7

So the rumors that Spotify is raising a new round of financing of around $50 million have been confirmed by TechCrunch. That gives it a valuation of $250 million. The money will come from Asian investor Li Ka-Shing and another venture firm, potentially Wellington. Our report from October that Spotify had raised €15.3 million from Northzone Ventures and Creandum at a €71.6 million pre-money valuation was close-sih. In fact it was €20 million, and – most interestingly – included investments from all the big music labels. That put the company at a €100 million valuation. Now, more rights holders are participating, pressured by lots of interest from other VCs. Spotify has 2 million UK users but in Sweden it’s rumoured to have at least 5 million 1 million, and a growing footprint in Germany.

Is it true that labels are making more money now from Spotify than iTunes in those markets? Well, they they clearly have a direct relationship with the company, but put it this way, my builder has heard of iTunes – but he hasn’t heard of Spotify.

Meanwhile We7, a UK-basd ad-supported music streaming service and integrated MP3 store which competes with Spotify only in the UKalready has already amassed 2.5m UK people and 1.5m via media partners which include the NME, The Guardian, The Sun and GQ. We7 competes with streaming music sites, Spotify, lala, and Imeem and with music search sites such as Seeqpod, Songza, Skreemr, Deezer, and HypeMachine.

In January last year We7 took a $7m/€5m series A round from Eden Ventures, Spark Ventures and musician turned entrepreneur Peter Gabriel.

While Spotify pushes for a US launch and retains its Joost-style model (stream from a desktop application) the web based nature of we7 means that the music can be played anywhere and shared via social networking sites, Twitter and even email. Their in-house research says 94% of users will listen to ads if they get music for free, so they’ve pushed the advertising angle hard, doing things like turning the service green for the launch of the latest Green Day album. They’ve also gone for the biggest audience base that was attractive to advertisers.

In theory that means it can scale faster. But Flash does not play on the iPhone, and Spotify is pushing it’s mobile angle hard with an iPhone app waiting for approval in the app store.