Now Powering Music Intelligence For Spotify, VEVO & More, Echo Nest Nabs $17M To Go Big Abroad

There’s a good chance that you’ve never heard of The Echo Nest. As a self-professed music intelligence company, Echo Nest is at its best when running quietly behind the scenes, methodically mining, packaging, and classifying music data from across the Web to provide developers with insight into their listeners’ musical preferences and taste profiles. Instead, you might better know Echo Nest as the company that powers Spotify Radio or as the brainpower behind VEVO’s new personalized recommendation features.

Thanks to its machine learning technology, Echo Nest has been laboriously building what is now one of the largest repositories of dynamic music data in the world, housing 5 billion data points from over 30 million songs. The Somerville-based company has come a long way from its beginnings at MIT Media Lab, where it grew out of its co-founders’ dissertation work in 2005. Today, the startup is helping over 340 developers better understand their music content (and their users), including prominent names like Clear Channel’s iHeartRadio, eMusic, MOG, Spotify, Nokia, the BBC and VEVO.

It hasn’t been an easy road for digital music startups over the last, oh, 10 years, and Echo Nest CEO Jim Lucchese is quick to admit it hasn’t been without its hiccups. Yet, because the company has focused so intently on data, building its model to cater to developers and startups themselves, it’s been able to avoid many of those Music Industry Blues in the post-Napster world.

Plus, being a data-driven digital music business in the current landscape just doesn’t elicit the same puzzled expressions it once did, especially from investors, the CEO tells us. Case in point: Today, the startup has received a serious vote of confidence from the other side of the table — $17 million votes, in fact.

This morning, Echo Nest officially announced that it has closed a $17 million round of venture funding, led by Norwest Venture Partners. The startup’s previous investors, including Matrix Partners, Commonwealth Capital Partners, Fringe Partners, Jim Palotta and board member Michael Brown, also contributed to the round. The investment brings Echo Nest’s total funding raised to just over $27 million, making it one of the most-funded music data startups out there.

Obviously, a lot of the appeal comes from the fact that Echo Nest has been able to ink deals not only with big names like Spotify but with thousands of independent developers (and even, gasp, EMI!), exposing it to over 150 million end users each month.

Not only that, but while the team is guarded when it comes to sharing insight into their financials, Lucchese tells us that sales have increased seven-fold over the last 18 months and that its overall query volume — the number of questions it sees about music every month — has grown 20-times-over in the last year to 250 million queries per month.

On top of already working with European customers like the BBC, the CEO tells us that the company has seen a big spike in inbound requests from international developers and music companies, particularly in South America and Eastern Europe. That’s part of the reason that the startup has been eager to take on another round of funding — to begin to really making a push to scale international sales, marketing, and business development operations. In fact, he expects its current team of 40 to grow significantly in the coming months.

Yes, scaling, hiring, and beginning to pump cash into marketing are all typical results of funding announcements like this. But I think there are a couple of other interesting things going on here.

For starters, we hear a lot about “Big Data” these days. It’s one of the hottest (and most overused) buzzwords in Geekdom. Hell, some of us even capitalize it now. Big Data. See? It’s out of control. The term has become essentially become a synonym for volume — for massive, gargantuan datasets. And while size is definitely a part of it, so are velocity and variety, in other words, the speed or rate at which the data changes and the diversity of the type of content, etc.

Echo Nest has been known to describe itself as the leading Big Data company for music. And, given the overuse of that, it’s easy to see that as an eye roller. In the big picture, there is definitely something to be said for the relative novelty of Big Data-focused businesses in the music industry.

Leveraging that aggregated and extremely diverse pool of music (and listener) data to improve the online/mobile music experience — based on real, nuanced indications of what will make the best match rather than falling back on the kind of limiting, catch-all segmentation native to radio (e.g. “urban,” or “indie,”) — is easy to get on board with. Hell, that’s been Pandora’s mission statement from the beginning and the reason the founders created the Music Genome Project.

Which brings up what has always seemed (at least to me) to be one of the startup’s biggest value props: The founders were smart, from the get-go to establish the business on a B2B model. Echo Nest has never had to deal with the giant pain in the ass and drama fest that is music licensing. The labels were notorious for destroying any startup that appeared to be trying to stir the pot. Instead, Echo Nest hawks its technologies to businesses, the startups themselves, enabling them to build better, smarter applications based on its data.

Interestingly, both Pandora and Echo Nest are really kindred spirits in this sense, as both originally developed technologies that sought to find better, deeper ways to classify, describe and understand music. With more granular data comes better, more accurate prediction and matching. But, Echo Nest is in the safer, perhaps more stable position (in comparison to Pandora) of not running a consumer-facing business. Obviously, Spotify Radio, which Echo Nest powers, is a direct competitor to Pandora. So, really, Echo Nest can go about to various digital music businesses and platform and help create an army of Pandora competitors.

So, does that represent an actual threat to Pandora? The Echo Nest CEO doesn’t think so. And, as Peter Kafka may or may not correctly point out, at the end of the day, there are only so many digital music companies and platforms it can serve. At least profitably.

That’s why Echo Nest will also be using its new millions to expand beyond the scope of music. Talking to Lucchese, he makes the very salient point that we can wax on all day about how impressive Facebook’s social integrations are, or Spotify’s, but without any real, valid context, our social shares and integrations mean little. Most of the songs/notifications in your social music sharing feed on Facebook you probably couldn’t care less about.

Lucchese’s point being that, with the proper context about me, my behaviors, tastes and preferences, those notifications and discovery tools naturally become a lot more engaging and useful. Matching gets better, etc. The Echo Nest team has been doing a lot of research into the corollaries between people’s musical tastes and the rest of their life — their political affiliations, food preferences, etc. After a lot of analysis, perhaps unsurprisingly, the team found that music taste profiles were remarkably good at predicting, say, which party you’ll vote for in the next election.

There’s some interesting research, which you can check out here. However, political affiliation and music seems like low-hanging fruit, the real interesting stuff comes as Echo Nest tries to find additional areas and places that are conducive to music-based prediction.