Stronger by Paying Salaries and I Have 1 Billion Employees

Three days later, at 19 King Street in Stockholm, the capital of Sweden.

An all-black Volvo XC90 turned off the main road and pulled up to the Spotify headquarters.

It was a twelve-story office building, designed primarily in a minimalist Northern European style and blended with modern architectural concepts.

It looked rather unassuming, seemingly at odds with Spotify’s market position as a leading music app in Europe and America.

Daniel Ek was wearing a custom-tailored blue suit over a white shirt, with a royal blue tie. His attire was crisp and exceptionally formal.

In Stockholm, the daytime temperature in October was only 8 degrees Celsius. He had wanted to wear a woolen trench coat, but to maintain a respectable appearance, he steeled himself and stood waiting downstairs without one.

”Boss, he’s just a Chinese guy. Even though the Alexa Smart Speaker has brought the company three million paying users, I don’t think he deserves this kind of reception.

Microsoft, Google, and Amazon are all developing similar smart speaker products. We should be focusing our energy on discussions and collaborations with other device manufacturers.”

Spotify’s co-founder, Martin, pursed his lips, perplexed by Daniel’s behavior.

In his view, the success of the Alexa Smart Speaker was merely a matter of getting a head start. Once Microsoft, Google, and Amazon made their move, Orange Technology’s R&D capabilities would stand no chance against these European and American tech giants.

Hearing this, Daniel’s expression immediately grew solemn. He warned in a serious tone, ”Martin, I want you to immediately drop your contempt for Orange Technology. Chen Yansen’s business acumen is in no way inferior to Facebook’s CEO, Zuckerberg. If not for their different circumstances, Chen Yansen’s business achievements would have likely surpassed Zuckerberg’s long ago.”

”I know Orange Technology’s valuation exceeds 20 billion US Dollars, but that’s just a valuation. Facebook is already public, and Zuckerberg’s holdings are worth as much as 30 billion US Dollars.”

Martin shook his head in disagreement.

”You have too little information! Chen Yansen also controls a courier company that handles over 10 million packages a day and an e-commerce company with annual sales exceeding 200 billion. In terms of overall strength, Zuckerberg is nowhere near Chen Yansen.”

Daniel shrugged and said with a light chuckle.

’An average daily pickup volume of over 10 million packages?’

Martin was stunned. He had only researched Orange Technology and had completely overlooked Senlian Capital’s other holding subsidiaries.

The entire population of Sweden wasn’t even 10 million!

Yet this man’s courier company was providing logistics services for over ten million people every day. Although Martin wasn’t familiar with how valuations were calculated in the logistics industry, he knew that with an annual volume of over three billion packages, its valuation couldn’t be less than 20 billion US Dollars.

He had to admit it; he had truly underestimated the man’s financial power and his influence in the East.

Just then, a Volvo XC90 came into view, stopping in the open area in front of the main entrance.

CLICK!

The car door swung open.

Chen Yansen stepped out. He was wearing a light gray, form-fitting suit. His straight, 1.86-meter-tall figure made him stand a few centimeters taller than even Daniel Ek and his group.

Song Yuncheng followed close behind, wearing a fleece-lined business suit and attending the meeting in his capacity as an assistant.

”Mr. Chen, welcome!” Before Chen Yansen could even approach, Daniel led a group of Spotify executives forward to greet him.

In terms of wealth and status, there was simply no comparison between him and Chen Yansen.

Eight months ago, Spotify had accepted 40 million US Dollars in financing from JPMorgan Chase, reaching a post-money valuation of 1.5 billion US Dollars and easily joining the ranks of unicorn companies.

But a year ago, Chen Yansen’s Orange Technology had already secured 1.35 billion US Dollars in financing from DST Capital, with a valuation as high as 9 billion US Dollars.

Now, a year later, Orange Technology had become a leading mobile phone manufacturer in Hua Country, with its valuation most likely exceeding 20 billion US Dollars.

Moreover, Orange Technology was just one of the man’s many holding subsidiaries.

Daniel prided himself on being a business genius, but when compared to Chen Yansen, his sense of accomplishment from founding Spotify completely evaporated.

Therefore, he adopted a very humble posture.

”Mr. Ek, it’s a pleasure. Thank you for your contributions to the Alexa Smart Speaker application ecosystem.”

Chen Yansen extended a hand and replied with a smile.

’In his eyes, the Spotify of today was no different from domestic apps like Kuwo, Tiantian, and Kugou Music, with a valuation of 2.5 to 3 billion US Dollars at most.’

’Only the Spotify of six years from now—the one that would ring the bell at the New York Stock Exchange with a market cap of over 26 billion US Dollars—was worthy of a second glance.’

Daniel quickly shook Chen Yansen’s right hand and said with a smile, ”You’re too kind, Mr. Chen. Orange Technology is an important partner for Spotify as well.”

After exchanging a few pleasantries outdoors, Daniel led Chen Yansen and Song Yuncheng into the Spotify headquarters building.

The group took an elevator to the rooftop terrace.

From there, they could overlook the entire city of Stockholm and its coastline.

”Mr. Chen, please have a seat!” Daniel offered warmly.

In 2012, Spotify was in a period of rapid growth. Its main markets were in European and American countries such as Germany, Australia, Ireland, and Lighthouse. The company was also tentatively collaborating with Penguin Music, preparing to expand into the markets of Hua Country and the rest of Asia.

Last year’s revenue was 240 million US Dollars, while revenue from Q1 to Q3 of this year had already reached 690 million US Dollars, showing significant growth.

But what gave Daniel a headache was that in order to secure the rights to a music library of 15 million songs from record labels like Universal, Sony, and Warner, Spotify had to pay enormous licensing fees every year.

These fees accounted for as much as 50% of their revenue!

The more users they had, the more money they lost!

Although Chen Yansen had no publicly listed companies to his name, his Senlian Capital possessed immense financial power.

To put it bluntly, Daniel wanted to use this meeting as an opportunity to secure a financing deal with the Asian businessman before him and obtain a handsome sum for expansion.

Over the past three months, he had been in contact with Goldman Sachs, but they had only made an insulting offer based on a 2.4 billion US Dollar valuation, which Daniel naturally refused.

But with only three months left in 2012, if he failed to secure more funding, he wouldn’t even be able to pay his licensing fees, let alone run advertisements and acquire new users.

”I hear Apple is negotiating with the record labels, planning to expand the iTunes music library.”

Chen Yansen remarked nonchalantly after taking his seat.

Daniel’s heart tightened. Apple’s smartphone shipments in Europe and America were second only to Mountain Star’s. Leveraging this hardware advantage, iTunes posed a massive threat to Spotify.

This was also why he placed so much importance on Orange Technology!

The Alexa Smart Speaker was only part of it. Orange Technology’s expansion into the Eastern European mobile phone market had presented him with a glimmer of opportunity.

If Spotify could form a strategic partnership with Orange Mobile Phone and have its app pre-installed on their devices, they could acquire new users at a low cost.

After all, the cost of advertising on Facebook was too high. Compounded by the pressure from licensing fees, it was becoming truly unbearable for him.

”The iTunes library is much smaller than Spotify’s. To enhance the user experience, I’ve signed licensing agreements with record companies like Universal, Sony, and Warner. Our music library totals over 20 million songs. Mr. Chen, Spotify is the best choice for Orange Technology.”

Daniel explained hurriedly.

He was terrified that Chen Yansen would ditch Spotify and switch the Alexa Smart Speaker’s music provider to iTunes.

”Is that so?” Chen Yansen countered noncommittally.

”Mr. Chen, what do you think of Spotify as a product?” Daniel asked, changing the subject with a dry laugh as he rubbed his nose.

’What do I think?’

Chen Yansen narrowed his eyes, mulling over the man’s words. He saw Daniel’s eager expression and the ingratiating smile on his face. ’Don’t tell me he’s taking me for a sucker and wants to hit me up for funding?’

In a matter of seconds, his mind raced through a dozen possibilities, but the likelihood of a pitch for funding was the highest.

”Mr. Ek, do you want me to be honest?”

Chen Yansen replied with a light chuckle.

”Of course.” Daniel sat up straight, preparing to hear what the business genius thought of Spotify’s business model.

”High licensing costs, an unclear profit model, slow user growth, a low paid-user conversion rate...”

Chen Yansen didn’t pull any punches, pointing out Spotify’s problems one by one.

The smile on Daniel’s face gradually faded, his facial muscles tensing as an awkward expression crept over him.

He knew all the problems Chen Yansen was pointing out.

The investors at Goldman Sachs had used similar arguments to force Spotify’s valuation down to 2.4 billion US Dollars.

But it was precisely because it was the truth that it stung so badly.

Daniel hadn’t expected Chen Yansen’s ”honest opinion” to be so completely unfiltered. The man was far too blunt.

Seeing Daniel’s expression grow increasingly sour, Chen Yansen reined himself in and let the topic drop.

”Mr. Chen, I am working on ways to improve the issues you’ve mentioned. What I want to know is, in your opinion, does Spotify have investment potential?”

Daniel took a deep breath and asked point-blank.