How did Shazam chiefs magic up $1bn valuation?

22 January 2015 -

App’s bosses hit financial benchmark rarely reached among UK-based tech startups

Jermaine Haughton

London-based “music discovery” app Shazam has become one of the UK’s most successful tech startups after receiving a valuation of more than $1 billion (£660 million). Based on a recent £19.8m investment round from three unnamed parties, Shazam has a joined a small number of tech firms that have reached the landmark figure despite being headquartered well outside the much-lauded US region of Silicon Valley – a traditional hub of tech startups.

Nonetheless, the company has established a firm foothold in the US, with chief executive Rich Riley and his team based in New York while founder and executive chairman Andrew Fisher works in London. Fisher leads on app development and the music industry side of the business, while Riley oversees advertising and sales.

In Fisher’s view, the billion-dollar valuation has stemmed from investor confidence in Shazam’s overall business strategy. “The valuation is a reflection of the fact that the strategy is working and we’re making really good progress,” he said. “One of the nice things that people don’t always recognise is that we’re a home-grown, UK company. We’re very proud to be a UK company.”

First unveiled 13 years ago, Shazam utilises the microphone on mobile devices to identify music playing in the user’s earshot. Once its identity has been conformed, the user can then pay to download the relevant sound file. As well as attracting a monthly, active flock of around 100m users, the app has been downloaded half-a-billion times, and earns revenue from the 10% of global digital music sales that it is thought to stimulate. In addition, Shazam carries mobile advertising and licenses its technology for use as a promotional tool – as seen in more than 500 “Shazamable” TV campaigns that have played out in the US.

Indeed, the firm is planning to open up a further revenue stream by using smartphone cameras to offer value-added content via QR codes or augmented reality.

According to Fisher, Shazam has transformed into “more of a media company” than a music outlet, and that the new investment “reflects the substantial progress we have made in delivering a new paradigm for brands and content owners to increase engagement with their audiences”, while “magically connecting people” to the world around them.

Prior to the latest funding round, Shazam had raised more than £65m from investors such as Mexican telecoms billionaire Carlos Slim. On the potential for taking the app public, Fisher said: “We do believe that Shazam would be a very successful public company, but we’re not commenting on timescales. The important thing about this fundraising is it gives us more options around an IPO.”

For more thoughts on how to achieve a transformation through digital technology, sign up to this forthcoming CMI seminar.

Image of Shazam logo courtesy of Twin Design / Shutterstock.