The Bubble Around Spotify

NEW YORK (TheStreet) -- Spotify's latest venture-capital injection of $250 million values the streaming music service at more than $4 billion, which is leading the Twitterati to ask whether there might be a social bubble around the company, one that might be about to pop.

Maybe. Or maybe what we have is a venture-capital bubble instead.

Fact is, this isn't a "round" of venture capital in the traditional sense, with a bunch of firms getting together and taking pieces of the deal. This is one firm, Technology Crossover Ventures, paying $250 million for what amounts to 1/16th of the target company.

Why would TCV do this?

One reason might be that it's awash in money it needs to invest. Its current portfolio includes such companies as Netflix  (NFLX), Facebook  (FB), Expedia  (EXPE), and Groupon  (GRPN). Past investments include CBS' (CBS) CNET, Electronic Arts  (EA), and (somewhat to my surprise)  (TSC).

There are lots of winners here. Big winners. We think of venture capitalists as making 10 investments, hoping maybe three will break even and one will be a 10-1 win. TCV's batting average looks to be considerably better than that.

TCV is not alone. The success of Facebook has brought a new level of wealth to Silicon Valley. Thanks to Facebook Jim Breyer of Accel Partners is now the hottest venture capitalist out there, and he's in Spotify. He's said to be worth $1.5 billion. That's right up there with John Doerr, long the valley's top dog, who is worth $2.9 billion.

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