Martin Lorentzon is a Swedish entrepreneur best known as the co-founder of the music streaming platform Spotify and digital marketing company Tradedoubler. Lorentzon’s passion for business harks back to his time at primary school. There, he reportedly told classmates of his ambition to become a billionaire by selling one matchbox to every person from China.
Read Also: Who is Daniel Ek?
How much is Martin Lorentzon Worth?
Martin Lorentzon’s net worth is highly tied to the market valuation of Spotify.
Spotify follows a freemium business model, where it leverages a powerful free app with hundreds of millions of users.
Indeed, by 2022 Spotify had a total of 489 million users.
Of these, 295 million premium members and 205 million ad-supported members.
The interesting part is that the ad-supported side of the platform is self-sustaining, and it works as an excellent funnel for Spotify to attract as many premium members as possible.
In fact, over time, free users likely convert into premium members, and they are retained for a long time.
The ad-supported revenue stream, while it has lower gross profit margins, it works as a sales funnel for the company to attract and retain premium members.
In addition, the ad-supported stream is getting more and more interesting as Spotify is ramping up its advertising network efforts.
Early career
After a brief internship at Swedish multinational telco Telia, Lorentzon moved to San Francisco in 1995 where he landed a role with AltaVista and then with investment company Cell Ventures.
Lorentzon’s first business success came from a company called Netstrategy which he founded in 1999 with Felix Hagnö. Lorentzon had met Hagnö whilst working at Cell Ventures and, as it happened, Hagnö was the son of the owners of Swedish clothing brand Joy and thus realized that eCommerce was the next big thing.
Tradedoubler
Netstrategy would later become Tradedoubler, the first European-based platform to capitalize on the emerging affiliate marketing trend in the late 1990s.
It was at Tradedoubler that Lorentzon first exhibited his skill at finding and nurturing talent. In addition to Daniel Ek, he recruited several employees that would later become superstars:
- Jacob de Geer – founder of the Swedish fintech company iZettle which was acquired by PayPal in 2018 for $2.2 billion.
- Gustav Söderström – who worked at Stardoll with Ek and played a key role in the development of Spotify’s recommendation algorithms, and
- Ludvig Strigeus – a software developer and one of the founders of µTorrent who, like Söderström, later found himself at Spotify.
After winning numerous awards in the early 2000s, the company held an IPO on the Stockholm Stock Exchange for SEK 1.3 billion in November 2005.
Lorentzon sold his Tradedoubler stock options for around $70 million soon thereafter and moved back to Sweden after a decade or so abroad.
Lorentzon meets Daniel Eck
In 2006, Tradedoubler acquired advertising company Advertigo for SEK 10 million. The acquisition precipitated the meeting of Lorentzon and Advertigo founder Daniel Ek, with the two subsequently becoming good friends.
While both entrepreneurs were comfortable financially, they felt they lacked purpose and needed to do something different.
After leaving Tradedoubler and transferring 1 million euros in seed money to Ek, the pair started a new company called Spotify in June 2006.
Spotify was founded because they feared the music industry was in decline despite millions of users listening to an increasingly diverse range of artists online.
Early headwinds
Securing investment funding was difficult in the early days, so Lorentzon used his own capital to fund salaries, offices, and music licenses.
In an interview with North Zone, he recalled that despite the company existing on a knife edge at the time, it was something that all entrepreneurs needed to become comfortable with to succeed:
“Tradedoubler found itself just hours from bankruptcy twice. Spotify also struggled several times; the first launch in Sweden, the launch in the US, the launch in Japan, and above all the shift from desktop to mobile phones.”
The pivot to mobile
When smartphone traffic exploded, Lorentzon was faced with a dilemma many companies face: stay safe in the current business and exploit it for all it is worth, or risk everything to build a new business model for the future.
Spotify’s decision was complicated by the fact that it had to convince the record companies an app was in their best interests. The company was also unprepared for the smartphone boom and, initially, had no such app in the pipeline in any case.
Thanks to what Lorentzon dubbed “some of the world’s best programmers”, Spotify kept its desktop app alive while the mobile app was created from scratch. It even managed to convince the record companies!
Ultimately, his large investment in Spotify meant his share in the company would later grow to be worth around $4 billion.
Lorentzon served as Spotify CEO until 2013 and remained on the board of directors for another three years.
After stepping down as Spotify CEO, Lorentzon joined Swedish Prince Daniel’s Fellowship Project in 2013.
As part of the project, he traveled to secondary schools, universities, and colleges to inspire the next generation to adopt more entrepreneurial mindsets.
Three years later, he became a member of the Royal Swedish Academy of Engineering Sciences which promotes collaboration and exchange between government, research, and business entities in the country.
Between 2013 and 2018, he also returned to Telia to serve on its board of directors.
Cervantes Capital
Cervantes Capital is an investment company that provides long-term capital and liquidity to small and medium-sized Nordic companies. Cervantes prefers to invest in companies with a robust business model, attractive growth opportunities, skilled management teams, and shareholder alignment.
Through his holding entity Rosello Company, Lorentzon is the majority shareholder of Cervantes Capital.
Subsequent endeavors
After stepping down as Spotify CEO, Lorentzon joined Swedish Prince Daniel’s Fellowship Project in 2013.
As part of the project, he traveled to secondary schools, universities, and colleges to inspire the next generation to adopt more entrepreneurial mindsets.
Three years later, he became a member of the Royal Swedish Academy of Engineering Sciences which promotes collaboration and exchange between government, research, and business entities in the country.
Between 2013 and 2018, he also returned to Telia to serve on its board of directors.
Philosophy
Lorentzon’s business philosophy focuses on the acquisition of knowledge. He believes that being widely read in subjects such as technology, economics, rhetoric, and language is one of the best investments anyone can make.
He has also stressed the importance of remaining solution-oriented: “If you’re to create something of value it’s an advantage to be showered with problems as the more you solve these issues, the more the value of the company increases.”
Lastly, Lorentzon is a constant tester of new ideas and sees any failure as simply moving one step closer to success. At Spotify, for example, he experimented with selling music via downloads and also with enabling others to build apps on top of the platform before settling on its current business model.
Key takeaways:
- Martin Lorentzon is a Swedish entrepreneur best known as the co-founder of the music streaming platform Spotify and digital marketing company Tradedoubler.
- Lorentzon’s first business success came from a company called Netstrategy which he founded in 1999 with Felix Hagnö. Lorentzon met Hagnö at Cell Ventures in Silicon Valley and together, they decided to launch Tradedoubler to take advantage of the emerging affiliate marketing industry.
- Lorentzon met Daniel Ek when Tradedoubler acquired his firm Advertigo in 2016. The pair were wealthy but unfulfilled, so they founded Spotify to revolutionize the music industry and give their lives purpose. Since his success with Spotify, Lorentzon has been involved in university programs to encourage the next generation to become entrepreneurs.
Read Also: How Does Spotify Make Money, Spotify Model, Who Owns Spotify, How Does Twitch Make Money, How Does SoundCloud Make Money, Who is Daniel Ek?, Who Is Martin Lorentzon?
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