A Secret Idea

In the fall of 2005, Daniel Ek passed through Vasastan in central Stockholm. His thoughts were brimming with an idea for a new company. He had a plan and a potential partner, but the timing still wasn’t right. What he needed right now was a job and an income.

The past few years had taken their toll on him. He had been working full-time since he graduated from high school. His was a world where new ideas sprung up all the time, and the work never really stopped. Daniel’s hustle included formal roles at tech companies, where he would get paid to apply his skills in online advertising and search-engine optimization, but he was also constantly developing other ideas, putting small teams to work on projects that he would often fund himself.

It was a taxing lifestyle. His hair was thinning, his clothes were unkempt, and he looked older than his twenty-two years. But none of that mattered much to him. He was a man with big ideas, and a mind fixated firmly on the future.

Daniel walked down Tegnérgatan until he arrived at the site of his job interview, a pub called Man in the Moon. It was furnished in a British style, with dark wood paneling lining the walls and sofas covered in green leather upholstery. After a moment, he fixed his gaze on a bespectacled man in his late thirties who waved him forward.

Mattias Miksche was dressed like your average tech entrepreneur—t-shirt and suit jacket. He had just become CEO of Stardoll, a website full of virtual paper dolls that catered to young girls. Stardoll had new investors, and the site’s user growth was impressive. Now, Miksche needed to recruit staff, rebuild the back end, and scale up the company for the international market.

The two shook hands and sat down. At first, the low-key Daniel Ek didn’t make much of an impression. But as the conversation unfolded, Mattias Miksche felt the young man growing in confidence. The disheveled twenty-two-year-old offered a variety of interesting thoughts on where the industry was heading.

“I’d like you to be our new CTO,” Mattias Miksche said, at last.

Daniel was ready and willing, but he wanted to join only as a consultant, not as a full-time employee.

“I have another thing that I’ll need to take care of,” he explained.

Mattias Miksche accepted, and the meeting ended with a handshake.

Light My Fire

To manifest his secret idea, Daniel Ek knew he needed a partner. He had recently met Martin Lorentzon, a thirty-six-year-old entrepreneur with a crooked grin and slicked-back hair. Lorentzon had moved to Stockholm from the textile city of Borås near Sweden’s west coast in the late nineties, and elbowed his way through the capital’s resurging tech scene. And if everything went as planned, he would soon be a very wealthy man.

When the tech bubble burst in March 2000, things had turned sour for nearly the entire industry. Martin, however, had been lucky enough to build a company in one of the few corners of the sector that survived the crash and thrived in the years that followed. With his partner Felix Hagnö, he had founded an affiliate marketing company called Tradedoubler, which offered a partially automated system for banner placement, in which advertisers paid for results rather than exposure. The company had taken off since its inception in 1999 and was now—near the end of 2005—poised for an initial public offering on the Stockholm Stock Exchange.

When the two first met, Daniel was only three years out of high school, but he already had a good deal of experience in Sweden’s fledgling online advertising business. In a recent side project, he had gathered a few programmers to create a new service he called Advertigo. The system was said to know what advertisement best fit a given space online. Advertisers could opt to pay only when the ad generated the phone number of a potential customer.

With the economy rebounding, Daniel was seeking new opportunities, which led him to Tradedoubler’s head office on Norra Bantorget in Stockholm, and into Martin’s orbit.

The pair first met in summer 2005, when Daniel tried to pitch Tradedoubler on a product search engine akin to Google’s “Froogle” (later redubbed Google Product Search). According to his own retelling, Martin wasn’t very impressed, but the two of them stayed in touch. Not long after, Daniel organized a game of Counter-Strike between his employer, the search-engine optimization firm Jajja, and Tradedoubler. Daniel’s team won the challenge handily, making a strong impression on Martin. Years later, he found out that Daniel had secretly enlisted the help of several professional gamers from the renowned Swedish Counter-Strike team Ninjas in Pyjamas in order to win.

Martin had no formal title at Tradedoubler. Instead, he took the role of an omnipresent founder, boosting the morale of his employees and troubleshooting various challenges. One former colleague would later describe him as the company’s “flying goalkeeper,” using a metaphor from two of Sweden’s favorite pastime sports: soccer and ice hockey. Martin had a brash, competitive spirit about him. Unwilling to be pinned down by specific responsibilities, he was ready to assist as negotiator, salesperson, problem solver, and cheerleader. Now, in the fall of 2005, his main goal was to take Tradedoubler public. After nearly seven years with the company, he was ready to sell off his shares and move on to something new.

Despite an age difference of almost fourteen years, Daniel and Martin hit it off. They found common ground discussing search engines, metadata, and how to generate large amounts of online traffic to sell advertising. More importantly, they bonded over the potential of peer-to-peer technology, in which files are distributed directly between users’ own hard drives without needing to transfer through a central server.

The soon-to-be partners also had several friends in common. One was Jacob de Geer, a social acquaintance of Daniel and one of Tradedoubler’s first employees. Much later, Jacob de Geer would make hundreds of millions of dollars by selling his payments company, iZettle, to PayPal.

In the fall, Daniel Ek and Martin Lorentzon began meeting regularly to discuss business ideas. Slowly, Daniel opened up about how he wanted to merge peer-to-peer technology with commercial content. Martin liked what he heard and seemed eager to give it a shot. But first, he had to list his company and sell off a large portion of his shares.

True Colors

A month or so after his job interview in Vasastan, Daniel Ek started to work as chief technology officer (CTO) at Stardoll. He quickly recruited several programmers out of his own network, and the team started to rebuild the website from scratch.

Colleagues found Daniel to be an introvert who avoided conflicts. He never wore a button-down shirt, preferring instead jeans and yesterday’s t-shirt. He’d often forget to clean up after himself. Once, allegedly, a sign proclaiming that “Daniel Ek’s mom doesn’t work here” appeared in the office kitchen. Soon, it disappeared, without any mention from Daniel.

After a few weeks, however, the twenty-two-year-old’s coworkers began to see how gifted he was. Mattias Miksche delighted at Daniel’s progression and at his own recruitment of the new CTO. As the weeks wore on, Daniel ensured that traffic to the website was through the roof. And when his shyness gave way, he could be both funny and fascinating.

Stardoll.com became one of the internet’s biggest playgrounds for girls between the ages of ten and seventeen. The website suddenly had millions of weekly users and was raking in cash by selling virtual clothing and accessories. Mattias Miksche now ran one of the hottest startups in Stockholm. He started recruiting the best engineering students in town, fresh out of the KTH Royal Institute of Technology, widely recognized as the MIT of Sweden. He also secured $10 million in financing from two of the world’s leading venture capital firms: Index Ventures in London and Sequoia Capital in Silicon Valley.

Despite this success, Daniel was committed to leaving Stardoll as soon as he could. His head and heart were in getting his own company on its feet. He also considered taking some of his colleagues with him on his new adventure. One candidate was a twenty-seven-year-old development director named Henrik Torstensson. Another was the company’s artistic director, Christian Wilsson, a tall and lanky guy with a dry sense of humor. But above all, Daniel wanted to recruit Andreas Ehn, a phenomenal programmer with side-swept bangs who dressed in carefully ironed shirts. Andreas had attended the private prep school Tyska Skolan in Stockholm, spoke with a posh accent, and had a worldly air about him. He’d recently interned at the software company BEA Systems in Silicon Valley as a part of his final year at the KTH Royal Institute of Technology. He never completed his degree, opting instead to work at Stardoll. When Daniel opened up about his side project, the ambitious Andreas Ehn was more than a little curious.

Paradise City

On November 8, 2005, Tradedoubler was listed on the Stockholm Stock Exchange. Martin Lorentzon was now able to sell a large portion of his shares for nearly $12 million. Felix Hagnö, who owned approximately twice as much of the company, raked in even more.

The two founders were now in the public eye. They gave an interview with the Swedish business paper Dagens industri and posed for photographs in Tradedoubler’s office and in the Norra Bantorget square. In the photos, Martin is dressed in a pinstripe suit and a striped shirt. He holds a Sony Ericsson P910i cell phone in one hand, and the stylus used to navigate the screen in the other.

Tradedoubler’s founders were quick to transfer their newfound wealth to Cyprus, where they had registered holding companies two months earlier. A few weeks after Tradedoubler went public, Daniel Ek established a holding company in the tax haven as well, likely with Martin’s help. Martin dubbed his company Rosello Company Limited. Daniel’s company was named Instructus Limited. By 2005, Martin and Daniel were ready to invest in a new project together.

There was just one snag: per the usual initial public offering (IPO) restrictions, the Tradedoubler founders’ shares were locked up, meaning they couldn’t sell all of their holdings immediately. Both Martin and Felix had to wait at least six more months. After that, the plan was to sell and reinvest in Martin and Daniel’s new venture.

Feeling Hot Hot Hot

In early 2006, Martin Lorentzon and Daniel Ek met frequently outside of work. Martin, now a multimillionaire, would take the green subway line to the grey suburb of Rågsved to visit his protégé. Daniel still lived in the apartment he grew up in, part of a three-story building atop a hill on Stövargatan, a few blocks from Rågsved’s subway station. His mother, Elisabet, and stepfather, Hasse, had moved out, but were still registered at the address. A hundred yards away, a few concrete high-rise apartment buildings shot up toward the sky. In Martin’s eyes, the rundown suburb would have contrasted sharply with the lush suburban area of Borås where he’d grown up in the 1970s.

The duo bonded by watching movies. At one point, ahead of Martin traveling out to Rågsved, Daniel jokingly gave him the same advice that Michael Corleone gives Enzo the Baker in the first film of the Godfather trilogy: “Put your hand in your pocket like you have a gun.”

Daniel’s apartment in Rågsved quickly became an impromptu workshop. Servers hummed in the closet, downloading countless pirated files at all hours of the day, warming the apartment to tropical levels. As they spitballed business ideas, Daniel and Martin would sometimes sit in front of their computers wearing nothing but underwear. They had now agreed to start a company, but Daniel still wasn’t sure he could count on Martin’s financial investment. He wondered what the next step was.

“I’ll put in ten million crowns,” Martin said at one point.

Daniel would later describe how he checked his bank account the next day and found the money, a sum worth more than a million dollars, sitting there. Martin’s decisiveness and dedication must have excited the twenty-three-year-old computer wiz.

They would later tell the story of them sitting in Daniel’s apartment, calling out words in the hope of naming their company something great that wasn’t already taken. Martin thought he heard Daniel call out, “Spotify” from another room. He typed “spotify.com” into his browser and nothing came up. He proceeded to purchase the domain name all over the world. Daniel, however, would maintain that Martin must have misheard him. He doesn’t remember saying “Spotify.”

Poker Face

As winter gave way to spring, Daniel Ek frequently had lunch with his Stardoll colleague Andreas Ehn. The young programmer had quickly taken on an informal leadership role at the company and looked like Daniel’s natural successor as CTO. During these informal chats, the pair talked about new business opportunities and the future of technology.

Gradually, Daniel opened up about his other projects. He wouldn’t say exactly what he was up to, but Andreas would recall how Daniel enjoyed discussing the possibilities of BitTorrent, a type of peer-to-peer technology which broke files down into smaller pieces, sent them between computers in a network, and then reassembled them on arrival. The technology allowed fast transfers, even over networks with lower bandwidth, and had been made popular by The Pirate Bay, the infamous Swedish file-sharing website. In essence, Daniel wanted to do something similar to The Pirate Bay, but legally. During that spring of ’06, Daniel revealed more details to Andreas, at one point proclaiming that it should be possible to build an ad-funded streaming service for video, music, and other media.

Around the same time, Daniel gave his colleague Christian Wilsson two small freelance assignments. One was to construct a graphic profile for his side project, Advertigo. Daniel mentioned that he was going to show the product to a representative from Google, with whom he had scheduled a meeting at Arlanda Airport north of Stockholm, as one source would recall. The second assignment was to create a logo for a new company that had “something to do with streaming.” Daniel told Wilsson that he was tossing the idea around with someone else, but he didn’t say whom.

“It’s important that the logo is ‘web 2.0,’” Daniel explained.

When Christian Wilsson created Spotify’s first logo, he was inspired by the graphic profile of Skype, the voice-over internet company founded by the Swede Niklas Zennström and the Dane Janus Friis in 2003. He used the same type of bubbly, playful font, and added three wavy lines above the “o” in Spotify to illustrate streaming. In a couple of days, he’d created Spotify’s first, light-green logo, with the wavy lines that would later become its app icon. He invoiced Daniel $770 for his work.

In late March 2006, Daniel Ek sold Advertigo to Tradedoubler for $1.3 million. The company had no income and basically consisted of some advertising technology and a few tech consultants. Advertigo’s services would have little impact on Tradedoubler’s operations, according to several executives serving at the time. Then again, the purchase price was small compared to Tradedoubler’s market cap of around $360 million. The deal hardly made a blip on anyone’s radar.

For Daniel, however, the windfall was more than welcome. Within a matter of weeks he and Martin Lorentzon would sign the paperwork and start their new company together.

Spotify was still in its conceptual stage, but Daniel now had his own funds to kickstart the project. In the coming months, he moved from his rundown apartment in Rågsved to a condo on Hagagatan in Vasastan, not far from Martin’s place in central Stockholm. There, he furnished a home office, installed a massive TV in the living room, and equipped his new digs with the latest home technology. He also left Stardoll to dedicate all his time to his new company.

In later interviews, Daniel would describe a period of partying in which he, newly rich, bought a Ferrari sports car and hung out at the nightclubs around Stockholm’s central business district of Stureplan. But the girls he wanted to impress turned out to be fake and shallow. The adventure ended with Daniel isolating himself in a house in the countryside, close to his mom, strumming his guitar. As he came out of his depression, he decided to dedicate his life to Spotify, a company that married his love for technology with his love for music.

The timing of this is unclear. More than a decade later, Swedish motor vehicle records contained no trace of a Ferrari, though an agency representative admitted that their historical data was sometimes spotty.

Perhaps Daniel’s origin story should not be interpreted literally. Many people who know him attest to his tendency, particularly in his early years, to embellish and add spice to his stories. As a young man, two people would recall, he earned the nickname “Spicer”—or “Kryddan” in Swedish—among some of his close friends.

Good Vibrations

According to Martin Lorentzon’s official story, Spotify was founded on his 37th birthday, on April 1, 2006. The paperwork was filed a couple of weeks later. For a brief period, the Swedish company, Spotify AB, acted as Spotify’s parent company. It was, in turn, owned by Martin and Daniel’s holding companies on Cyprus.

With the Advertigo deal behind them, and the paperwork complete, the pieces quickly fell into place. On May 3, Tradedoubler announced that Martin had sold half of his remaining shares in the company for almost $11 million. Felix Hagnö had sold shares worth twice that. To calm the market, the founders promised not to sell any more shares for the next six months. The stock price took a hit, but would soon bounce back and climb to new heights. Between them, Tradedoubler’s founders had now amassed around $70 million.

At about the same time, Daniel Ek went to see his successor at Stardoll, Andreas Ehn, to make him an offer.

“We’re starting a company. You want in?” he said.

Andreas didn’t need much time to decide. Pioneering the international market for virtual paper dolls was not a bad gig for an engineer in his early twenties, but here was an irresistible opportunity. He soon became Spotify’s first CTO, with enough stock options to eventually make him independently wealthy.

Andreas Ehn’s departure from Stardoll was a blow to its CEO, Mattias Miksche. In the years to come, he would find himself in an uphill battle with Daniel and Andreas for Stockholm’s top programming talent. Stardoll was no longer the hottest startup in town.