Music streaming service Spotify is pumping more money into its coffers.
The Swedish company has raised $1 billion in convertible debt from investors, a Spotify spokeswoman confirmed to Fortune. Private equity firm TPG and hedge fund Dragoneer Investment Group led the round, along with clients of Goldman Sachs.
Despite having the most users (reportedly about 30 million), the music streaming service has faced growing competition from others, most notably Apple’s
own service which debuted that summer and already has more than 11 million paying subscribers. This week, music hosting service SoundCloud announced its own on-demand music subscription service that will directly competing with Spotify and others.
“As content consumption continues to evolve, Daniel Ek and his team are well-positioned to build the leading marketplace for consumers, artists, and the music industry at large,” TPG partner David Trujillo said in a statement. “This financing gives them the strategic resources to further strengthen their leadership position.”
TPG invested out of its private equity fund focused on growing late stage startups, as well as its special situations credit arm.
Last summer, Spotify closed a $526 million round, which put its valuation at $8.53 billion. However, with the investing climate chilling over the last several months to a year—and Spotify’s lack of net profit based on the scant information available—it’s not surprise the company opted for convertible debt, which can be exchanged for stock later. According to the Wall Street Journal, citing anonymous sources, Spotify’s deal terms come with “onerous guarantees,” including being able to convert the debt into equity at a 20% discount to the share price of the public offering, among other special promises. Spotify has also told investors that it plans to go public in the next two years, according to the Journal.
Other large startups in need to big chunks of money, like Uber and DraftKings, have also gone the way of convertible debt over the past year.