Spotify is the latest internet company to get swept up in the current dotcom bubble, with the music streaming service reportedly involved in a new funding round that values it at $1bn (£616m).

The fledgling digital music site is reported to be seeking around $100m in funding from the Facebook investor Digital Sky Technologies (DST) and Silicon Valley firm Kleiner Perkins, which owns a stake in Twitter and FarmVille-creator Zynga.

Loss-making Spotify is building up to its long-awaited launch in the US. The online jukebox hopes to build on its rapid European expansion, where around 10 million people use its advertising-funded service for free. Fewer than 1 million people pay for Spotify's premium service.

Spotify and DST declined to comment.

Kleiner Perkins, which has led investment rounds for Amazon and Google, is reported to be paying $50m for just under 5% of Spotify.

The high-profile Russian investor DST, which has poured money into daily deals site Groupon among other highly valued internet startups, is also reported to be involved in the funding round – which would be Spotify's largest to date.

Five-year-old Spotify's $1bn (£616m) price tag is the latest in a flurry of sky-high valuations of internet companies, which has provoked talk of a new goldrush similar to the dotcom bubble of a decade ago.

Facebook sparked the frenzy last month with its $50bn valuation, and in recent weeks Twitter has been said to be worth up to $10bn, the social-gaming firm Zynga $9bn and Groupon $15bn.

Spotify, meanwhile, has had talk of its growth stymied by its long-delayed expansion into the US. The four major music labels – Universal Music Group, Sony, EMI and Warner Music Group – have to date been reluctant to seal distribution deals with the online jukebox due to concerns about its "freemium" business model.

Converting one in 10 music lovers into paying customers has so far not convinced all four major labels of Spotify's free streaming charm. Earlier this week it was reported that both EMI and Sony had finalised a US expansion deal with Spotify, but that Universal – which is the world's largest music label – and Warner were still not on board.

The most recent audited annual accounts for Spotify, for 2009, show it lost £16.6m in the UK on revenues of £11.3m.