Venture Voice – interviews with entrepreneurs

Entertaining Entrepreneurship

VV Show #54 – Tim Westergren of Pandora

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It takes only a few seconds to customize a radio station on Pandora. Its founder Tim Westergren has been struggling for almost a decade to make it that way. Pandora was five years in the making before it streamed a single song to a user. For over two of those years the company was completely broke. While Tim convinced employees to defer over $1 million in salaries, Pandora underwent several changes in name, product and revenue models. Now Pandora is a leading online radio destination that’s starting to bring in sizable ad revenue. Tim is still battling with the record industry for its survival.

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2:40 – Studying music technology at Stanford

4:30 – “The world of the working musician” and the advent of desktop recording

5:45 – The Music Genome Project, the underpinnings of Pandora

8:15 – Early entrepreneurial experience: band manager and self-employed film composer

8:50 – Single greatest challenge of building a business: “Attracting, retaining and managing the best talent you can.”

9:40 – Writing the first genome and starting Savage Beast Technologies (the precursor to Pandora) – “the first phase was euphoric”

12:10 – “We thought we were building a recommendation tool for other businesses.”

12:45 – “A year after we started, we began to sense that money was going to be a challenge.”

14:30 – Bank account at zero

15:40 – “The company deferred about a million and a half dollars of salary. So, people really did sacrifice an awful lot.”

17:40 – “In [20]04 when we finally raised a big round of investment… we had no business. We had this incredible piece of intellectual property.”

19:10 – “Music discovery… is a huge problem and there’s a big appetite for it… and this thing we build was the perfect way to solve it. So, we just had to figure out how to bring it to market.”

19:45 – Why were you able to raise money in 2004 and not 2002?: 1) Impressive client list 2) “We had demonstrated a real entrepreneurial ability as a company.”

21:55 – “I can’t blame anyone who, back then, decided to quit. That was a perfectly rational decision.”

22:05 – “The company should not have survived. Really, we were dead. We were financially insolvent on paper for two years.”

23:35 – Raised $9MM in 2004 with a focus on web enabled kiosks for record stores.

24:00 – Hired Joe Kennedy as CEO, “re-purposed the business for radio.”

26:10 – Leaving the CEO role: “It’s not a job that I really wanted.”

26:50 – “My time is best spent doing strategy and evangelism.”

29:20 – Building and launching the new product, Pandora.

32:15 – Limited release in Fall 2005

33:00 – $12MM round in November 2005, went “free” shortly after and “took off like a rocket ship.”

34:00 – “We’ve never spent any marketing money on Pandora… Gave it to bloggers and they became our evangelists.”

36:00 – “If you make good choices with your personnel and your product, they tend to line up.”

36:35 – “Growth was our focus in the beginning, growth and also the building of a brand and our identity.”

37:50 – “Now we’re at revenue per hour. That’s an important metric for us.”

38:55 – “We thought it was going to be a subscription business” “It was pretty clear, people weren’t going to pay for radio.”

41:00 Question for Tim from VC Martin Gedalin submitted over Twitter: “How can you create ad engagement with naturally disengaged audience?”

41:30 – Pandora audience: surprisingly engaged, “comes back to the site six times an hour.”

42:15 – Doubling annually, $20MM in revenue last year, “it’s all going in the right direction”

42:20 – “It takes a lot of effort. We have a 45 person advertising sales team.”

42:50 – “We’re not profitable but that’s largely due to the performance fees we pay, the per-song fees.”

43:10 – Industry and rate structure

44:55 – “Pandora was the only company that would be able to fight this fight.”

45:50 – On audio advertising

47:00 – On the recording industry and the RIAA: “I think we’re part of the solution, not the problem.”

47:40 – “The business doesn’t support the level of taxation they’re pushing for.”

49:15 – On starting a business in the music industry (responding to Venrock VC and former eMusic CEO David Pakman’s post): “There are lots of landmines.”

50:55 – Current snapshot of Pandora: “We’ve built a genuine ad platform.”

52:00 – “I’m confident [the licensing issue] will get resolved. Nobody stands to gain by not resolving it.”

53:00 – “We see an opportunity to really redefine radio and do it globally, and do it in every musical genre… and to, at the same time, change the plight of the working musician.”

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