Pandora closes new financing round

Chris Caceres · July 10, 2009 · Short URL:

Internet radio giant will keep on streaming tunes to our computers and smartphones

  Pandora, an Internet radio giant, has had a wild week.   Just a few days ago, record labels and webcasters came to an agreement, which pretty much has saved Internet radio. 

To top it off, today Pandora has closed another round of funding.  They still won’t tell us how much, peHUB is estimating somewhere around $35 million. 

A representative from Pandora told me Greylock Partners led the round and was joined by Crosslink Capital, Walden Venture Capital, Labrador Ventures, King Street Capital, Hearst Corporation, DBL Investors and Selby Venture. 

This financing comes at a good time, when Pandora had been struggling under a pretty hard royalty structure, requiring the company to pay almost 70% of its revenue to the record labels.  If the webcasters and record labels did not come to this recent agreement, Pandora’s fees would have increased by 33% next year – probably putting Pandora out of business.

But nobody wants to see Online radio go away, especially as it's availability grows while the world adopts more smartphones.

The fundraising news isn’t too surprising for a company like Pandora.  We recently spoke with Pandora’s CEO Joe Kennedy in a series of interviews you can find below, who told us the company was expecting sales to double this year, due to the popularity of its iPhone app.  The service also draws 6.5 million unique visitors to its website and another 3 million visitors to its mobile applications – nearly 10 million uniques per month.

Along with the funding, we should expect to see some significant changes in how Pandora functions for its users.  On July 7, Tim Westergren, Pandora’s Founder laid the changes out in a blog post.  Basically, Pandora is going to begin limiting listening to 40 hours per month on its free version.  If a user hits that limit, they can opt for unlimited listening for the remainder of that month for $0.99 cents.  Westergren says these changes should only affect about 10% of Pandora’s users.  The company will still keep its premium version, which offers unlimited, ad free listening but costs $36 dollars/year.

Pandora told us it will use the funding toward continued growth and development.

Support VatorNews by Donating

Read more from our "Trends and news" series

More episodes

Related Companies, Investors, and Entrepreneurs



Joined Vator on

Pandora, the leading internet radio service, gives people music they love
anytime, anywhere, through a wide variety of connected devices: laptop and
desktop computers, smartphones, connected BluRay players, connected TVs,
etc. Personalized stations launch instantly with the input of a single “seed” –
a favorite artist, song or genre. The Music Genome Project®, a deeply
detailed, hand-built musical taxonomy, powers the personalization or
Pandora. Using this musicological “DNA” and constant listener feedback
Pandora crafts personalized stations from the more than 800,000 songs that
have been analyzed since the project began in January 2000.
More than 75 million people throughout the United States listen to
personalized radio stations for free on Pandora through their PCs, mobile
phones and devices such as the iPad, and connected in-house devices
ranging from TVs to set-top boxes to Blu-Ray players. Mobile technology has
been a significant factor in the growth and popularity of Pandora, starting
with the introduction of the Apple app store for the iPhone in the summer of
2008. Pandora instantly became one of the most top downloaded apps and
today, according to Nielsen, is one of the top five most popular apps across
all smartphone platforms.

Pandora is free, simple and, thanks to connectivity, available everywhere
consumers are – at the office, at home, in the car and all points in between.
In 2009 the Company announced that Pandora would be incorporated into
the dashboard in Ford cars via SYNC technology; GM has already followed in
announcing plans to integrate Pandora into its vehicles and Mercedes-Benz
introduced their Media Interface Plus device that works with the
free Pandora iPhone app to provide direct control of Pandora from in-dash
stereo controls. This was all great news for the millions of Pandora listeners
who had been plugging their smartphones into car dashboards to listen to
personalized stations while driving. More than 50 percent of radio listening
happens in the car, making it a crucial arena for Pandora.

Today tens of millions of people have a deeply personal connection with
Pandora based on the delight of personalized radio listening and discovery.
These highly engaged listeners reinforce the value Pandora provides to: 1)
musicians, who have found in Pandora a level playing field on which their
music has a greater chance of being played than ever before; 2) advertisers,
who benefit from the multi-platform reach of Pandora, as well as its best
practices in targeting consumers for specific campaigns; 3) the music
industry, which has found in Pandora a highly effective distribution channel;
and 4) automobile and consumer electronics device manufacturers, who have
noted that incorporating Pandora into their product makes it more valuable
to consumers.

Pandora continues to focus on its business in the United States. The radio
arena has never been hotter, thanks to technology that enables radio to be
personalized to the individual and more accessible than ever before. Right
now millions of people listen to Pandora in the United States and we hope
someday to bring Pandora to billions of people around the world.

• 2000 – Tim Westergren’s Music Genome Project begins.
• 2005 – Pandora launches on the web.
• 2008 – Pandora app becomes one of the most consistently downloaded
apps in the Apple store.
• 2009 – Ford announces Pandora will be incorporated into car
dashboard. Alpine and Pioneer begin selling aftermarket radios that
connect to consumers’ iPhones and puts the control and command of
Pandora into the car dashboard.
• 2010 – Pandora is present on more than 200 connected consumer
electronics devices ranging from smartphones to TVs to set-top boxes
to Blu-ray players and is able to stream visual, audio, and interactive
advertising to computers, smartphones, iPads, and in-home connected