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The Pandora founder talks about maxing out credit cards and buffets questions about an IPO
Pandora founder Tim Westergren just delivered the first keynote speech of the night at Vator Splash at Cafe du Nord in San Francisco. Jim Feuille of Crosslink Capital, Pandora's biggest investor, introduced Tim and outlined some of the reasons why Crosslink invested in Pandora. Five years ago, Pandora was known as Savage Beast, and provided music recommendations to major businesses like Target and Best Buy. Crosslink, at the time, was in the market for a music startup and it stumbled across Savage Beast, which was then a subscription based model meant to rival Sirius and XM.
Crosslink didn't think Pandora's subscription model was viable. Their trial groups insisted that they would never pay for it. So they switched to an ad-based model and the rest is history. Crosslink ended up investing $33 million in the company.
We actually got some pretty awesome "Tim" chanting. And then Feuille played the Ghostbuster's theme song "Who ya gonna call?"...with the implicit "Tim" in place of "Ghostbusters."
Here are some of the highlights of his speech:
--Prior to Pandora, Westergren had played in a number of bands, and he realized that there are some similarities between being in a rock band and being an entrepreneur: 1) you have no money, 2) it's creative, and 3) you're working in a creative environment.
--He had worked as a film composer before Pandora and he got good at predicting what a film director wanted before they asked. He had the idea to codify the genomic approach to musical tastes and then pedaling it out to music businesses. They raised $1.5 million in March of 2000--"right before the shit hit the fan," he added (referring to the burst of the tech bubble).
--When he first created the Pandora prototype, they typed in Beatles and the first song that came up as the closest musicological connection was...the BeeGees. But, what they realized was that when the BeeGees got started, they were actually a sort of Beatles copycat band and their music was actually closely aligned with Beatles, and Westergren and crew realized that they were onto something.
--The company plowed its way through tough times, charging up credit cards (Westergren maxed out 12), eating Ramen, (rumor has it that Westergren attempted to rally the troops to take a collective trip to Reno to gamble their way into more money). He owed $1.5 million in back salaries...ouch.
--He kept on trucking, pitching to close relatives, hedge funds, and everything in between. And then he got the funding he needed and was able to pay back salaries. Some people got $100K checks. (!!)
--The success of a company depends on its ability to embrace change. Pandora started out as a kiosk company and evolved to an ad-based direct-to-consumer Internet radio service.
--Anecdote: a while back he was in a suite in a Las Vegas hotel at 11 o'clock at night, and it was a reception for a big Wall Street investment bank. In one hand was a glass of red wine, in the other was an $80 truffle-infused kobe beef burger, and he thought, "What the f*ck am I doing here? At midnight the clock is going to strike and this is going to become a coke and a Big Mac, and I'm going to be in a corner sweating over my bills..."
Westergren then took some questions and answers from the audience. The first one was probably on everyone's mind--it was certainly on mine--how do you convince 50 people to work for free?
"At a certain point, you do what you're doing for the person next to you, not for yourself. You have to inspire people, you have to lead by example. We were the first ones to give up salary," Westergren explained.
I went ahead and asked the obvious: "Does Pandora plan to IPO this year?"
"We're not going to talk about it," said Westergren. "We planned to be a stand alone company from the beginning."
Image source: emusician.com
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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
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