At Vator, we’ve been following the progress of Pandora for some time. Pandora, which just went public Wednesday morning to a public market starved for growth stocks now sports a $3 billion valuation. But it took Pandora more than 10 long years to hit IPO stardom. In our best-of stories, we thought we’d share some of our moments with Pandora, from interviews with Joe Kennedy, Pandora CEO, talking about Pandora’s recap and pivots, and details into its finances, to interviews with Tim Westergren, Pandora’s founder, to Tim’s keynote speech at our recent Vator Splash event in San Francisco. If you think Pandora is a cool company (I’m a fan. I’m listening to Pandora in the background as I write this), you’ll like it even more for its storied beginnings and trials along the way to success.
Here’s our some of our best-of pieces.
How Pandora survived on 12 maxed credit cards
When people, or I should say, when I, talk about successful pivots, I typically refer to Pandora as a great example. As you can imagine, therefore, it was an honor to have Tim Westergren, founder and CSO of Pandora, keynote Vator Splash and share his story and hear this inspiring tale of sheer determination, straight from the founder. When I asked Tim at the end of his speech, what kept him going, he said: “I had a dream.” After watching Tim, you’ll probably agree: Dreams are powerful. And, Tim is a quintessential example of someone who has the bullheadedness to crash through walls and not give up – a quality, many venture capitalists look for. You’ll have to watch Tim’s speech to grasp his story. For those of you that think the world is ending after 12 maxed out credit cards, and when the only thing you can ask of your employees is to work yet another few months without salary (his team went without salary for two years), don’t fear. There’s hope. Read and watch more.
Pandora shares over $20 for $3 billion valuation
Pandora hit the NYSE Wednesday morning, and less than half an hour into trading, the company’s stock was soaring 35% at over $21 a share for a market cap of more than $3 billion. That’s a far cry from the estimated $1 billion valuation Pandora was given two weeks ago when it priced its IPO at $7 to $9 a share. On Tuesday night, initial trading priced the company’s shares at $16 for a valuation of $2.6 billion. Can Pandora keep up the momentum? The company’s skyrocketing share prices come amid a recent string of naysayers who have warned investors against buying Pandora shares at such high prices. Pandora was considered a safe bet until it raised its share prices from the $7-$9 range to the $10-$12 range, causing some analysts to grow leery. Specifically, BTIG Research released a report advising investors not to buy Pandora stock at the $10 to $12 prices, arguing that Pandora’s shaky future and inability to turn a profit over the last 11 years make it an unwise investment. Rather, the research firm argued, a more accurate share price for Pandora would be $4 to $5 a share. Read more.
Winners in Pandora’s explosive IPO
Pandora has joined the elite club of Web companies whose first day of trading took off like a raging team of horses. Pandora hit the ground running this morning at $20 a share for a market cap of $3.2 billion, after pricing its IPO at $16 per share on Tuesday night. So who are the winners in this IPO?With 34.9 million shares, Crosslink Capital owns the largest chunk of the company—nearly 23%, to be exact. At $20 a share, that would make Crosslink’s Pandora stock worth nearly $700 million. Well done, Crosslink. Coming in second is Walden Venture Capital, which owns 28.4 million shares for 18.67% of the company. Walden’s share of the company is now worth over $480 million. And with 21.4 million shares, Greylock Partners claims 14% of the company, which is now worth $428 million. Greylock is followed by Labrador Ventures, which owns 12.9 million shares that are now worth $258 million. Read more.
Q&A with Tim Westergren of Pandora
I got a chance to chat with Pandora founder Tim Westergren, who will be presenting at Vator Splash February 3, in San Francisco. While he was reticent to discuss Pandora’s rumored IPO this year, he did state that an IPO will not change the service that Pandora delivers or how the business is run.
Q: The New York Times just published an article on the shaky future of the digital music industry. Do you worry that if the music industry falls on hard times, there will be a backlash against Pandora and other Internet radio sites? Tim: I don’t think so. I think over time what this pressure will do is force the industry to figure out which services are accretive to their business and which aren’t. I think Pandora really passes that test. I think we’re a positive influence on the overall economics. I think the overlying fundamental issue is the fact that people aren’t buying CDs as much. But I think Pandora is a bright spot in the industry. Q: How strong is Pandora’s paid subscription service? If royalty rates shoot up again, could you see Pandora being forced to return to a paid-only service? Tim: If rates shot up, we’d be in big trouble. It’s our single biggest cost. Read more.
Pandora banks on advertising over music sales. Interview with CEO, Joe Kennedy
While Pandora expects to rake in $40 million in sales this year, double last year, more than half is expected to go toward royalty payments. Currently, Pandora pays 3 cents per listener per hour, said CEO Joe Kennedy. But he expects the RIAA (Recording Industry Association of America) – which has historically pushed for higher fees – won’t prevail in driving them higher. In this second part of a three-part interview with Kennedy, we not only cover the topic of royalty fees, but what’s going to drive revenue for Pandora to cover that immense cost. Traditional radio stations typically play 16 audio ads in one hour of listening time! Kennedy said Pandora plans to expand audio ads, but they’ll never reach 16 in an hour. And, while Pandora is selling $1 million in monthly music sales, Kennedy says it’s advertising on mobile and the Web that will be the driving force. Here’s our interview, partly edited. At the time, Pandora was not developing a service on Android. In an email update, Kennedy said Pandora is releasing this service “as soon as possible.” Additionally, Kennedy said Pandora has now reached six million iPhone activations, and 1.5 million Blackberry activations. This is up 20% and 50%, respectively, from activations just one month ago.
Read and watch more.
Pandora sees revenue up 80% this quarter
Even though Pandora recently introduced a $36 annual subscription service called Pandora One to augment its advertising revenue, the Emeryville, Calif.-based company expects sales to rocket in the current quarter and double this year, thanks in part to its popularity on the iPhone app. In this three-part interview segment, I talk to Joe Kennedy, CEO of Pandora, a personalized radio station that creates music stations based on personal preferences. Kennedy told me, when I recently interviewed him on stage at the ContentNext’s EconSM conference in San Francisco, Pandora now has 5 million iPhone activations and 1 million Blackberry activations. Here’s my interview, partly edited. BF: Pandora generated $20 million in revenue last year. And, it looks like you’re going to double this year. Where do you see revenue this quarter and this year? JK: The first couple of months this year were a little bumpy. Advertisers were figuring out what their budgets were. But we’ve been having a fantastic year in terms of generating ad revenue. We are currently tracking up 80% this quarter verses the same quarter last year and I think we have a decent shot of doubling to $40 million this year. Read and watch more.
How Pandora hit the reset button
In this segment of Lessons Learned, Bambi Francisco interviewed Joe Kennedy, CEO of Pandora, a personalized radio station that creates music stations based on personal preferences. BF: You started Pandora when it was Savage Beast Technologies and there were 12 people there at the time. You were actually undergoing a restart. Many people are nervous about starting a company and having to hit the reset button. But it was a good thing for Pandora. JK: Pandora is a recapitalization, or revision, which started in January of 2000. There still is a core music genome project that is still a part of that. But the core business is entirely different. One piece of advice that I would give to entrepreneurs is that it is incredibly common that it’s very rare that the founding idea turns out to be right on the money. There are almost always pretty considerable twists and turns. That’s just part of the reality. BF: So you shouldn’t fear a restart or a recap. JK: I wouldn’t fear it. I’d expect it. You need to keep your eyes open on what is working and what is not working in the earliest stages of the game. There is a great paradox in that your greatest capability as a young company is that you need to be maniacally focused on one thing and be better than the rest of the world but every once in a while you need to ask yourself if you’re really on the right track. You need to make some course corrections. But at the same time, you need to maintain focus and not scattered into four things. You’ve got to maintain being focused and periodically have perspective about what’s working and what isn’t working and make the coarse correction. Read and watch more.
