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VV Show #54 - Tim Westergren of Pandora

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Tim Westergren

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."

Posted by Greg Galant on Mar 9, 2009 | Permalink | Comments (7) | TrackBack (0)

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Comments

I love Pandora.

Tim, you have a lot of passion. Not many people could have gone through what you did and come out on top. Kudos my man.

Good show Greg.

Posted by: Joe at March 9, 2009 8:44 PM

Greg,
You have no idea how important this Venture Voice is to me. It has been key source of education, creative solutions and inspiration that has helped me build my company www.ShowcaseConnections.com from its start in September of 2008. I listen to all of your shows at least twice and always take notes. Venture Voice is largely the reason that my website is where it is today because of the incredibly valuable stories of experience. This podcast with Tim Westergren was extraordinarily important and timely. I appreciate Tim’s honest account of battling through the difficult times because he believed in his idea so strongly. I have poured my heart and soul into a web concept that I created and quit my job to develop. My former employer is now trying to sue me for separating from her company to develop a concept uniquely my own. I am in a place with which Tim is familiar. Although the website continues to grow and achieve great successes with new opportunities coming in, I am having to try very hard not to focus on the fear that it could all be taken away by pure vindictiveness and jealousy. Listening to the story of how Tim kept working toward his goal and kept innovating despite the uncertain future is exactly what I needed to get through this week that was particularly difficult. The interview brought me back to the realization that I have come too far to even think about giving up. Thank you!

Posted by: Audrey Ryan at March 14, 2009 10:37 PM

Hats off to you Tim. GOOD LUCK with evrything...you have gone through the dip and I sincerely hope everything will work out for you.

"If Winter's Here, Can Spring Be Far Behind?"

So...stay optimistic...

Posted by: andhapp at March 15, 2009 11:41 AM

Everytime I try to use Pandora, it never plays the style of music I want. Try setting up an Italian traditional station! Garbage...

Posted by: JazzGuy at March 15, 2009 8:16 PM

Audrey

I second your comment. I know I am going to have a good week when I get a new venture voice podcast. I listen to each episode at least twice and I make note cards to reinforce the lessons. Thanks I have started Engineering Accounting Magazine/website.

Good show Greg

Great guests

Posted by: Brian at March 16, 2009 11:42 PM

Excellent interview. Very inspiring and informative.

Posted by: Steve at May 8, 2009 12:46 AM

Greg & Tim,

Great show, with some very inspiring and motivational stories. I feel many allusions to my own life... extremely relate-able.

I do have a quick two-part question. Was there anywhere in particular Tim went for research as he was starting, and further were there any sources he found from either a development, or business standpoint that really made an impact? (books, websites, articles, people...)

Thanks again for a great show!

Posted by: Brandon at October 14, 2009 12:24 AM

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