From minus -$1.5M to plus +$2.6B (Pandora)

Have you ever had $1.5M in debt? Tim Westergren, founder of Pandora did. But he was able to turn it into a $2.6 billion dollar company.

Here are the keys to how he managed to do this:

1. Initial personal pain. Prior to Pandora, Tim Westergren had played in a number of bands, watching talented musicians try to find an audience and but have no easy way to do that.

2. Initial solution. Then he worked as a film composer. He spent all his time trying to figure out what a director wanted. He interviewed film directors and played songs for them, and he used their feedback on those songs to glean their musical taste.

3. In 2000, he had an idea to codify the genomic approach to musical tastes that will .automatically recommend new music. you'd like.

4. .In a few weeks., he and his entrepreneurial friend pitched the idea to investors. They were calling everybody they knew and asking if they knew people, networked, getting as many introductions as they could, then pitching and practicing the pitch and refining it.

5. In March of 2000 (2 weeks before the burst of the tech bubble), they raised $1.5 million.

6. They hired 70 people (mathematicians, computer scientists, musicians, musicologists) and started research and development.

7. In 2 years, the money was gone, so they asked employees to work for free (~50 of them kept on working for free for 2 years).

8. From 2000 to 2004, the co-founders pitched Pandora 347 times to close relatives, hedge funds, and everybody who was ready to listen. They racked up enormous credit card debt, personal debt, borrowed money from everybody they knew and their salary debt to employees had increased to $1.5 million.

9. In March 2004, finally the 348th pitch resulted in new $9 million funding. They paid off all their debts.

10. They finally finished developing the technology and tried to license it to companies such as AOL, Best Buy, Barnes & Noble, and Tower Records. But that didn't work well enough.

11. They decided to pivot their monetization strategy and create an online radio station (with a 'freemium’ model) for each user, with automatically created music playlists that the user prefers and without music that they don’t prefer.

12. In August 2005, they launched the radio: users got 10 hours of free online radio at signup, after which they were asked to pay $36 per year.
Results:
+ People were so excited about it that they shared it with their friends.
+ Without a dime spent of marketing in 2 weeks they had 100,000 users.

13. But there was a problem. People listened to every last minute of their free 10 hours, but after they were asked for a credit card, they vanished. Nobody wanted to pay.

14. So they pivoted to an “ad-supported” type of monetization, while they had no ad server, no ad staff, not even a place on the page to put ads and no advertisers.
Result: Growth tripled overnight.

15. Within 3 days Apple called and asked to buy out ad inventory at $10,000 per month.
The team literally hard-coded the ads into the page. Every time Apple changed the creative they would need to re-launch the entire site.

16. Because they were the first with this type of service on the market + their technology did its job perfectly, they grew virally for 5-6 years straight without a dime spent on marketing (by 2011, they gained 80 million users).

17. On February 11, 2011, Pandora filed for an IPO and officially began trading on June 15, 2011. This gave them a valuation of $2.6 billion.

Source: en.wikipedia.org


Cheers,
Charlie Patel ;)



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