Pandora's brutal early days and the core belief that carried the founders through

By Michael Carney , written on January 7, 2014

From The News Desk

Despite its status today as arguably the world’s most successful digital music service, Pandora was anything but an overnight success. In its early days, when its name was still Savage Beast Technologies, the company wasn’t even an internet radio service. The founders spent more than four years toiling away building a music genome and recommendation service with the goal of licensing it out to third party platforms. It was a complete failure, according to the company’s co-founder and CSO Tim Westergren and CTO Tom Conrad, who told the formation story at tonight’s Last Vegas PandoMonthly fireside chat.

“People don’t give you guys enough credit for the number of times you shouldn’t have survived,” host Sarah Lacy said to the Pandora executives.

“It’s appropriate that we’re in Vegas right now,” Westergren says. “Because we doubled down and doubled down. At the end of that time were like the guy walking out of a casino with only his underwear on.”

Before turning things around, four and a half years had passed. The founders had 11 maxed out credit cards, were $500,000 in personal debt, and were on the verge of being evicted. Across the company, 50 people had been working for several years without salaries, five of which were suing the company for back wages.

Westergren recalls pitching VCs 348 times during those dark days with no success.

I got told no by every living VC, and understandably. It was a completely fucked up idea to hire 40 musicians and have them come in with a pair of headphones and writing numbers with pencil and paper and then transfer them to spreadsheets.

Around this time, Westergren's wife told him, to “stop being self conscious about being an entrepreneur.” It was the best advice he ever received, he says. “As an entrepreneur, unless you’re incredibly lucky, you’re always borrowing.”

In 2004, by the force of sheer will, Pandora managed to raise a $9 million Series B round led by Walden Venture Capital Managing Director Larry Marcus. Marcus was a musician himself, who the founders had pitched five times previously.

The day after the wire hit, management convened an all-hands meeting. They began the meeting by handing out envelopes with checks in the range of $100 a piece to the remaining employees, distributing a total of $1.5 million worth of back pay that day.

Around this time, Pandora found its current business model and evolved into the personalized digital radio service that people

“We always believed that the idea was a good idea,” Conrad says. When they finished the first version of Pandora radio, the team all said to themselves, “this is fucking cool."

"We always had a belief that this is gonna find a home,” Westergren says. Pandora is all about the feeling you get when you listen to that one perfect song at the perfect moment, he adds. It’s a universal feeling.

“To experience that yourself is a great thing and to share it with other people is a great thing,” he says. “To this day, we hundreds of thousands of emails per month from listeners. We answer each one personally, many are just saying I just want to say thanks.”

[Photo: Geoffrey Ellis for Pando]