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Ask HN: How does this happen? Pandora Radio founder owns less than 3%

8 points by AndrewMoffat 16y ago

http://blogs.forbes.com/nicoleperlroth/2011/02/11/pandora-files-for-ipo/ "The biggest winners in a public offering would be Pandora’s investors: Crosslink Capital (owns 23%), Walden Venture Capital (19%), and Greylock Partners (14%). The offering would be the second big win for Greylock this year–the firm also owns 16% of LinkedIn, which filed two weeks ago. But according to the S-1, founder Tim Westergren owns less than 3% of the company." I imagine this situation being far from ideal for Westergren. How does this sort of thing happen?

adelevie 16y ago
3% of a (soon-to-be?) public company is pretty good.
jorkos 16y ago
The short story, the company struggled for a long time early on, hence the need to dilute to not close the doors
noonespecial 16y ago
This happens when you owe more in royalties than you make in revenue. http://mediamemo.allthingsd.com/20110212/pandoras-music-fees-are-huge-and-not-that-bad/ http://mediamemo.allthingsd.com/20110212/pandoras-music-fees... Check out what they paid in 2009 for royalties. Yeah. That might lead to some big funding rounds and some major dilution.
neworbit 16y ago
They took an awful lot of investment rounds and dilution. (The alternative was closing the doors.) As tends to be the case several rounds down the line, the investors own nearly all of the firm.
- pakafka 16y ago
  Yup. Worth noting, though, that Tim and some other execs already got to take a few million off the table last summer by selling some shares to their biggest investors. See "investor offer" in the S-1: http://sec.gov/Archives/edgar/data/1230276/000119312511032963/ds1.htm#toc119636_14 http://sec.gov/Archives/edgar/data/1230276/00011931251103296...
joelsmith88 16y ago
Dilution is apart of the entrepreneurial game, I am not surprised that Westergren only has 3%, his value proposition for the first 2 years to investors was less than stellar. investors that put money into this type of startup require large amounts of equity because they need assurance that they will receive a return on their money that they pay forward
miha123 16y ago
That is $3M for each $100M valuation. 100M was last year valuation. See http://www.quora.com/What-was-Pandoras-valuation-in-the-last-round http://www.quora.com/What-was-Pandoras-valuation-in-the-last... There is also a rumor Google will buy it and here is the speculation Pandora may reach 500M value; http://vator.tv/news/2010-07-07-why-pandora-may-end-up-acquired-by-google http://vator.tv/news/2010-07-07-why-pandora-may-end-up-acqui... That $15M for the founder. Sure, very little I think Google (if they buy) will structure a special deal for the founder. Sequoia is known as ruthless for founders, and Google knows the original founders are important

8 points by AndrewMoffat 16y ago

adelevie 16y ago

3% of a (soon-to-be?) public company is pretty good.

jorkos 16y ago

The short story, the company struggled for a long time early on, hence the need to dilute to not close the doors

noonespecial 16y ago

This happens when you owe more in royalties than you make in revenue. http://mediamemo.allthingsd.com/20110212/pandoras-music-fees-are-huge-and-not-that-bad/ http://mediamemo.allthingsd.com/20110212/pandoras-music-fees... Check out what they paid in 2009 for royalties. Yeah. That might lead to some big funding rounds and some major dilution.

neworbit 16y ago

They took an awful lot of investment rounds and dilution. (The alternative was closing the doors.) As tends to be the case several rounds down the line, the investors own nearly all of the firm.

pakafka 16y ago
Yup. Worth noting, though, that Tim and some other execs already got to take a few million off the table last summer by selling some shares to their biggest investors. See "investor offer" in the S-1: http://sec.gov/Archives/edgar/data/1230276/000119312511032963/ds1.htm#toc119636_14 http://sec.gov/Archives/edgar/data/1230276/00011931251103296...

joelsmith88 16y ago

Dilution is apart of the entrepreneurial game, I am not surprised that Westergren only has 3%, his value proposition for the first 2 years to investors was less than stellar. investors that put money into this type of startup require large amounts of equity because they need assurance that they will receive a return on their money that they pay forward

miha123 16y ago

That is $3M for each $100M valuation. 100M was last year valuation. See http://www.quora.com/What-was-Pandoras-valuation-in-the-last-round http://www.quora.com/What-was-Pandoras-valuation-in-the-last... There is also a rumor Google will buy it and here is the speculation Pandora may reach 500M value; http://vator.tv/news/2010-07-07-why-pandora-may-end-up-acquired-by-google http://vator.tv/news/2010-07-07-why-pandora-may-end-up-acqui... That $15M for the founder. Sure, very little I think Google (if they buy) will structure a special deal for the founder. Sequoia is known as ruthless for founders, and Google knows the original founders are important