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Summary:

Internet radio pioneer Pandora announced Friday it was filing for an initial public offering, hoping to raise $100 million through the sale of stock. Though saddled with a deficit, the company has seen incredible growth and has been a bright spot in the digital music industry.

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Internet radio pioneer Pandora announced Friday it was filing for an initial public offering, hoping to raise $100 million through the sale of stock. Though saddled with a deficit, the Oakland-based company has seen incredible growth and has been a bright spot in the digital music industry.

Pandora has reported revenue of $90.1 million for the first nine months of 2010, triple what it made during the same period in 2009. The company’s revenues consist of $77 million from advertising while subscription revenue was $12.2 million.

In the first nine months of last year, the startup posted a loss of $328,000 after losing $18.6 million over the same period the year before. The company is carrying an accumulated deficit of $84 million and said it expects to incur a loss through the end of fiscal 2012, which ends Jan. 31, 2012.

Pandora has been one of the success stories in the Internet music space. The company boasts more than 80 million users and earlier this year, founder Tim Westergren blogged that Pandora doubled its user base in 2010 to 75 million, as it branched out from the iPhone to other consumer electronics devices. The company has also won praise for its Music Genome Project which has analyzed 850,000 songs to date.

The company’s filing said it streamed 3.9 billion hours of music in the fiscal year ended on Jan. 31 It hopes to build future success by improving its advertising, which accounts for 1 minute per hour of streaming compared to 13 minutes per hour by traditional radio networks. The company is also looking to widen distribution to other geographies, explore more content beyond music such as sports, talk and news and grow its sales force.

But the company faces challenges as it seeks to grow. Internet radio is still an emerging business and is reliant on building a user base that listens to more and more music. The company could encounter problems if it fails to increase its user base or has trouble advertising on mobile devices. It must also manage relationships with copyright holders and connected device makers, who could harm the business if they change the terms of licensing deals and partnerships.

The deal will benefit investors Crosslink Capital, Walden Venture Capital, and Greylock Partners. Westergren owns 2.39 percent of the company. The IPO suggests the market for public offerings continues to improve, setting up a strong year despite companies like Facebook, Twitter and Zynga remaining private. LinkedIn filed for an IPO last month while Groupon is reportedly preparing to go public in a blowout offering.

Here’s an interview Om conducted with Tim back in November.

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  1. good interview spoiled by poor editing. whats with all the gaps?

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  2. great news. I hope they will expand to germany as well. I will love to listen to pandora, but in Germany it just doesn’t work.

    keep posting great news!
    Olmo

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  3. [...] about a potential stock market flotation, not least because other outfits such as LinkedIn and Pandora are doing the same. But until the relationship between Zynga and Facebook is clearer, it’s [...]

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  4. Pandora is quite a fascinating company. For anyone interested, I recommend you google the company’s history and see how they have evolved over time and how they categorize music. A couple of years ago, the company went through a major inflection where they got much better at their core making the service much better. The amount of information they index and the usage of experts in doing so is quite astounding. Suffice it to say, it is not easy to get hired as one of their music experts. Great company, great offering, always trying to get better, etc. It will be interesting to see how it evolves especially if wireless data starts down the road of usage based pricing.

    - Adrian Meli

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  5. It will be interesting to see how investors feel about a netflix like company that has huge upside potential in the future but is on and off hemorrhaging cash with Lawsuits from the soon to be broke record labels left and right. None the less I have been a faithful user for years but on the ad supported side.

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  6. [...] thinks the best defense is a good offense. Plus, Pandora may soon have access to more funds if its planned initial public offering goes [...]

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  7. [...] 11 are trading at or above their offering prices as of March 31, 2011. That’s a good sign for Pandora, LinkedIn, Kayak, Boingo and Fusion-IO, which have all filed to go public, as it means they may [...]

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  8. [...] disclosure, released in an updated S-1 filing as part of Pandora’s preparation to go public, said that Pandora was not the target of the investigation, and that the company believes other app [...]

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  9. [...] but they are not always from companies who have great financial stability — just look at Pandora, hoping to raise $100 million on the stock market, but still losing money. It’s a mistake to think …can be just a footnote two years [...]

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