

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

http://blogs.forbes.com/nicoleperlroth/2011/02/11/pandora-files-for-ipo/<p>"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."<p>I imagine this situation being far from ideal for Westergren.  How does this sort of thing happen?
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noonespecial
This happens when you owe more in royalties than you make in revenue.

[http://mediamemo.allthingsd.com/20110212/pandoras-music-
fees...](http://mediamemo.allthingsd.com/20110212/pandoras-music-fees-are-
huge-and-not-that-bad/)

Check out what they paid in 2009 for royalties. Yeah. That might lead to some
big funding rounds and some major dilution.

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miha123
That is $3M for each $100M valuation. 100M was last year valuation.

See [http://www.quora.com/What-was-Pandoras-valuation-in-the-
last...](http://www.quora.com/What-was-Pandoras-valuation-in-the-last-round)

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-
acqui...](http://vator.tv/news/2010-07-07-why-pandora-may-end-up-acquired-by-
google)

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

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joelsmith88
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

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

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neworbit
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.

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pakafka
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/1230276/00011931251103296...](http://sec.gov/Archives/edgar/data/1230276/000119312511032963/ds1.htm#toc119636_14)

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

