12 Lessons Learned Building a Company from Zero to Acquisition
The Story of Next Big Sound: 2008–2017
In 2008 Alex White, Samir Rayani, and I set out to answer a question: how does a band become famous? We spent the next decade building the music analytics company Next Big Sound in pursuit of the answer. It was an insane, exciting, wouldn’t-trade-it-for-the-world experience where we tracked data on hundreds of thousands of artists, established a track record of predicting break-out stars, published industry-redefining research, and supplied analytics and insights to the vast majority of the music industry, from individual artists to the major labels. We learned a ton and had so much fun.
I left Next Big Sound and Pandora last summer to spend time with my young family, and after reflecting, I want to share the story of Next Big Sound and twelve lessons I learned going from zero to successful acquisition.
The Story of Next Big Sound
Our company started as a project at Northwestern University in 2008 as part of Troy Henikoff’s entrepreneurship class. We were baby-faced college kids and didn’t have a clue how to build software, let alone a company. I still remember Troy explaining relational databases to us on a whiteboard. Little did we know at the time, Troy’s class would send us on a wild journey for the rest of our twenties and beyond.
After Troy’s class, the great recession, and many fits and starts, Techstars took a chance on us in 2009 and we had a life-changing summer in Boulder, Colorado.
We showed up with our original concept, a fantasy sports for music website, and promptly decided to scrap it because it was growing at a snail’s pace. We were terrified Techstars would kick us out of the program for abandoning the idea. After the first day we sheepishly approached David Cohen to tell him that we weren’t going to pursue the concept we applied with. I’ll never forget what he said, “We invest in people, not ideas. But you better figure out what you’re going to build!”
We were still obsessed with the original question of how a band becomes famous and realized that we didn’t need to build another destination site where fans and bands connected. Instead, we could track how music was already being consumed online.
One night Walter and Samir stayed up writing a script that grabbed play counts from the XML feed being read by the Flash player on each artist page of the most popular music website at the time: MySpace. The first artist we tracked was Akon and when we saw he had added over 250,000 plays in one night, we were blown away. The numbers were huge, and we wanted to make sure the industry was paying attention.
It turns out they were. At the same time, Alex was on the phone with band managers every week and discovered they were writing down numbers from MySpace and other social websites by hand with the help of interns. They would miss days, could only track a few bands, and most importantly didn’t know what to do with the data. But the numbers were big and they knew they had to pay attention to what was happening with music online.
To test our idea that we could track this data better than an intern, we emailed beautiful PDF reports with time-series graphs and top-line numbers to each band manager. We waited. Crickets.
“Shit!” we thought, “They don’t actually care.”
Not exactly. It turned out they were on their Blackberries and couldn’t open PDF attachments. The next week we sent the same exact data, but in a plain text email, and nine out of the ten managers wrote back enthusiastically asking us to track additional bands and share with their colleagues. We really knew we were on to something then.
In Boulder we had moved into a house on the hill, biked to the Techstars Bunker every day, and secretly finished our coursework at Northwestern (Alex had graduated the year prior, but Samir and I were still finishing our degrees at the time, unbeknownst to Techstars).
The summer culminated in us giving a killer presentation at demo day and raising a $1.5m seed round led by our mentor Jason Mendelson from Foundry Group. We were off to the races.
In 2012, after launching a widely used free product, getting the majority of people at the major record labels paying for our subscription software, and growing our team, we moved out of Boulder to New York City and raised a $6.5m Series A co-led by Foundry Group and IA Ventures.
Once we arrived in New York, we worked in an awkward office-sharing arrangement, gathered around the sole conference table for bagels every Friday morning, built our first NYC office from scratch, and created a new home for Next Big Sound a short subway ride away from the major record labels.
We spent the next three years trying a lot of things that failed. Software for scouting artists, custom research reports, working with brands and book publishers. We fended off competitors quick to copy our latest feature and took every approach imaginable to teach our clients how to combine data with their own intuition.
Ultimately, in 2015, after building upon our product offering, publishing ground-breaking research, turning that research into product features, and being named the most innovative company in the music industry by Fast Company, Pandora acquired Next Big Sound.
Being part of Pandora freed us to focus on helping artists and the industry. I became obsessed with simplifying our product and growing engagement as part of Pandora. In the two years that followed, under my product leadership, we tripled Next Big Sound’s product usage.
The team accomplished this by focusing on a single key metric and executing a focused product strategy. We also impacted Pandora’s business-at-large through reporting usage data to labels, creating Pandora Charts, and enabling Pandora teams across the board with Next Big Sound’s data and insights.
At the end of 2016 my daughter Sofie was born and I left Pandora in the summer of 2017.
Through this journey I have learned countless lessons, and after reflecting, I’ve boiled them down to twelve that sit at the forefront of my brain. I wrote this largely for myself as I think about the next decade, and I hope it’s also helpful to someone out there obsessed with a question, thinking about starting a company.
Lesson 1: People First
In 2012 as a bone-headed twenty-five-year-old I didn’t understand the idea of “people first”. I was so focused on our clients and our software, I was treading water when it came to people management and can cringingly recall more than one occasion where I was a crap manager and shit teammate. If you were on the team then and are reading this now, I’m sorry!
Around the same time, a more experienced person joined our team and coached me to realize that I could greatly improve my self-awareness and style. I now know at my core that people, especially the people you work with every day, are the most important part of any business.
What this means to me in practice: hire diverse groups of people you see yourself spending every day with and pay them fairly, have high quality weekly 1:1s managing for engagement; have transparent weekly full team meetings; help people reach their personal goals, not just the company goals; actively listen, don’t interrupt; and treat others as they wish to be treated.
Lesson 2: Hire to Values; Manage for Engagement
Does the person you’re thinking about hiring share similar values to the company? Do they have examples of living those values? Every time I interviewed someone at Next Big Sound I always asked questions about what they were learning, how they had built value, looked for thoughtfulness, and got a sense of how they liked to have fun.
On the flip-side, if someone isn’t engaged with their work, it is their job and their manager’s job to acknowledge and fix the problem. If things can’t be fixed, letting the person go can be the best option. This is way easier said than done and I took way too long to let go of unengaged teammates and watched others do the same. If this isn’t handled well, it sinks morale for the whole team.
Lesson 3: Do What is Necessary, Not Just What is Fun
In the early days, as a designer, I was best at researching, sketching, designing interfaces, and breathing life into products alongside engineers. But I also joined a lot of sales meetings, not because I was good at it then, but because it was the right thing to do for the business.
Time and time again, we struggled individually and as a team when we did the fun work but didn’t do the hard work. When we did go outside our comfort zone, learned new skills, and did the not-so-fun jobs we always saw the biggest impact and grew the most.
Lesson 4: Leadership is about Creating Context
As soon as Next Big Sound grew to a point where tens, hundreds, and then thousands of decisions were being made every day by the team, people needed the right information at the right time so they could make the best-informed decisions on their own.
We accomplished this by having a clear mission and vision, having goals for making an impact on our mission and vision, having a strategy for reaching our goals, having a roadmap of projects that follow our strategy, having teams and sprints to accomplish our projects, and having metrics to measure our impact. If you put it all together, it looks like this:
Mission/Vision → Goals → Strategy → Projects → Sprints → Metrics
These concepts create the ability for anyone on the team, at any given time, to link the work they’re doing to the overall mission of the company and have tremendous ownership. It gives everyone on the team the ability to make countless decisions confidently and with little oversight.
I know this sounds a little bit like buzzword soup, but learning how to articulate each of these concepts, develop them through collaborating with our team and customers, and then rally our team around them was one of my favorite parts of leading Next Big Sound.
Lesson 5: Repetition is the Key to Communication
Repetition is the key to communication.
Repetition is the key to communication.
Repetition is the key to communication.
Our leadership team repeated things so much it hurt. Once people on the team started openly making fun of a phrase, or finishing a oft-said sentence, we knew the idea had stuck. This is the key to creating context and getting everyone working towards the same goals.
Lesson 6: Design and Brand Matter
In a sea of enterprise software from twenty years ago (looking at you IBM Cognos and Microsoft Access), showing up with a well-designed, easy to use, strongly branded product was a HUGE leg up on the competition. Our software demoed well and worked well too. This made the difference for us over and over again in terms of attracting users and winning contracts.
The bar is higher today than it was when we started in 2009, but there are still plenty of industries stuck with solutions in the design dark-ages that I’m excited to see evolve.
Lesson 7: Managing Customers is Tricky Business
I had a love/hate relationship with our customers. I loved them when we successfully collaborated to build the future of music analytics and helped them succeed at their jobs. I hated them when they threw their weight around and pushed us to develop features or provide data integrations they would never use.
But mostly I hated myself for not managing that process better. When you’re a startup struggling to survive, and the majority of your revenue is from three customers, it’s easy to bend your roadmap for one customer.
Later on I learned that there’s a way to manage customer requests that involve being open about your roadmap, explaining trade-offs, and diving deep to understand the problem trying to be solved and then generating solutions more inline with providing value for all customers.
Lesson 8: Market Size Matters
I’m hard-pressed to think of an industry worse than the music industry to enter as a startup. This will be a large factor in how I choose to spend my time next. Three major enterprise players plus a lack of growth meant that we had to work extra hard to succeed in the music industry. That said, our love of music, the intellectual intersection of music and data, and how much fun we were having always outweighed any concern for market-size or growth.
Lesson 9: Persistence
I’m also hard-pressed to think of better timing than 2008 to start a company. This is counter intuitive. Alex (my co-founder and Next Big Sound’s CEO) rescinded his job offer at a top-tier consulting firm and went all in on Next Big Sound the same week Lehman Brothers collapsed. The economy went into a tailspin and we had countless fundraising conversations that ended in a hard no. Despite this, we succeeded. Starting a company when things weren’t all sunshine and rainbows created the right mindset for us, one defined by persistence, to confidently face countless challenges along the way.
Lesson 10: Good Board Member, Bad Board Member
We were lucky to have super supportive and smart investors that added a lot of value beyond the checks they wrote.
Jason Mendelson stands out as one of the most formative people in Next Big Sound’s creation. We always considered Jason more of a co-founder than investor. As a musician, former software engineer, and lawyer, Jason wasn’t your typical VC. He took us in, met with us every week through Techstars and for years afterwards, coached us on everything under the sun from personal stuff to the hardest business challenges, and was at the table for every major decision. We were crazy lucky to have him alongside us for the ride.
When we moved to New York, away from Jason and Foundry Group, IA Ventures and Brad Gillespie picked up where Foundry left-off. Hands-on, super super smart, value add investors and board members. IA’s focus on data, and getting to know their other portfolio companies, gave us a community in New York and much needed expertise as we scaled. Special thanks to Brad for originally encouraging me to write this post.
We also unfortunately had some terrible investors and board members that nearly sank the company. It’s not worth dwelling on, and the only way I now know to predict what kind of investor and board member a person will be is to talk with several other founders before working with someone.
Lesson 11: Acquisitions
What started as partnership talks turned into an offer from Pandora we couldn’t refuse (and their first technology acquisition). After working with more than thirty data-partners throughout the industry (think Facebook, Spotify, YouTube, Twitter, Wikipedia, Nielsen, etc, etc.), Pandora remained our largest blind-spot, not to mention the largest US streaming service and a company with a tremendously sophisticated data practice. Talks heated up quickly and we ran a smart process based on the advice of every person we trusted that had been there before us.
We had a lot of fly-by offers over the years. Each time, our leadership team had a frank conversation about what was best for all stakeholders. When Pandora came knocking we were excited to join forces in a way we hadn’t ever been previously– we saw eye-to-eye with the leadership team and loved that Pandora was exclusively focused on music. It’s been a great fit, our product and brand have stayed in market and thrived, and our team has remained largely intact. Pandora was the best home for NBS to take the next step towards fulfilling its mission and vision.
Lesson 12: On Sleeping With People You Work With
I met my wife at Next Big Sound and our daughter was born while we were both at Pandora. Liv never reported to me directly but I was a founder on the leadership team and she was an early hire, joining around the time we moved from Boulder to New York. It would have been easy for things to go awry if we hadn’t thoughtfully shared about our relationship and hadn’t kept our work and personal life mostly separate.
This isn’t to say there weren’t times where being in a relationship with a co-worker wasn’t distracting, or that it didn’t make some people on the team uncomfortable, but I believe our relationship brought an already very close-knit team closer together.
I wouldn’t recommend this for the faint of heart, but part of the intensity of a startup and close culture is that people can fall in love, and I’m lucky to be one of those people.
Next Big Sound gave me an amazing first chapter of my professional career, and it quite literally gave me my family.
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