Crosslink, Walden, Greylock Would Be Biggest Winners in Pandora IPO

Popular Internet radio streaming service Pandora Media Inc. filed Friday for a $100 million IPO that should bring profits to investors Crosslink Capital, Walden Venture Capital and Greylock Partners.

The money-losing company has 80 million listeners, a 50% share of the Internet-radio-listening audience at the nation’s top 20 stations, and revenue of $55.2 million for fiscal 2010 ended in January.

It is the second top-name Internet company to file for a public offering in recent weeks, as private company valuations swell and investors hope to cash in. LinkedIn, the social networking site for businesspeople, filed for a $175 million IPO in late January.

Both filings will be an important test of what many believe will be a more receptive IPO market for high-growth companies.

According to an S-1 filing with the Securities and Exchange Commission, Oakland, Calif.-based Pandora plans to use more than $25 million of the funds to pay accrued and unpaid dividends to preferred stock holders. The remainder of the offering will go to general corporate purposes, including potential acquisitions.

The company’s largest stockholder is Crosslink, with 35 million shares, or 23.03% ownership. Walden holds 18.59% of the shares and Greylock’s share is 14.13%. Other investors include Labrador Ventures, with an 8.5% stake; The Hearst Corp., with 5.75%; and GGV Capital (formerly Granite Global Ventures), with 5.2 percent.

Allen & Co. and Selby Venture Partners invested in Pandora, according to Thomson Reuters (publisher of this blog), but neither is listed among the principal shareholders.

Pandora has raised $64.79 million since its founding in 2000, with a $35 million round in July 2009, according to Thomson Reuters.

The company grew out of the Music Genome Project, which used musicians to identify types of music. In 2005, Pandora introduced a service that finds music similar to a listener’s favorite tunes and in 2007 it brought the service to mobile phones.

The company is growing rapidly. For the nine months from February to October 2010, revenue rose to $90.1 million from $31.4 million the year before. Losses narrowed to $300,000 from $16.8 million in the 2010 fiscal year.

Because Pandora is a free service, about 90% of its revenue comes from advertising. The remainder comes from subscriptions. The company says that it expects operating losses to continue through the end of fiscal 2012.