Pandora’s Stock Drops, but Investors Still Like Sound of Music Deals

Pandora Media (NYSE: P) saw its shares drop to below $10 on Monday—its lowest point since going IPO at $20 a share on June 15.

While Pandora’s stock slipped (likely in response to the launch of the iHeartRadio app) Pandora Chief Strategy Officer and founder Tim Westergren was addressing the industry at the SF MusicTech conference. He told the crowd there that he was bullish on Internet radio and that the digital music service Pandora—which previously raised more than $56 million in VC funding—has notched 1 billion thumbs up and thumbs down feedback clicks on its site since launching a decade ago.

To put that number into perspective, the company announced in July that it had 100 million registered users, 36 million of which the company considers “active.”

In a better measure of just how much music is being played, Westergren (pictured) also said that some 90% of Pandora’s catalog of over 900,000 tracks got at least “one spin last month.”

As you would expect from a music and technology conference, the mood was mostly upbeat. And, why not? All year long, before and after Pandora’s IPO, digital music companies have been snagging VC funding left and right. (VCJ subscribers can read more about music tech deals here).

The most recent music funding involved RootMusic, the San Francisco-based company that developed the BandPage Facebook application for musicians. RootMusic announced Aug. 31 that it raised $16 million in Series B expansion led by GGV Capital and has now raised $18.3 million in total funding.

Another notable funding deal this year came from Spotify, the U.K.-based digital music service provider, which released its services in the United States with a big splash in July. Before that, the company raised $100 million from Accel Partners, Kleiner Perkins Caufield & Byers and Digital Sky Technologies.

Other music-related tech companies to secure funding this year include SoundCloud, Inhance Media, TuneUp Media and Scratch Music Group.

“Demand for music and investments in music tech companies is not going away,” Mark Montgomery told me earlier today.

Montgomery, an investor and an entrepreneur from Nashville, Tenn., took part in a panel discussion today at SF Music Tech on “Investing in Music Technology Companies,” which also included Larry Marcus of Walden Venture Capital (an investor in Pandora and RootMusic) and Hany Nada of GGV Capital (which also invested in Pandora and RootMusic).

Montgomery says that he sees plenty of investment opportunities in music technology, including digital rights management, mobiles apps, artist services, digital radio and other forms of distribution.

The key, he said on the panel, is for music tech companies to “focus on the customer and get the product right. Then everything else, [such as funding], will take care of itself.”

He told me after the panel: “That’s exactly what Apple did. They focused on the customer. And look at how they’ve changed the music industry.”

However, no one’s denying that Pandora is enjoyed by a lot of customers. RootMusic has also grown tremendously in the last year and is now used by nearly 300,000 musicians on Facebook.

The question, which seems more acute today with Pandora’s stock drop, is whether advertising will be there to support the music companies and Pandora in the long run, especially in light of growing competition from the iHeartRadio app and Spotify?