Who drives a Honda Civic, adamantly opposes SOPA, PIPA, and ACTA, drinks Heizenweiner? Hint he is also co-founder of the largest startups in Florida with over 130 employees and over 35 million global active users, and yes they are profitable. If that wasn’t enough this startup is facing litigation from 3 major record labels placing them at a crossroads in terms of where to go from here. A lot of folks seem to think the end is near for Grooveshark, I beg to differ. See figure (1).
There is in this world no such force as the force of a man determined to rise.”
– WEB Dubois –
Josh Greenberg was a finalist for Bloomberg BusinessWeek best Young Entrepreneur in 2008 and one of Forbes top 30 under 30 for music in 2012. Co-Founder and CTO of Grooveshark Josh is a St. Petersburg native and attended the University of Florida before dropping out of school launched Grooveshark, a project he noticed that was starting to take off. At the time he like so many entrepreneurs had a few side projects and no particular one had taken precedence before he decided to…
We all know what happened to the founder of MegaUpload Kim Dotcom. There is a war going on between the internet companies that enable sharing of any materials and the entertainment industry. The Internet has transformed the music business and record labels haven’t figured out how to stop the bleeding and fully monetize it effectively. Here we have Grooveshark facing litigation from 3 of the 4 major labels, as they have a deal with EMI. Litigation over innovation seems to be the main strategy of the music industry. This is rather unfortunate and may hasten their eventual demise. Artists no longer need record labels or production companies. Look at Louis C.K, the comedian who independently distributed his latest stand-up special vastly exceeding his expectations and earning substantially more money than he ever would have by going the traditional route even as he acknowledged that he didn’t completely understand the internet and tormenting. He’s not alone in his efforts as a celebrity artist to independently produce and distribute digital content on the web.
There were a few times when Grooveshark had stopped and examined their business model and put a finger in the air to check the wind. Listening to your users and having a robust feedback mechanism in place is key to growing your user base. Josh stressed the importance of giving your consumer the product and user experience they are looking for. One of the advantages of being a small startup was the fact that they could drastically change directions when needed. Josh described how they had to completely start from scratch on more than one occasion.
LOCATION DOESN’T MATTER
Another big difference between Grooveshark and other startups is its location. Josh emphasized how location became an advantage for Grooveshark when they were tight on cash sometimes coming down to only a week of operation cost. For instance, you are able to rent an apartment for $400 per month in living in Gainesville whereas in Silicon Valley we know rents are much much higher. There is this persistent allure of Silicon Valley and the false belief that you need to reside there in order the attract the best talent. That may be true for Google or Facebook but chances are you will have no problem finding adequate talent if you remain in close proximity to a fairly decent university that offers a computer science curriculum. In this case, the University of Florida was located literally next door and provided the talent Josh and his team needed to launch, build, and maintain Grooveshark.
HIRE THE RIGHT TALENT
Josh didn’t mention too many books but one he did mention was the book by Jim Collins….Good to Great. He suggested it as a read for all entrepreneurs. So how do you get the right talent? In order to quickly decipher a passionate coder from a hack job, Josh would start by asking him what type of side projects they were working on, particularly what they did over the weekend. If they do not have an answer, then they are not as passionate a coder as one may desire. Remember with a start-up you need highly passionate and motivated individuals to help you build a company. The most important task facing any entrepreneur looking to build and grow a business involves building the right team of individuals that can help you achieve your goals.
MOTIVATE YOUR TALENT, STAY LEAN, and INNOVATE your way out of problems
Have you seen Dan Pink’s TED talk on motivation where people who have autonomy, mastery, and purpose remain motivated, as contingent motivators (i.e. carrots and sticks) do not work with tasks that require cognitive function? After watching this TED talk you can really see the dichotomy in the startup culture and young entrepreneurs vs old school corporate America.
After receiving their first investment from a family member Josh and his team decided to finally get an office holding out as long as possible again saving funds by working out of the home. One thing I have learned is that most of the most successful entrepreneurs I know agonize over large or redundant costs. Grooveshark received more funding throughout their existence although they were very careful about not raising and spending a lot of cash. Josh and his team watched competitors raise and burn through large amounts of cash as if they were already big successful companies, a mistake they were careful to avoid although they did receive just under a million in seed funding in 2009. Grooveshark hit its inflection point and became profitable in April of 2008. There exists a wall bearing all of the logos of competitors that have gone out of business in the offices of Grooveshark.
With the pending litigation against Grooveshark, all investment opportunities have seen to dry up as the uncertainty of these pending lawsuits creates the perception of increased risk. Despite all the IPO hype surrounding social media, there are no plans to go public at this time. Another skill required for entrepreneurs is the ability to haggle as anything and everything in the business world is negotiable. As Grooveshark’s traffic began to increase they were able to pull more weight when negotiating with their different ad networks. The next step was to implement a smarter ad server, one that took into account various factors such as which ad will generate more revenue or be more relevant to a user.
When their app was removed from Apple’s App Store and the Android Market Josh and his team didn’t give up. Instead, they built a platform-agnostic browser-based HTML 5 version of the app. They also created a way for Android users who preferred a native app experience to download the app outside of the Android Market. Grooveshark has evolved from being produced via Adobe Flex framework to a complete rewrite from scratch with PHP and MySQL, making use of Memcache and other database technologies that scale more efficiently than the originally developed website.
One of the ways Grooveshark ensures a positive user experience is with web analytics and various tools. They quickly realized a mistake had been made when they offered to make the entire website look as if it had been destroyed in an ad campaign for GreenDay as it confused users visiting the website. A lot of times the pursuit of revenue can overshadow the mission and founders overlook user experience.
COULD FLORIDA BE THE IDEAL LOCATION FOR STARTUPS
There is a little-known but rapidly growing tech hub in Gainesville, FL. When people talk about the tech scene in Florida. Orlando is often the city that people mention. The University of Florida research department has spun off an average of 13 new companies per year during the past eight years. In order to help retain some of these businesses and boost the local economy, Innovation Square was unveiled in November of 2011. Utilizing 40 acres of unused land the University of Florida plans to construct between 1 million to 3.5 million square feet of office space along with a 120,000 square foot Infusion Technology Center. At a whopping 8 stories, this will be one of the tallest buildings in Gainesville and will include space for research, product development, and office space for companies to grow. Also planned scheduled to open in Fall 13’ is a “Start-Up Dorm” formally called the Entrepreneurial Housing building located within the Innovation Hub only entrepreneurs will be allowed to reside in this dorm which will include a special VIP area for visiting guests.
In closing, I think one of the most important aspects of growing any business is to remain personable. In speaking with Josh he was very candid and offered real advice that any entrepreneur could take to heart. I have realized that the most successful individuals I have had the right mix of talent, smarts, persistence, and personality. You can check out random posts from Josh here.