How it began
Let’s rewind to 2018, a year that marked the budding promise of the audio format. With the rapid expansion of the Jio network, it became evident that content consumption across various mediums was on the brink of a surge, and audio was no exception. Across the globe, particularly in the United States, podcasts were experiencing explosive growth in popularity.
Yet, despite this surge in engagement, there lingered a critical issue—the struggle to monetize effectively. We realized the obstacle was not in the lack of Product-Market Fit (PMF), but in its optimization. While audio content (excluding music) had undoubtedly achieved PMF on a global scale, the path to scalable monetization was yet to be figured out.
This realization sent us on a search for founders who were exceptionally sharp product thinkers. Founders who could navigate the complexities of building an audio platform and unlock its full potential.
Five years ago, I found myself face-to-face with Rohan, Prateek, and Nishanth for the very first time. Little did I know that within 24 hours, Lightspeed would offer a term sheet for their startup, Pocket FM. At that time, their product had just about launched on the Play Store and was recording about five minutes of average user engagement per day. It wasn’t the numbers that spurred us into action; it was something far more special.
What captivated us was the team’s relentless focus on building a product that resonated deeply with users, coupled with their unshakeable belief in the potential of audio as a category.
Building consumer tech ventures is no walk in the park; it demands constant experimentation, constant learning, and the courage to silence self-doubt with every stride forward. Rohan, Prateek, and Nishanth were young and raw but they possessed something very compelling. Their resourcefulness, keen instinct for spotting opportunities, underlying determination, and sheer intellect were palpable throughout our four-hour dinner—an encounter that left an indelible impression and set the stage for an extraordinary journey ahead.
Picture this: It’s a crisp Bengaluru morning, and the founders are ready to deliver their pitch. As Rohan and Nishanth spoke, goosebumps rose on my arms — their words painted a clear picture of emerging trends that demanded an audio-first content platform. I could almost feel the sheer potential of their idea in that room!
Fast forward to the next day, when I found myself en route to the airport, bound for Mumbai to chat with the founders once more, this time over dinner. What was intended as a short catchup to cover a few key questions turned into a captivating four-hour conversation. The only reason we parted ways was out of politeness, not for lack of conversation!
The next morning, as the clock struck 7, I was already deep in discussion with the Investment Committee, seeking their approval. By 9am, fueled by the excitement of the previous day’s discussions, we gathered over breakfast to present the term sheet. And within an hour, ink met paper, and the deal was sealed.
It’s moments like these that reaffirm the age-old adage: when it’s meant to be, it’s meant to be! This whirlwind of events serves as a testament not only to the vision and passion of the founders but also to the agile and decisive nature of Lightspeed as a firm. We pride ourselves on being prepared, but more importantly, on recognizing opportunity and seizing it with unwavering conviction. For us, the process never stands in the way of belief!
Head in the clouds, feet on the ground
The founders of Pocket FM possess an extraordinary gift: absolute clarity. Faced with challenges, their ability to envision the industry’s trajectory five years ahead is nothing short of remarkable.
Just as impressive is their capacity to zoom in on one target at a time. When Lightspeed first invested in Pocket FM its user engagement was at about five minutes per day. Yet, the team remained resolute and focused on boosting this metric while expanding the footprint.
By Series A, daily engagement had soared to an impressive 40 minutes. With this milestone achieved, the team pivoted their attention to D30 retention while maintaining their commitment to enhancing growth and engagement. By Series B, not only had retention improved, but engagement had skyrocketed to an astonishing 120 minutes per day.
Following Series B, with both retention and engagement on solid ground, the company shifted its focus to monetization and optimizing economics. The company redirected its focus to CAC recovery and nailed it! And post that, it was a scale-up journey – The results speak for themselves: from a $2 million annualized revenue run rate at the outset of 2022, to an impressive $24 million by the year’s end, and an impressive leap to an annualized revenue run rate of $150 million by the close of 2023.
Such meticulous execution and single-minded focus on one metric at a time are a rarity, demanding not just grit, resourcefulness, and patience, but an unparalleled clarity of thought.
Culture of experimentation
The journey of Pocket FM is not merely a story of incremental changes to the product; it’s a testament to the founders’ willingness to embark on significant pivots and foster a culture of bold experimentation. From the outset, they dared to challenge convention, continuously iterating to deliver exceptional performance.
When Lightspeed initially invested in Pocket FM early overtures were centered around building a podcast platform tailored for non-metro India. The belief was that Pocket FM would be a UGC platform, and that was the only way to build a scalable company. However, by Series A, they had challenged this conventional wisdom and pivoted into PUGC, knowing fully well it could come at the cost of speed. They had moved away from podcasts and started early experiments with new content formats. By the time Series B rolled around, Pocket FM had ventured well into uncharted territory, embracing fiction as its primary focus.
Today, Pocket FM stands as a trailblazer in the realm of digital entertainment, having forged a new category: audio series. Its daily listeners exhibit binge-listening behavior, immersing themselves in content for an average of two hours each day. For context, Netflix’s subscribers spend close to three hours on the platform.
Another area where Pocket FM took a bold bet was with their pricing strategy. In a world where subscription-based models are increasingly the norm, Pocket FM also made a daring decision to adopt microtransactions. This bold move not only facilitated trials for its new content format through micropayments but also addressed the challenge of content density—a hurdle that many content platforms face in their early stages.
In 2022, Pocket FM expanded its horizons to the United States, only to discover that the appetite for audio series was global. With an annualized revenue run rate exceeding $150 million, of which a staggering $100 million comes from non diaspora audiences in the US.
Role of AI
The strategic integration of AI within Pocket FM’s content production and discovery processes has emerged as a game-changer, propelling the platform’s growth trajectory to new heights. Here’s a closer look at how AI is enabling Pocket FM:
Blockbuster Identification : Pocket FM leverages AI algorithms to identify potential blockbusters with unprecedented accuracy and efficiency. By automating the creation of show pilots, Pocket FM has not only expanded its testing scale tenfold but also slashed pilot costs by over 50%. This strategic use of AI has led to a remarkable 300% increase in monthly blockbuster identification, ensuring a steady stream of high-potential content for users to enjoy.
Content Production: AI plays a pivotal role in facilitating content creation by empowering writers to reach millions of users across various languages. Through AI-driven voice conversion technology, writers can effortlessly transform their stories into captivating audio series, choosing from a diverse range of over 50 AI voices. This streamlined process has revolutionized audio storytelling, resulting in a fivefold increase in the monthly publication of user-generated content (UGC) audio series, totaling an impressive 2000+ AI series per month.
Recommendation System: Pocket FM’s recommendation engine harnesses the power of AI to deliver personalized content recommendations tailored to each user’s preferences and listening habits. Powered by the innovative EASE model, this AI-driven algorithm considers a myriad of variables derived from user behavior, ensuring that each recommendation resonates with the individual user. This personalized approach has not only increased user engagement but also boosted autoplay minutes by an impressive 56%, indicating a deeper level of interaction with the recommended content.
In summary, through the intelligent deployment of AI technology, Pocket FM has not only accelerated its time to scale, but has also elevated the quality and relevance of its content offerings.
Building for the world – from Day 1
The revenue scale achieved by Pocket FM in the US serves as a testament to a shift in how Indian founders are redefining their Total Addressable Market (TAM). Much like their counterparts in China, Indian entrepreneurs are recognizing the potential to create globally impactful products. Notable successes such as Oyo, Zomato, Playsimple, and Quizziz have paved the way, inspiring a new wave of founders to think beyond borders.
Several factors are fueling this trend. First and foremost, India boasts a wealth of talent capable of building world-class products. Additionally, the country’s vast population presents a unique advantage, particularly when it comes to customer acquisition costs (CACs). With historically low CACs and a captive audience of 1.3 billion people, Indian companies have the freedom to experiment with products at a fraction of the cost compared to their US and European counterparts. As a result, Indian founders can refine their product and growth playbooks in India, before porting these playbooks to other regions.
From its inception, Pocket FM harbored global ambitions. Each growth and product experiment was scrutinized through the lens of scalability to other markets. When successful, the company would double down on refining a clear playbook, which, when applied to developed markets, would yield 50-60% higher efficiencies. Ideas confined to the Indian market were swiftly discarded in favor of those with broader global appeal.
Currently, Pocket FM is venturing into markets such as the UK, Canada, Australia, the EU, and Latin America. Along this journey, the company has grappled with organizational restructuring, market selection, and nuanced market differences.
As a firm, Lightspeed has long championed the belief that Indian founders possess the potential to create globally relevant products. To support this vision, Lightspeed has invested heavily in cultivating a tightly integrated global franchise, poised to assist entrepreneurs on their journey to global success. Early lessons from this endeavor are chronicled in the #limitless series, providing invaluable insights for aspiring Indian founders looking to make their mark on the global stage.
Shift in thesis
Companies at Series D rarely resemble their seed-stage counterparts. What began as an audio podcasting platform for Bharat has since transcended its initial vision, venturing into new territories that extend far beyond its humble beginnings. In parallel, Lightspeed’s fundamental thesis has also undergone a transformation.
The emergence of AI has been a game-changer, effectively addressing one of the most critical challenges faced by content platforms: ensuring content density. With AI-powered solutions at their disposal, companies such as Pocket FM can now build and scale content platforms at an unprecedented pace, laying the groundwork for rapid expansion and innovation.
Looking ahead, the potential for Pocket FM to evolve into an IP powerhouse is nothing short of extraordinary. By repurposing content across formats and establishing itself as a new-age digital media brand and production house, Pocket FM is poised to disrupt the entertainment landscape. Pocket FM is not merely building an entertainment platform; it is carving out a niche as an alternative to traditional music streaming, television, and social media.
Notably, the largest intersection of Pocket FM users coincides with users of video and music streaming platforms, highlighting the complementary nature of audio series alongside other forms of digital entertainment.
With AI as a catalyst for growth and expansion, Pocket FM is slated to seize a share of the burgeoning digital media and entertainment market.
Pocket FM’s evolution from its inception to its current standing is a testament to the power of innovation and adaptability. While the company has achieved remarkable milestones, it is important to recognize that its journey is far from over. With each step forward, Pocket FM continues to redefine the boundaries of digital media and entertainment. As we at Lightspeed eagerly anticipate the next chapter in Pocket FM’s story, one thing is certain: the journey ahead will be as exciting as it is promising. Here’s to Pocket FM and the countless possibilities that lie ahead!
Authors
