Turntable should become available in countries outside the U.S. sometime in the next few months, Mr. Chasen said. "We'll slowly turn on countries because they all have different specific requirements on what we have to do to actually play music in them."

The direct partnerships with labels carry other perks, he said. Previously, Turntable was streaming music according to the Digital Millenium Copyright Act, which comes with some restrictions. You can only skip songs a certain number of times, for example, and can't see what the next song will be. By negotiating directly with labels, Turntable was able to get around those restrictions. Features that take advantage of the new freedoms are coming soon, Mr. Chasen said.

Turntable was without a doubt the most-hyped startup to emerge from New York in the last year as music lovers discovered it and shared it with their friends. Was it demoralizing when some of that hype died down?

Turntable still gets a fair amount of hype, Mr. Chasen said, "usually around when we release things" or make announcements. "There was definitely a moment where we came out and everyone needed to see what we were," he said. "Obviously a lot of that traffic isn't going to be our core audience."

Turntable has found its true fans now, he said, and has been growing sustainably week-over-week since January. Mr. Chasen is, as ever, totally not worried about competition from Facebook, where Spotify integration and the new chat feature Listen With threaten to chip away users from Turntable. "We're integrated with Facebook," he said. "We've always been excited to work with them. They want to help anything that is potentially social find its audience online."

The startup continues to score high profile partnerships, including helping out with an event for the Grammys. "We got invited to go to the Grammys. That's not something every startup gets," Mr. Chasen said. At SXSW, Turntable partnered with Intel and Pepsi and hosted a party with Flying Lotus on Saturday. But Thursday is the big blowout: Questlove, A-Trak and Diplo at a 2,000-person venue.

The company is up to 12 employees in its Union Square office, but hopes to find a few new employees—and a new office—in the next month or two.

Turntable.fm + SXSW +Avatar DJ + Pepsi + Intel from Turntable.fm on Vimeo.

Being a good DJ means making hard decisions

Betabeat covered the rise of Turntable.fm this summer and the pivot/restart founder Billy Chasen made from his previous company Stickybits. During the most recent episode of Founder Stories, he told Chris Dixon about how he came to make this hard decision and break the news to his investors and employees.

"I was looking at the health of the company, just a dozen different metrics, how are users liking it, where is the product at, and everything was just kind of a mediocre success. So I wasn't as excited going in, I was like, can I really see myself doing this for another year."

The big problem with StickyBits, said Mr. Chasen, was that it never found a way to get traction among users. "I had this huge missed connection how I thought things would run with brands. I thought we would deliver this awesome app that brands would use and they deliver the crowd. But really brands wanted to test it, and asked us to bring the crowd. So it was a Catch-22."

Turntable was the top idea on his list of companies Mr. Chasen thought would try to build at some point in his life. But he admits the decision to completely change course was still terrifying. "Knowing what the signs are and how to recognize them, so you don't become a walking dead startup, is really important.

Check out the full episode for some more cool insights.

That's Betabeat alone on the dance floor with the lame avatar.

It's possible Betabeat's "Summer Jamz" tag for Turntable.fm posts may have proved portentous. After looking at the site's traffic and search trends, Digital Music News wonders, "Has the fickle internet already chewed this site up, spit it out, and moved onto something else?"

It echoes what a norms friend and former TTFM enthusiast said to us over coffee last weekend, "Remember when everyone was excited about Turntable.fm?!" She has since moved on to Spotify.

The tech press is just as eager to roast a failure as it to crown a startup prince (not us, of course, no never). But while the data is unverified, a unique visitor count from Compete.com, ranking data from Alexa and Google search trend data all show a markedly similar downward-sloping curve after a steep spike in June and July.

Last week, just before Turntable.fm was going to showcased at the Raise Cache fundraiser, co-founder Billy Chasen told Betabeat that the service was streaming as many as a 1 million tracks a day. Around the same time, co-founder Seth Goldstein told VatorNews, "We have a passionate core of 20,000 to 40,000 users, who use the service 10-20 hours a month."

Digital Music News posits several reasons for what looks like a traffic dive:

" . . . there are factors inhibiting growth.  Like international licensing, or lack therof.  Currently, Turntable.fm is flatly illegal outside of the US, given the absence of DMCA protections. "We had to shut off international access very early on, because the DMCA provisions don't support international access," Goldstein continued. "And early on, Japan, Brazil, and some of these other countries were huge consumers."

However, as the post points out, even if TTFM can get major label licensing, "big licenses cost big money, and investors rarely see a big return on those investments."

A Betabeat tipster, who wondered by Turntable.fm seemed "so empty" despite its 1 million daily plays, pointed us to Turntable.fm's AppData listing, where the source recommended, "You should get the 90+ day view for even more reverse hockey stick fun.  Maybe there is a technical reason for this. If so what is it?"

via AppData

Betabeat has reached out to Mr. Chasen for comment about what, if any, significance he sees in their numbers,  whether they are accurate, and whether they can grow off a core base of users alone. We'll update the post when we hear back.

The tipster also had a theory: namely that the problem lies with user's unfamiliarity with DJ-ing, pointing out that even Mr. Chasen found it "a little intimidating." Said the tipster:

This is a great quote. It's intimidating because there is more to DJing that queuing tracks, actually.  Is this going to be more of the mormon bartender problem?

The source was referring to Pinboard founder Maciej Ceglowski's recent, incisive post on the social graph, where he wrote, "Asking computer nerds to design social software is a little bit like hiring a Mormon bartender."

On Digital Music News, the commenters seemed of two minds about the apparent slump, with @fingertipsmusic calling Turntable.fm "a cautionary tale for an industry immune to cautionary tales," while @bsstoner defended its chances, "Too much early hype, it's still a killer product."

If you fancy yourself a turn-around expert, head over to Quora. No one's attempted to answer the "How will turntable.fm make money?" question since August.

Internet rock stars

Silicon Alley is buzzing for tonight's fashionable tech fete, the runway party to Raise Cache for HackNY. The DJs for tonight's event will rocking the house via Turntable.fm, which bestowed special avatars on Fred Wilson, Andy Weissman, Dennis Crowley, Dave Goldberg and Lauren Leto.

Betabeat chatted with Turntable.fm co-founder Billy Chasen, who will also be spinning tonight. "To be honest, I've never really been a DJ in real life," Mr. Chasen said. "It's a little intimidating."

Online, however, he has no such hang ups. "When I am DJing on Turntable.fm and a whole room is listening to what I want them to, people pressing the awesome button, that's just a powerful feeling."

Turntable.fm is now up to ten employees and streaming as many as 1 million tracks per day, said Mr. Chasen, who spends his work day in techno rooms, but relaxes at home with some indie chill vibes.

The offline success of Turntable.fm has been a pleasant surprise. "It's great to see an event like Raise Cache doing things in the New York tech scene with our product. We just let this stuff happen organically." The rapper Wale, for example, is using Turntable.fm as the opening act on his tour, letting his fans in concert and at home DJ the set before his performance.

The next challenge in perfecting the Turntable.fm product is figuring out a better way to get new users involved. "Once Twitter started suggesting people for new users to follow they found engagement jumped way up. We are working on ways to help our new users connect with the DJs they might enjoy following," Mr. Chasen said.

Like his early projects, Firef.ly and Chartbeat, Turntable.fm is about interacting with a community of web users in real time. "We believe in our bones that music is inherently social, and that a lot of that got lost when you're just plugged into iTunes with your headphones on. People are reacting to Turntable because they are finding that social element again, even when they are stuck at their computer."

In a room of bobbing avatars, "Radiohead" takes on new meaning.

While the legal paperwork is still being finished, Betabeat has learned from multiple sources that Union Square Venture is the big new investor in Turntable.fm.

Betabeat was the first to report the company was raising significant funds. It was later reported by Business Insider that the round had closed, which was not true at the time, and technically is still not the case. We have been told that BI was essentially correct on the numbers, which were reported as a $7.5 million round at a $37.5 million valuation.

TechCrunch was the first to report that Turntable was choosing between USV, Kleiner Perkins and Accel. The choice of USV over West Coast heavyweights like Kleiner Perkins and Accel makes a lot of sense. Both Kleiner and Accel have deep ties with Facebook, which is reportedly building its own music service, so there is a potential for conflict of interest. USV, by contrast, has deep ties with Twitter, which is Turntable.fm's most powerful distribution platform.

Turntable was less concerned about the amount of money than with finding a VC who could connect them to the best talent, and USV is undoubtedly one of the best connected and most visible firms on the East Coast. They also specialize in companies with highly-engaged networks of users and a somewhat murky path to revenue. UPDATE: as Scott Rafer and Rafat Ali both pointed out, Turntable.fm co-founder Seth Goldstein was an Entrepreneur in Residence at Fred Wilson's first VC firm, Flatiron Partners, and the two have been close ever since.

Things are still in flux and it's possible some music industry folks will be joining in on this round, along with original investors in Stickybits like First Round Capital, Polaris, Lowercase, Mitch Kapor and Chris Sacca.

Over the last few weeks, Turntable has secured licenses with ASCAP and BMI, which covers most of the performance rights needed when streaming music, although deals with SESAC and EMI still need to be worked out.

But one major question remains. Will Turntable.fm be able to qualify as a non-interactive streaming radio service, afforded DMCA protection by the Copyright Act of 1998? If it does, then all it needs are these relatively inexpensive performance rights. If, on the other hand, Turntable.fm is labeled an interactive streaming service like Spotify, then it would need to go about securing the rights from all the record labels, a much more daunting and expensive task.

It reminds Betabeat of the amazing Foursquare activated door the guys at Apartm.net built when they accidentally invited the whole internet to their New Year's Eve party.

Pivot Prof. Billy Chasen

There is no more overused and reviled word in the world of tech start-ups than pivot. Pivot. Pivot. Pivot.

It seems to capture the manic energy of the current tech industry, in which an idea can get millions in funding before building a product and, if the users never materialize, or the business model never emerges amidst all hype, simply change their direction and try something new.

No company better epitomizes this idea of second chances than Turntable.fm, a social music site, born out of the ashes of a failed venture called Stickybits. Founders Billy Chasen and Seth Goldstein raised almost $2 million for Stickybits and worked on the project for about a year. The idea was to leave little stickers on physical objects that contained links to stories, photos and video on the web. Big brands like Pepsi thought it was a great idea. Users, not so much.

With little momentum and cash running low, they decided to pull a monster pivot. Turntable.fm, which launched a little over one month ago, has already attracted over 300,000 users and the interest of top tier investors on the east and west coast. Suddenly a team that was running low on funds is being courted for a fresh infusion of $5-10 million at a $40 million valuation, Betabeat has learned from multiple sources.

Exclusive: Turntable.fm's #1 Spinner, DJ Woooooo, Shares his Secrets

Update: Fred Wilson, Kleiner Perkins and Accel in Bidding War Over Turntable.fm

“Pivoting is sort of unique to the tech world,” said Kevin Ryan, probably New York’s most successful serial entrepreneur. Doubleclick, the ad serving platform Ryan founded during the dot-com boom, was eventually purchased by Google for $3 billion, and remains New York’s biggest exit. “Most people don’t realize this, but that company was actually a pivot,” says Ryan, leaning back deeply into a leather chair at the offices of his largest current company, Gilt Groupe.

“We were an ad sales network, a media company, and maybe ten percent was dedicated to tech for ad serving. What we saw was that the majority of the company was not growing or producing like the sliver focused on tech. So we sold off 90 percent of the company, something like 600 employees.” He stops and take a big sip of diet Pepsi. “As far as pivots go, that was a double backflip with a twist, because we had already taken the company public, and while tech folks understand the pivot, hedge fun managers do not. People thought we were crazy at the time, but Doubleclick wouldn’t be powering Google today if we hadn’t made that change.”

Pivoting isn’t unique to the East Coast, but New York is the first tech center to institutionalize the pivot as strategy for creating internet companies. Betaworks, where Billy Chasen cut his teeth as an entrepreneur, began with a simple maxim. 100 days and $100,000 to get a company into beta, a working product that can be released to users for feedback. “If you can shrink the cycle between idea, scrawling on a napkin, and testing with users, that is the most important piece of the puzzle,” said betaworks CEO John Borthwick, seated in front of a green chalkboard, pushing his bushy hair out of his eyes.

“What that means simply is you want to get to market as fast as possible, test and trail and then pivot if need be. Because the moment you get into the process of fundraising you begin to lock yourself up, both literally with investors, and psychologically, that I am going to build a business around X. Because my experience is, once people actually start to use your product, that X can turn into Y very quickly.”

As one of the co-founders of betaworks, Mr. Chasen built a product called Firef.ly based on the 100 days $100,000 model. It began as a way for web site owners to see how users were mousing around their site. But seeing what people were doing in real time didn’t help publishers learn much. So when this failed to catch on, Firef.ly pulled a quick pivot, adding a feature that let users visiting the same web page chat with one another. Problem was, users ended up talking about Firef.ly, instead of browsing the site. So the team at betaworks changed direction again.

“It’s most aptly described as a 180 degree pivot, because we sort of turned the product on its head,” said Mr. Borthwick. Instead of showing exactly what users were doing, or letting them interact, betaworks created a product that showed website owners exactly how many people were on their site, where they were coming from and what they were reading. That product, renamed Chartbeat, now has thousands of clients around the globe and millions in annual revenue.

It’s successes like that which have made changing ones mind and abandoning the original project a strategy without a stigma in the New York tech scene. Howard Morgan, the partner at First Round Capital who led the $1.6 million Series A in Stickybits, recently declared, “When we fund a company, we hope that we have picked the combination of a great entrepreneur and his/her team, along with a great product in a large available market. But sometimes it doesn’t turn out the way we all expected. Perhaps we need to modify the old adage to 'If at first you don’t succeed, try, try again. Then pivot, don’t be a foolish slave to the first idea.'” Knowing that Chasen had pulled off an acrobatic pivot of Chartbeat’s caliber was part of the reason First Round backed him in the first place.

Chris Dixon, who recently pivoted his new startup Hunch from a consumer facing taste engine to a platform for businesses who want to offer recommendations, thinks most entrepreneurs don’t pull the trigger fast enough. “The most common mistake is to pivot too late. You have sunk costs. You get sort of married to your project. I find a sign of a mature entrepreneurs is someone who can throw away original hypothesis, and some of the dreams around that. That is a difficult thing to do.” It’s the language of romance applied to a labor of love. Some entrepreneurs learn to settle for good enough, some keep chasing after that elusive Mr. Right idea.

Back when Billy Chasen was still working on Stickybits, he sat down with Mr. Dixon for an interview on TechCrunch TV. Talk turned quickly to the merit of pivots and how Stickybits was refocusing itself. ““If your not willing to fail fast, not willing to figure out what’s working and what’s not, you’re going to have to do something like completely shut down and start over or ditch the project entirely,” said Mr. Chasen, who ended up doing just that with his move to Turntable.fm.

The two entrepreneurs, handsome and casually dressed, chatted on stools inside the Stickybits office. “It’s a tough trade-off, because on the one hand its important to be iterative and listen to the market, on the other hand some of the greatest companies were formed by very stubborn people,” said Dixon.

“You kinda doubt yourself sometimes, because you had this vision for something, you’re like, how stubborn will I be, because you know there are people who are stubborn and then time proves them...” said Mr. Chasen, looking a little abashed, before Mr. Dixon cut him off, throwing up his hands in agreement.

“Steve Jobs is an example, he doesn’t listen to the market at all, just decides what its gonna be!”

The stubborn success of Silicon Valley visionaries like Mr. Jobs haunts the agile New York entrepreneur. With all the emphasis on capturing user feedback and moving to where the market seems ripe, local techies have yet to build a true titan on the scale of Apple, Facebook or Google.

“I don’t know if I would have done the same thing as Mark Zuckerberg, with introducing the news feed,” said Mr. Chasen. “When they first did that everyone cried privacy—‘This is an infringement, this is horrible this isn’t what I signed up for.’ He said, 'you’ll get used to it and you’ll like it.'”

The streaming music service Pandora recently filed for its IPO, giving hope to a young company like Turntable.fm that a big payday awaits at the end of a tough road. But Pandora was unprofitable for the better part of a decade before finally coming into its own with the emergence of mobile apps. Things would have turned out very differently if founder Tim Westergren had been a student of the pivot, instead of stubborn perseverance.

Having executed its graceful pivot, Turntable.fm seems well situated. Investors are looking to cut the company fat checks, and Facebook is sweating about the platform’s viral growth while struggling to get its own social music app launched with Spotify. But a little further down the road—if, say, the users stop signing up in droves, or the major labels start sending out their lawyers—Mr. Chasen will face a stark choice. Should he dig a little deeper and push on despite the challenges, or keep on running and gunning, moving to meet the market and every so often stumbling into success.

For the average entrepreneur, the best strategy for success is to fail, to learn and to change. But what if, like Jobs or Zuckerberg, the rest of the world just doesn’t understand, and the only way to make it big, really big, is to just ignore what the market is telling you, and follow your gut instead. The central paradox of the pivot is this: how do you know if you’re a visionary?

Blowin' up: Turntable.com.

Today, a start-up is putting Turntable.fm to the test. Mashable reports 1band1brand, a site for indie music and fashion brands, is hosting a Turntable room shortly with "trivia contests, giveaways, artist DJs (Eastern Conference Champions and Kopecky Family Band) and open mic spots for participating users."

It's scary how fast Turntable.fm blew up. At the beginning of the month, invites went out to a small batch of early adopters, who used Facebook to spread it to their friends, and somehow it got picked up by a music blog in Germany, and then it was all over Twitter, and then the co-founders had to stop signing up new users for a while due to the unanticipated windfall. And that was just the beginning:

Developers started building hacks and apps for Turntable (the latest is the Turntable Dashboard, which shows what's playing in all rooms with more than 20 people) About two weeks after its public launch, Turntable announced it was hiring and started iterating on features.

They've got the users. They've got the hype. But legal threats from the still-entrenched music industry threaten the sustainability of a hyper-popular site in the absence of a revenue stream, so co-founders Billy Chasen and Seth Goldstein better be thinking beyond just making something cool.

Turntable sends some referrals to iTunes, but it's widely agreed that the biggest potential for money-makin' is in hosting music events online--like when Diplo ambushed the System Addict - Idle Warship room--as a marketing tool.

Turntable is in the opposite situation of the barcode-based social network Stickybits, the first incarnation of the company, which racked up a slew of early partnerships with Pepsi, Campbell's Soup and Lipton Brisk Tea, but never caught on with users. "It was a great idea, but didn’t gain traction, possibly because it was ahead of its time. So Billy directed his software team in a totally different direction, into the music world," explains Philip Chasen, antiques dealer and grandfather of Turntable.fm, in a post about the site's growing pains.

Stickybits: Customers but no users. Turntable: Users but no customers (yet). Man, internet start-ups are hard, aren't they?

Co-founder Billy Chasen sent out the tweet on Saturday. It's nothing to be ashamed of really. Pandora has blocked international users for years, and Spotify, the biggest streaming music service in Europe, still hasn't officially arrived in the U.S.. For a glass half full type, this might be a sign the start-up is rolling with the big boys.

The problem, as always, is that labels and publishers prefer to pursue an aggressive legal strategy and protect their shrinking revenues rather than learn from innovative music apps and build new business models. 

As Om Malik points out, Turntable.fm is already becoming a platform for artists to sell music. His example features an independent musician, but the opportunity clearly exists for major artists to tease or premiere tracks that can only be played on Turntable.fm when purchased through a special offer.

In the meantime international users are resorting to well-worn tactics like proxy servers. Nobody has created an single site interface for border jumpers yet, as they did with Pandora, but considering the numbers of hacks popping up on Turntable.fm and the large Japanese audience that frequented the site before this shutdown, expect a some workarounds to start appearing in the next few days.