When David Pakman, the former CEO of eMusic who recently became a partner at Venrock, told The Deal he believes the best entrepreneurs are those who know how to read signals accurately and make changes accordingly, the first person we thought of was Daniel Klaus, the co-founder of Original Signal Recordings/Music Nation Inc. and our guest in this episode of The Deal's Behind the Money online video show.

Klaus describes how the online video contest company he founded three years ago evolved into an independent record label that distributes Ingrid Michaelson and The Sounds, among others.

Echoing Pakman's thoughts, Klaus says the secret was paying attention to which parts of the business were generating revenue and which weren't.

The company's backers seem to like the change of plans. Original Signal recently raised a Series B (amount undisclosed) from Greylock Partners and Point Judith Capital, both of which led the company's $5.5 million Series A in January 2007. The label also signed a distribution and promotion agreement with Universal Motown Records, a division of Universal Music Group. (The Deal Pipeline subscribers can learn more here.)

The videos with Klaus and Pakman were taped at Silicon Alley Insider's recent Startup 2009 competition. Watch the Klaus video below, or download it on iTunes. And be sure to watch the whole series (links provided below). - Mary Kathleen Flynn

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Check out the other videos in The Deal's Behind the Money Startup 2009 Series:

Jason Calacanis, the colorful entrepreneur who founded Silicon Alley Reporter back in the day and is currently the CEO of Mahalo.com, calls Wikipedia founder Jimmy Wales a "poser," not an entrepreneur, for giving up too quickly on a search service Wales touted as a Google killer.

Kevin Ryan, the former CEO of DoubleClick Inc. and the current co-founder of AlleyCorp, talks about the New York tech ecosystem that has grown up since the dot-com days.

Dina Kaplan, Blip.tv co-founder and Founders Club host, provides a frank analysis of why New York isn't Silicon Valley, pointing to the Big Apple's high real estate prices and lack of an engineering university of the same caliber as Stanford University.

David Karp, the 22-year-old founder of Tumblr Inc., says that adding to the startup's team -- including bringing aboard John Maloney as president -- has made him happier and the company stronger.

Charlie O'Donnell, co-founder of Path101 Inc., sometimes wishes he never heard of venture capital but, nevertheless, says, "We're always raising money."

George Bell, managing director of General Catalyst Partners, which ponied up the $25,000 investment for the grand prize and co-sponsored the contest, talks about how he came up with the idea for the competition.

Cheryl Milone, founder of Article One Partners and grand prize winner, tells us what her victory means for her company.