Europe’s Plan to Beat Silicon Valley at Its Personal Recreation

In 2001, the corporate attorneys had organized a gathering with RIAA and MPAA—large groups of attorneys flying in from the East Coast to satisfy of their attorneys’ workplace in Beverly Hills on a Friday. On that Wednesday, they discovered an inside memo leaked from the organizations they have been supposed to satisfy that referred to as them “Public Enemy No 1 working offshore.” The memo mentioned “it was crucial to make an instance of us,” he remembers with a slight smile.

“As an alternative of going to the assembly, we have been driving round and round whereas the attorneys have been doing their factor. Later within the night, after we went to our attorneys’ workplace, we switched garments with two attorneys on their staff to keep away from being served. After that, we moved from one shady motel to a different, night time by night time, paying in money till we purchased tickets on the airport an hour earlier than we departed, as we have been positive they have been monitoring our bank cards.”

Zennström and Friis bought Kazaa for a mortgage notice of €600,000 on the finish of 2001 (about $600,000 by in the present day’s trade charges). Then, in 2003, utilizing Kazaa’s P2P backend, they based Skype, an app that allowed customers to make a name by immediately connecting with one another. However the early days of Skype appeared to disclose one thing surprising—that European VCs weren’t taken with innovation.

“We obtained turned down by everybody,” he says merely. “We needed to disrupt the worldwide phone community with this peer-to-peer expertise, and that’s a giant ask. Plenty of them had been burnt by the dotcom crash. The mannequin they most well-liked was to take one thing that labored within the US and do it in an area market.” He pauses and smiles. “In fact, we have been additionally concerned in a large, billion-dollar litigation …”

However, Skype would quickly develop into one of many first European startups to problem the hegemony of American web giants within the early 2000s. Zennström confronted an important choice when, in 2004, one of many large Sandhill Highway VCs provided to fund the corporate, however provided that it moved to the US. “At that time, we had already constructed up a world-class staff in Tallinn, London, and Stockholm, and I didn’t need to go away my staff,” he explains. “We knew then that we have been dedicated to constructing Skype as a globally profitable expertise firm primarily based out of Europe.” He declined the supply.

One 12 months later, Skype went on to develop into a unicorn—eight years earlier than enterprise capitalist Aileen Lee coined the time period—after being bought to eBay for $2.6 billion. It was the world’s largest tech M&A for the reason that dotcom crash and dwarfed eBay’s $1.5 billion acquisition of PayPal in 2002.

All of this led to Zennström’s subsequent transfer—to disrupt enterprise capital with the launch of Atomico in 2006. European VCs weren’t taking dangers. Founders have been coming to him and asking for recommendation. VC funds have been inviting him onto their boards to make themselves look good. “In the meantime, the one place on the earth that had a functioning tech ecosystem was Silicon Valley—and I like being opposite and breaking monopolies, so we got down to break the US VC tech monopoly with Atomico,” he says.