Skype and Kazaa: Niklas Zennström

29:04Oh, they were going to use the meeting to serve you the papers. Yeah, that's what we thought they would do, right? Or the lawyer thought it's possible. For us, it was interesting because we were like, wow, this is like a Grisham book, kind of. Yeah. Not as dangerous, but the thrill was there for sure. So we didn't show up ourselves to the meeting. So our lawyer, he says, I can produce you my client, but, you know, we need to sign something first that you are not going to be serving them. But we were around and we were like, you know, basically driving around or sitting around, you know, next door trying to not be visible.

29:39So we kept a really low profile. Yeah. So for us, it was all about not being served while we were there. So you were just kind of evading them and trying to presumably get out, go back to Europe. Exactly. So we, it's like, so then let's not use credit cards. Let's use pay cash. So what we did was like first like paid cash hotels and then hotels in Los Angeles take cash. They're not the nicest hotels, put it that way. But that was fine. We did a few nights and then we went to LAX and we bought tickets like as late as possible for takeoff, right? So that there was no chance that they would have a chance to pick it up.

30:23So, yeah, so we were happy to get out of U.S. And that was like the last time I was in the U.S. until 2006, I think. Wow. All right. So you guys basically head back. And now you are finding yourself in a position that Napster had found itself. And you are just saddled with lawsuits. they eventually also are going to file suits against you in Europe. In the meantime, you're getting millions of downloads per week. It becomes like one of the world's most popular pieces of software. But from what I understand, you had no revenue. You had no money. I mean, very, it's some advertising, but really you had no money coming in.

31:11I mean, weren't you scared about being saddled with multimillion-dollar lawsuits when you had no real money coming in? It was extremely stressful. But what we realized were a few things, right? One was like, well, I don't have a lot of assets, right? The only thing we had was our company. And your company was worth nothing at that point, right? Exactly. So we realized like we got nothing to lose. That's a pretty interesting thing when you're like in a battle with someone. That's kind of liberating when you realize that. And the other thing was like, we realized that these guys are big, but they're also really slow.

31:51One thing that I learned from the company I worked with in my first job, one of the phrases that was used internally was that it's not the big that beats the small, it's the fast that beats the slow. That's kind of what I took on. It's like we're just going to be faster than them, and we have nothing to lose. They have a lot to lose. We have nothing to lose. When we come back in just a moment, Nicholas and Janice have so little to lose that they decide to start a whole other company, one that will grow much, much bigger than Kazaa. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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35:48Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2002, and the recording industry is suing Kazaa for enabling internet piracy. And Niklas and his partners decide that fighting those lawsuits is fruitless. The record companies, they needed to make an example of us. But at some point, we realized, like, you know, we don't want to become martyrs. And we don't want to kind of prove a point, just proving a point. And we realized that we have such conviction in peer-to-peer. So at some point we decided, you know what, let's just move to the next chapter with peer-to-peer. Let's sell this thing.

36:26That's exactly it. So this is, I think, in January of 2002, you do sell it. It's acquired by a company called Charmin Networks. undisclosed price, but it was not a lot of money. No. Not get a lot of money out of this. No, no, no, nothing really. I mean, you know, less than a million. But we did retain the technology. Right. So basically you sell Kazaa, but the technology, the peer-to-peer technology, which is called Fast Track, right? Yes, exactly. You keep that as your own property. Yes. But it's amazing. I mean, it's just, you know, you had at one point, I think the third most popular piece of downloaded software in the world, and it sells for less than a million dollars.

37:13So it was a – and now the idea, I'm imagining, also the idea behind selling it was you thought, well, maybe these lawsuits will go away. Yeah. So this, of course, become a problem because of the other side, ROAA, MPA. They said, well, these guys now are trying to do a maneuver to get away from this. Yeah. Essentially did not get you out of the lawsuit. It didn't matter that you sold it. You were still being sued left and right. And we'll come back to that because that features later. But you guys sell this thing, right, for very little. But it seems like you already, you and Janice, I keep saying Janice and Janice, and I'm sorry, Janice, if you're listening.

37:59I think either works, yeah. But you guys already are saying, okay, we did this. We still have this peer-to-peer technology. Let's think about the next thing that we want to build. I mean, I guess at this point you were in, you're still in Amsterdam. I think at that point I'm actually moved to Stockholm. Janos back in Copenhagen, where it's from, and our developers were in Estonia, and we had one person in Amsterdam. Okay. So you were distributed. and I guess you're calling each other all the time because you've got to communicate over the phone and that sparks an idea. Tell me about how it sparks an idea.

38:43Yeah, so you have to remember fully distributed, really cash poor. Saving money was an important thing because we were calling each other and back when I was at Tele2, one project that we were doing back in i guess 99 was trialing voice over ip voip voice over internet protocol these i remember there were all these phone companies are starting in the early 2000s you could get voip yeah and it sucked it's really really sucked so the conclusion back in like in 99 was it's not that great but then i thought like now we're in 2002 surely things moved on. And the other thing that was happening now was also another kind of enabling technology trend was broadband.

39:32You know, we started to have broadband at home through your cable TV or whatever. So surely we can use voice over IP now. So I asked one of our engineers, hey, why don't we set up voice over IP so we can use that between ourselves? So you asked one of your engineers, hey, can you set this up so you don't have to pay telephone bills? Completely. And it turned out that it was really complicated. So if you were like skilled engineer, you could do it, right? But then the other result when we started using it, that pretty crappy voice quality. So it wasn't very successful. But the other thing we did was traveling.

40:13As you know, like the great thing in Europe is that it's easy to travel between different countries. So you take your mobile phone, travel to another country and still use it, which was amazing. The problem is that the roaming fee was like very, very expensive. So the mobile operators really took advantage of roaming because essentially the cost to produce a phone call whether you're roaming or not is kind of the same. Right. But it was an opportunity for the phone companies to charge like extra money. And that was something that we was like thinking about as an issue. And then we had another kind of mega trend that was happening was Wi-Fi.

40:51Yeah. You started to have Wi-Fi everywhere. And then you also started to have this PDA, personal digital assistants. You know, remember the compact iPad. Palm Pilots. Palm Pilots, exactly. And this was actually, ironically, Microsoft was ahead of the curve. They had Windows, you know, Pocket PC. So at some point, we started to figure out, hey, there's no opportunity here to build. You know, you take your Pocket PC. The killer app for this would be voice so that you could use, you access this Wi-Fi, global Wi-Fi signal everywhere. And then you connect and make voice calls over the Internet and provide free Internet telephony.

41:35Just to be clear, the idea was, hey, let's piggyback on these existing personal devices people are carrying, and particularly this Microsoft one. where it already is kind of like has, you know, it's a handheld device. It just doesn't have a phone, but we can basically create an application where users could use it as a free telephone. Completely. What I'm curious about, I mean, this is now 2002. You're digging into a very complex question because it's not yet what it would become, which of course was Skype, was not yet, it wasn't fully formed how it would be used. Like initially you're thinking it's going to be on these PDAs, personal devices and so on.

42:15And that's not what happened as we know. But just as an aside, I mean, by – I know around September of that year of 2002, you got a little bit of seed funding,$250 ,000. Sounds like a lot, but it's – for what you were going to do is nothing, almost nothing. And from what I've read, it was quite hard for you to find anybody willing to finance this. Yes. So we thought we had this amazing business, what we called Skyper, because it was peer-to-peer in the sky, right, on the Wi-Fi. Peer-to-peer in the sky. Skyper. Yeah, exactly. That was it. But it needed all these different stages. And we got Bill Draper to invest.

42:59Bill Draper, kind of a legendary investor. Yeah, so Bill Draper is like, you know, he's one of the, I guess, first generation of Silicon Valley venture capitalists. Yeah. And he had someone working for him, Howard Hartenbaum, out of Luxembourg to basically do like early stage investments. And Howard was like looking around and he got hold of me and I was very suspicious because, so you have to remember, this was still, we were trying to avoid being served. So we were like hyper. Oh, like this is lawyers again playing dirty tricks. So like still trying to pin you down for the Kazala suits. Yeah.

43:43So it's like, this is like, maybe this is a way to try to serve us through this potential investor. So we were like extremely, normally if you're an entrepreneur looking for money, you would be like, yes, please. Jumping at it. Yeah, you would like set up the meeting with the VC who wants to have a meeting with you. But I was, we were extremely difficult to get hold of for that reason. But it turned out to be completely legit. And Bill Draper, he said, like, I know nothing about the technology. I know that the telecom industry is huge. And they're dinosaurs. I also know that you guys had success with Kazaa.

44:24You created something that became really big. You did not make money from it. So you must be extremely hungry for success. Yeah. All right. So you've got a little bit of cash to start building this thing. Yeah. And this is going to take longer than building the technology for Kazaa. It's interesting because Kazaa sounds very complicated. I mean, sharing files, but actually it turns out that trying to transfer voice in real time over the Internet is quite challenging. This is not an easy thing to do. And just out of curiosity, I mean, was$250 ,000 enough money to develop this thing? No, but I think we raised a bit more.

45:10But it was still in the hundreds of thousands, I think. But during the time, again, this was created so much stress for me when I could not pay our developers. I saw that development actually came to a halt at a certain point in the summer of 2003. It just stopped because you couldn't pay the Estonian developers. How did you, I mean, as you sort of started to run out of money in the summer of 2003, what did you do? Were you just dialing anybody you could to see if you could get money? yeah so we we went around in europe we went to kind of all the vcs and we tried to raise money and were unsuccessful and we thought that these vcs there they don't get it and the model for european vcs at the time was to invest in a copycat of a u.s internet company and use the language barrier as a as a moat so you kind of was really smart to invest in say a german copycat of ebay because ebay would probably buy them or or a nordic version of of amazon that was the model pretty much and we had this like a plan we're going to change global telephony using peer-to-peer technology which no one else had done but of course the other thing that made them also not wanting to invest that we had this you know pending litigations of billions of dollars so you can understand that not like a vc would not want to invest yeah every month was about scraping money but it also made us super lean right we did not grow the organizations we realized we could just get things done with very few people so okay so it took basically a little more than a year and a half of developing the technology.

47:11And it launches, you release a beta version on August 29th, 2003. By this point, when you release a beta version, the original idea was let's put this on like these personal devices, these like Palm Pilot type devices. But by the time you released it, that was out the window. Yeah. Well, so what we realized was that, okay that vision was great but how do we get there it's just not going to happen from day one so we needed to do things in different stages so the first stage was to develop skype for pc they'd have to plug in a microphone they'd have to buy yeah and they had to plug in a microphone and this was the thing that was the big unknown for us because most computers did not have a microphone Why would you?

47:57Yeah. So when we launched, it was always the challenge. Would people really be able to use it even if they wanted to? Maybe they download the software, cannot make a call. And another thing we did not know, will people really want to sit in front of the computer to have a phone call? Because, you know, otherwise, you know, people probably had a cordless telephone for their fixed telephony or they had a mobile phone. Now they have to be in front of the computer. Even if you didn't have video right when we started, but you're sitting in front of your computer to make a phone call. It turned out that people had absolutely no problem to do that and people had absolutely no problem to figure out a way to connect a microphone.

48:36And why was that? Because the desire for people to connect with their loved ones, with their friends, relatives, or for business across the world for free was a pretty big desire. So people had no problem kind of to sit in front of the computer and to make those calls. And what made this so kind of perfect in a lot of ways was the built-in virality, right? Which is like you had to download Skype. And then if you wanted to talk to your friend around the world, they also had to download it. Once both of you downloaded it for free, you could just talk. 100%. That built-in virality was like a really fundamental growth driver.

49:19because you probably have like five to ten people that you speak to regularly, whether, you know, friends or family. And that's really how it spread. And just to kind of clarify, I mean, this was free. I mean, this is the second business you create where the product is, you have to pay for it, which is great in terms of getting a lot of users, but could also create a long-term problem, which is you don't have any money coming in. Yeah. So, you know, one thing we figure out, we're not the only one figured that one out. If you want to have like a viral consumer online service, you should take away all frictions for people to use it, right?

50:03Make it free. Yeah. Now, to your point, where do you have your revenue? Because having very low costs and you can have very small overhead because we're a small, scrappy, bootstrapped organization, We did not need to make a lot of money to cover overhead. But the business model was always going to be the paid service. A premium offer eventually. Exactly. And that we thought we launched that later on. But first we need to get a free service out. But we were pretty confident that we would be able to have a premium service because there will be a lot of phone calls that you want to make that are not on Skype.

50:42So the idea that we had that we launched was Skype out, meaning that you called from Skype to a public telephone number. That was not a Skype number. Exactly. So I could call you from Skype to any phone number in the world, but the pitch to consumer was that you make a global long-distance phone call or international phone call, but you're paying a local rate. So, you know, think about that. If you say that you're like in San Francisco and you have relatives in Australia, that's a pretty expensive phone call. But for your Australian relative to make a phone call to their neighbor in Sydney is a pretty cheap phone call because it's local rate.

51:28So what we did, we used the internet to transport this call from wherever, from you in San Francisco, and then have a local agreement with a local telecom operator in Australia to connect locally so we could sell local phone calls globally. We thought it was a pretty disruptive offering in the world of telecommunication. All right. So you launch it in August of 2003. Soft launch really launches in like September of 2003. By April 2005, you've got 100 million downloads of this thing. So this is no joke. I mean, I remember – and I know a lot of people listening can remember using it. I mean, I lived – I was a foreign correspondent at the time.

52:10It was like a lifesaver because I could go in an internet cafe in the Balkans or in the Middle East somewhere and use it. My mom, who traveled around the world with a backpack at the time, that's how she communicated with people. So it was really an amazing product. But I still have to think that even then, even as you get 100 million downloads in April 2005, you're not a profitable business. We raised money. So this time, you know, no one wanted to invest. When we launched in September 2003, and it really takes off virally immediately, right? And then now we got phone calls. Now we get emails.

52:58Now people are saying, oh, okay, yeah. Now we're investors. Yeah. So you get, you know, several U.S. VCs contacting us, flying over, offering us nice dinners. So we managed to raise money. I think almost$20 million in March of 2004. Yeah, that's the B round. So we did an A round of like, I think, I don't know, it was like$3 million or something. Dollars. Then we did a B round already like six months later. So you didn't have to worry about profitability. essentially. But what was interesting though is that we launched the paid service, I think, I don't know, 15th of May or something in 2004. And the beautiful thing with this was that it was prepaid.

53:42So you, when buying those Skype out credits, you uploaded$10,$20, whatever you wanted. And you had your credits that you could use to make calls. So it's like a traveler's check or a gift card. Essentially, people are prepaying for something that they're not going to use right away. No, exactly. And a lot of people picked up on this, I think kind of five, six percent or something of users. It was actually very, very popular. So we started to collect a lot of cash. So we didn't really have to touch that money that the 20 million that we raised in a series B, we didn't really have to touch it that much, actually.

54:21All right. So you have, All right. You've got this thing is growing. There's a lot of excitement around it. Meantime, you do get served with papers from this previous lawsuit, the Khazad lawsuit. Like somebody finds you. I guess you were in London. Yeah. And like you step outside and there's like a bunch of like servers waiting to serve you papers. Yeah. So we moved to London because we thought launching a global online company, internet company from Europe, London is the best place. So we moved there. And I was walking out with my wife. I think it was a Monday in the morning, stepping out the door, talking to each other as you usually do.

55:10And then someone comes up and calls my name. and I kind of like figure out, you know, in a split second, okay, this is the moment. So I start running because I didn't want to be served and I start running. I wasn't very fit at the time because I was like an entrepreneur trying, you know, working very hard and not exercising. Eating pizza. Yeah, exactly. And definitely not going to the gym. But then someone else steps in the front of me and then there's a motorcycle coming. So there's all these people from all different. Wow. This is like a movie. Yes. So I tried to kind of, you know, I tried to change direction and, of course, a slip.

55:52And then, of course, you're being served, as you see in the movies, like slapping the papers on you. And you get this, you know, thick pile of papers with a lawsuit. And my wife was really angry with them. It's like trying to defend me. And but then it's done. It's happened very quickly. but that's one of those moments where it's like you get a lot of adrenaline and then it's like you're scared and it's like what's happening because that was the moment that we wanted to avoid but we knew it would kind of happen at some point. When we come back in just a moment Nicholas is pursued not just by lawyers but by executives from some of the biggest tech companies in the world who are looking to acquire Skype.

56:38Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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59:09Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2005, and depending on the moment you ask, Nicholas is having either a very good or a very bad year. On the one hand, he's still facing onerous lawsuits from his time at Kazaa. But at the same time, Skype is exploding in popularity, and giant tech companies are starting to take notice. I mean, you knew that the big tech companies, Yahoo, AOL, Microsoft, Google, they were looking at what you were doing and they could easily build something to replicate it and potentially crush you. Were you getting nervous at all? Yeah. So we, you know, if you remember back in the time, Yahoo had Yahoo Messenger, which was awesome.

59:58A lot of people used it. you had aol with aol instant messenger and you had microsoft with microsoft msn messenger all text messaging all text messaging yeah but they had like pretty much everyone online in western world at the time um so we were always nervous like when are they going to wake up and compete because if they're going to crush us or not and then we got this message that yahoo is building something okay so let's talk with them and we kind of say okay what are you doing maybe we can do something together yeah um and then we find out that it's not only a yahoo it's also aol and microsoft and even google are kind of looking at building their versions of of skype so we said okay that's not great so we speak to all of those companies and ask them hey why don't we do a partnership we provide a version of skype that is integrated into their messenger ah so you're a white label you will do like a white label for you a white label yes smart okay And then we charge you for that.

1:01:10But also, if you invest into our company, we have a stronger relationship. So we thought that could be good because then we can get like a big sibling to protect us from the others. We can get more distribution. We can get capital and we take out one potential competitor. But the interesting thing is that the answer from all of those companies was, no, we're not interested in that. We were already building it, but we would be very interested to have a conversation about a much closer relationship, i.e. to acquire us. Buying you. Yes. Now, we started this company not to be acquired because with Casal, we had to get out of it.

1:01:54So we said, this time we're building something that's going to last. And there should be a company online that is like dominating online telephony or communication or real-time communication. And that's something that we want to do. So you've basically all of these suitors coming in. I mean, what an amazing position to be in, right? Because the more people who want to talk to you, the higher the price goes. And then in addition to AOL and Microsoft and Google, you get contacted by eBay as well. So, I mean, a lot of heavy hitters interested in you at this point. 100%, yeah. So we use this competitive situation to try to negotiate and see who's going to be willing to pay more.

1:02:40At the same time, we were not committed to selling because we said, well, we're not really for sale because we're raising money. We want to be independent. But, you know, and there's a few others who are interested. So we decided to run a process, but we also run a process to raise gross capital to stay independent. So, you know, there's going to have to be a really high premium. And through this process, you know, we ended up with eBay coming up with like a really attractive offer,$2.6 billion and a$500 million earn out. And just as an aside, I mean, eBay is thinking, OK, this could be a great way for people to use our platform.

1:03:20You know, they could communicate through. I mean, not a bad idea from eBay's perspective. but they're going to pay a lot. I mean, it was going to be up, I mean, with all the incentives, they're paying over$3 billion for this thing that you just launched two years before. Yeah, it was unreal. You know, to be clear, it was unreal. And you have to put this in the context of 2005, right? It's like there was a few years post.com crash. The largest internet M &A before us was PayPal to eBay, right? 1.5 billion. Right. And so this was like 2x. It's amazing. And then you had... This is amazing. YouTube was also 1.6 billion or something like that.

1:04:05Also the same year with Google. So this was the largest... Acquisition. Acquisition, online acquisition post.com of an internet company globally. So, I mean, you would be foolish to reject that. And you didn't, of course. They bought it. Yeah. And overnight, I mean, you had gone from just a few months earlier freaking out about whether you can make payroll to now being a multimillionaire. Yeah. No, no. It was certainly a life-changing event, not only for us, but also for a lot of our team, right, who had options. A bunch of these Estonian programmers had options. Yeah, totally. So there was a lot of people who benefited.

1:04:53But we wanted to continue to build. So we were happy to stay on. I stayed on as a CEO for a few years because we had all these ideas and a vision how to scale it. Yeah. Meantime, let's just go back to the lawsuits. There's this lawsuit that's still hanging over you. And I guess that year, so 2005, you guys sold to eBay. You're working at eBay in 2006. And I think in 2006, you and the new owner of Kazaf, you agree to settle with all of the various companies filing lawsuits against you in part because now you had a bunch of money. I mean, you had to actually pay some money, right, to settle this lawsuit?

1:05:37Yeah. So in parallel, when we were negotiating with eBay, we worked with another set of lawyers trying to settle with suitors with MPA and RIAA before the transaction was announced. Because we knew, of course, that when the transaction is going to be announced, we're going to have to pay them something. But we didn't manage to do that. It's like time was running out. So we had to pay them to settle. But that wasn't a hard thing to do because to get that problem to walk away was pretty nice. All right. So that goes away. But you do have to put some money into it. One interesting thing, and I don't want to get into this too deeply just because there's so much you've done.

1:06:23But while you are at eBay running Skype, you and Janice start two things. You start a venture capital firm, Atomico, together. And you also begin working on another business called Juiced, which is going to be, I guess, the best parallel to today is it was going to be like Hulu, what Hulu became, which was a video platform for watching content. Yeah, I think we had this vision that you could use this peer-to-peer for so many different things. Right. And we built a team for that. And again, I was like CEO for Skype. I was full-time there. So we hired people, a management team, really, really good people, by the way, to run this.

1:07:11But I think that it's hard. If you're a founder and you start a company, but you don't have time to run it, you have other people running it, I think it's just you don't have that connectivity. I think it's harder to be successful. You can be successful, but it's harder. Yeah. Yeah. That company, Juiced, eventually would not – it wouldn't work out. And it makes sense now because your whole – the whole concept begins with this peer-to-peer platform. It makes sense that you're going to try and come up with all these different ways to use it, right? You start with Kazaa. Then you go to Skype. Then you go to Juiced.

1:07:47Now, in 2008, concurrently when Juiced was being built, you and Janice create a company called RDIO, which essentially is the first version of what Spotify would become. This was going to be a streaming music service. Tell me why – I mean, look, again, you've had massive success and you've had a huge impact on our culture globally. but why do you think RDO didn't work? Because it came out before Spotify started. Well, it's kind of the same time and I thought RDO was really, really good user experience and we launched in the US like a year before Spotify. So we had that market. We could have taken it.

1:08:38Why did not take off? I don't really know exactly the answer but I think one reason was that But I think we learned through both Casa and Skype that we didn't want to pay for user acquisition. And like that should just be viral. There was really little virality in it. So that was one of the issues. So I think Spotify, they paid for users. They were more aggressive about user acquisition and spending money on marketing. Exactly. Both that and brilliant in terms of building relationships with some of the big online companies like Facebook and others. So Spotify created an amazing kind of aura around them because it wasn't available in the U.S.

1:09:21But first it was only available in Sweden and become very, very popular, you know, filling the void off the Gaza and off the kind of Pirate Bay. And then, you know, people just waited for that to take off. You were out of, by 2007, out of eBay and done with Skype. And that was it. You were finished. but remarkably you would return to skype in in 2009 uh ebay apparently they you know they they kind of wrote it down because they they was not a successful product for them skype was not and they decided to sell it for i guess they they sold it for they sold a majority share of it for about two billion dollars to some investors um and you and janice tried to buy it back when you heard that eBay wanted to sell it.

1:10:14And so I think you guys got a 14 % stake in Skype. I guess you essentially were able to get equity in Skype that you had already sold for essentially a fraction of the cost. And it was risky because you had to show that eBay could not successfully make it work. But I mean, you guys must have had confidence that you could help turn this around. Yeah, I mean, Skype was doing well, right? What had happened during the years at eBay, you know, the company got too big, as typically happens in really large corporations. They just hire a lot of people, becoming too much of a corporate culture. So we thought this company under private ownership and you refocus it has a huge potential.

1:11:05Yeah. So that's why we kind of got back into it. And it's amazing. And I mean, I'm sort of, you know, fast forwarding here, but then it gets acquired by Microsoft in 2011, 18 months later. Yeah. So Microsoft came along and makes an offer that, you know, the investors took on for$8.5 billion. For$8.5 billion. So not only does eBay do great, but all the investors, I mean, 18 months later, have a massive return. Your 14 % stake was probably comparable to the original sale that you had when it was$3 billion. Yeah, completely. It's amazing. So now you are out of the business. You know, you really, I think, after that period of time, were focused primarily on being a VC.

1:12:02but after the end of RDO was there any talk of okay well let's start another company or at that point were both of you sort of thinking okay we can focus on being investors yeah so I think for me there was a need for better investors in Europe yeah back then you're talking about 2002 to 2007 whatever, that time period, there was one place in the world that you had to be if you were serious about building a tech company, which is where you are. San Francisco, Silicon Valley, that was the only place in the world, right? And what we did, we proved that it was possible to build a global tech leader from Europe.

1:12:50And we were not just like super special. We were not just like the exception that proved the rule. You know, we were just normal people. My conviction was there's no reason why there will not be other companies on the scale of Skype or even bigger coming out of Europe. So Atomico was built with a mission to disrupt the monopoly of Silicon Valley. I'm curious just to get your thoughts on Skype today, because Microsoft clearly has leaned into Teams, which is its competitor to Zoom. And there was a lot of talk during the pandemic about how it was a moment for Skype and Zoom kind of overshadowed it.

1:13:30But what's your sense? I mean, do you feel like, do you care? I mean, does it have any emotional resonance with you or any thoughts about what they've done with this thing that you built? The first time when we sold Skype, I was so emotionally attached to it, to the extent that was part of buying it back. When Microsoft acquired it, I did not have that emotional attachment because I moved on. They obviously paid a lot of money for it. And of course they could have done, if you ask me, they could have done so much more with it. I think they missed an opportunity to make it really, really big. But I'm not so sad about it.

1:14:14I mean, it's like we had a reunion, 20-year reunion, since we launched and it was just great to see people and i'm so proud of what we achieved one thing that we did was that we looked at what is the skype effect and we looked at how many companies have been started from skype alumni and it turned out there's been 900 companies started by wow skype alumni but also the second generation so so that effect is like that's just direct effect it's amazing so and the other effect that skype have had on europe is that it created this belief among a lot of entrepreneurs that they can build the next Skype.

1:14:53Yeah. When you think about all of these things that happened, right? I mean, you left Tele2, you know, on the prompting of Janus and you could, you know, today you could have been almost 60 and you could have been close to retirement and you get your party at Tele2 and And you'd, you know, whatever, Swedish telecom. And, you know, you'd have your boat and you'd enjoy, you'd have a good life. Maybe you'd probably have a very nice life. And that was one path you could have taken. But you took this path and obviously had massive impact with the things that you helped to found and build. How much of that journey do you attribute to the work that the grind?

1:15:37And how much do you think had to do with just luck and chance? You know, that's a very good question, right? the reality is that being at the right place at the right time is pretty critical. And, you know, the reality with starting companies is that there's very, very few companies that are successful. And, you know, the companies I've been part of starting, one became really successful, but no money. One became a big home run. And to others, you know, we burnt a lot of money. But that's still... Pretty good record. That track record is like amazing, right? It's not basketball when you have a 40 % field goal.

1:16:15It's more like soccer. You have to take a lot of shots on goal, and most of them you're going to miss, but you have to keep shooting. And that's just kind of the statistics of being an entrepreneur. That's Niklas Zennstrom, co-founder of Kazaa and Skype. By the way, shortly after I interviewed Nicholas, Microsoft announced that it would permanently retire Skype and shift its remaining users over to Microsoft Teams. Skype will ring for the last time on May 5th, 2025.

1:16:52Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at gyros.com or on Substack. This episode was produced by Chris Messini with music composed by Ramtin Ereblui. It was edited by Neva Grant with research help from Catherine Seifer. Our engineers were Patrick Murray and Jimmy Keely. Our production staff also includes Alex Chung, JC Howard, Casey Herman, Iman Ma 'ani, Sam Paulson, Carrie Thompson, John Isabella, and Elaine Coates.

1:17:29I'm Guy Raz, and you've been listening to How I Built This.

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