Tech entrepreneur Niklas Zennström: ‘Let’s break the Silicon Valley...
1 of 7
https://www.ft.com/content/104bc361-050a-43be-bc67-e8cf72d79734
Lunch with the FT Life & Arts
Tech entrepreneur Niklas Zennström: ‘Let’s break the Silicon Valley
monopoly’
30/09/23, 9:55 am
Tech entrepreneur Niklas Zennström: ‘Let’s break the Silicon Valley...
2 of 7
https://www.ft.com/content/104bc361-050a-43be-bc67-e8cf72d79734
John Thornhill 9 HOURS AGO
The Swedish entrepreneur Niklas Zennström has much in common with your
typical Silicon Valley tech billionaire. A life-changing fortune made at lightning
speed before the age of 40? Tick. An overenthusiastic tendency to evangelise about
how start-ups can put a dent in the universe? Tick. A love of bobbing up and down
on an ostentatious yacht? Tick.
Yet in several other respects, the shaggy-haired, leather-jacketed, 6ft 4in
Zennström, who ambles into the Roka restaurant in Fitzrovia in central London on
a Friday lunchtime, is an intriguing outlier who would confuse any patternmatching algorithm for tech bros.
A one-time fugitive from US legal process, Zennström argues that money is not the
only metric for success and, as a leading European venture capital investor, says he
now wants to disrupt Silicon Valley and build a more purpose-driven capitalism.
As a philanthropist who supports various human rights and environmental
campaigns, he expresses pride at sharing the same nationality as Greta Thunberg,
even if he does not agree with all the green activist’s views. And as a passionate
sailor, who believes yachts are for racing more than showboating, he has twice won
the classic Fastnet race aboard Rán, named after the Viking goddess of the sea.
Having made his fortune building and
I thought there was
such potential in
Europe for more
companies like Skype
to be created . . . We
could build the same
thing or even better
selling the internet telecommunications
company Skype Technologies in the early
2000s, the 57-year-old Zennström now
runs Atomico, one of Europe’s leading
venture capital funds, which has backed
more than 130 start-ups and has $5bn
under management. “I thought there was
such potential in Europe for more
companies like Skype to be created. Let’s
break the [Silicon Valley] monopoly. We
could build the same thing or even better in
Europe,” he says in his lightly accented, monotonal English.
Zennström chooses to lunch at Roka, a Japanese robatayaki restaurant that
promises to “wrap each diner in a cocoon of warmth, welcome and hospitality”, for
both nostalgic and pragmatic reasons. The restaurant opened in 2004, about the
30/09/23, 9:55 am
Tech entrepreneur Niklas Zennström: ‘Let’s break the Silicon Valley...
3 of 7
https://www.ft.com/content/104bc361-050a-43be-bc67-e8cf72d79734
same time that he launched the London office of Skype in nearby Stephen Street.
He and his team would pop to the restaurant whenever they had something to
celebrate. Now he’s based just round the corner again with Atomico.
After checking my likes and dislikes, Zennström takes control of the menu and
briskly orders an eclectic feast of Roka’s signature dishes: yellowtail sashimi with a
yuzu truffle dressing, rock shrimp tempura, black cod and crab gyoza, piri-piri
maki, lamb cutlets with Korean spices and black cod in yuzu miso. He makes clear
that he does not want to drink anything alcoholic, so we stick with sparkling
water.
The FT’s Nordic correspondent had told me that Zennström is regarded as
something of a “mythical presence” in his native Sweden. I am intrigued how such
a singular individualist could emerge from a famously collectivist society, so I ask
him about his upbringing. Zennström has a reputation in London’s tech circles for
taciturnity but Roka’s warming cocoon is clearly having an effect and he eagerly
replies in free-flowing paragraphs.
He describes how he was raised by two idealistic leftwing teachers who met at art
school. While he was young, his family moved to Uppsala, a beautiful university
town some 40 miles north of Stockholm, “the perfect place to grow up”. His
parents protested against the Vietnam war and even took an American draft
dodger into their home at one point. The family would spend the summer months
sailing around the Swedish archipelago in a 30ft boat, instilling a love of the sea in
Zennström. He says he learnt empathy and solidarity from his parents, even if he
himself wanted to become more like his friends’ parents, who wore suits, made
good money and worked in business.
His father told him not to do what he had done and to pay attention at school.
“Make sure you get good grades, because then you have optionality.” The young
Zennström duly obeyed and graduated from Uppsala university. That was followed
by an “eye-opening” year abroad at the University of Michigan, where he met
students from all over the world and became increasingly fascinated by computers.
Growing up, he remembers the infamous Apple commercial that played during the
1984 Super Bowl, introducing the Macintosh personal computer. “I thought, ‘Wow.
This is cool. This is special. This is really a glimpse of the future.’”
As we have been talking, a stream of dishes has been arriving at our table. The
yellowtail sashimi is a bit too heavy on the truffle for my taste but the rock shrimp
tempura is moist and tangy (even if we call it scampi where I come from).
Zennström declares it all to be very tasty as he chopsticks a gyoza into his mouth.
30/09/23, 9:55 am
Tech entrepreneur Niklas Zennström: ‘Let’s break the Silicon Valley...
4 of 7
https://www.ft.com/content/104bc361-050a-43be-bc67-e8cf72d79734
Zennström declares it all to be very tasty as he chopsticks a gyoza into his mouth.
Graduating at a time of great excitement about technology, Zennström was, he
says, naturally drawn to the industry. After failing to land a job at consultants
McKinsey, he started working for the upstart telecoms company Tele2 in
Copenhagen, which gave him a taste for taking on Europe’s “dinosaur”
monopolies. But after a few years he was keen to break out on his own: “The whole
dotcom thing was happening and I was like, ‘Shit, this is a lifetime opportunity.
This is what I should do.’” He resigned from his position at Tele2 at Christmas
1999 at the peak of the dotcom mania and set up his new business in February just
as the bubble burst.
He and his “genius” Danish business partner Janus Friis had been closely
following Napster, the wildly popular file-sharing service that enabled users to
download music for free. The big record companies eventually buried Napster
under a mountain of lawsuits. But Zennström and Friis developed their own peerto-peer sharing company called Kazaa and — somewhat naively — approached the
record companies, hoping to collaborate and create a legal music-sharing business.
However, on a trip to Los Angeles, they caught wind of the fact that a music
industry association had declared them “public enemy number one” and wanted to
slap a writ on them for copyright infringement. Desperate to avoid being tracked
down by a bailiff and trapped in the US judicial system, they switched motels every
night, paying their bills in cash before slipping out of the country on a flight from
LAX airport. Litigation was to hang over Zennström’s head for years, putting paid
to any ideas that he might move to Silicon Valley, before finally being settled.
Menu
Roka
37 Charlotte Street
London W1T 1RR
Kampachi (yellowtail) salad
£18.80
Rock shrimp tempura £17.50
Black cod and crab gyoza
£17.20
Piri-piri maki £14.50
Black cod £44
Lamb cutlets £38
Asparagus £9
Seasonal fruits £11
Mochi ice cream £8
Bottle sparkling water x2 £11.20
Total inc service and Savitri
The restaurant is growing increasingly
raucous, making it difficult to hear each
other across the table. Flames periodically
shoot upwards from the robata grill in the
open kitchen. Zennström winces every time
the bandanna-wearing cooks shout
Japanese chants as they complete an order
or drop a fish on the floor or do something
else unfathomable (our waitress is later at a
loss to explain the ritual).
Having realised that Kazaa was a deadend, Zennström and Friis hit on the idea for
Skype while travelling around Europe and
discovering that mobile phone calls were
30/09/23, 9:55 am
Tech entrepreneur Niklas Zennström: ‘Let’s break the Silicon Valley...
5 of 7
Total inc service and Savitri
Trust donation £217.63
https://www.ft.com/content/104bc361-050a-43be-bc67-e8cf72d79734
discovering that mobile phone calls were
crazily expensive: “Why are these
monopolies ripping us off? Because they
can.” Noticing that most places they visited
were covered by WiFi networks, they
realised they could use peer-to-peer technology to enable international calls to be
placed for the cost of local ones.
“That was a Eureka moment,” Zennström says. “There was a huge opportunity to
disrupt the whole global telecoms industry.” The additional advantage was that in
building Skype they were not breaking any laws.
In the first few weeks, Skype’s internet
When will Europe
produce its first
company valued at
more than $1tn? ‘I don’t
know . . . I would
rather have 10 $100bn
companies’
telephony service went “exponential” and
two years later it had 52mn users and
estimated revenues of $60mn. Such was
the rate of growth that big US corporations
started muscling in on the market, leaving
Skype with some stiff strategic questions.
“Do we have escape velocity? Or will we be
crushed like a bug?” Zennström recalls
asking himself.
The Skype team concluded that they
needed the protection of a bigger partner and sold the company to eBay for $2.6bn
in 2005. Zennström made even more money a few years later by participating in
an investment consortium that bought Skype back from eBay and flipped it to
Microsoft for $8.5bn in 2011, making him a billionaire.
With his newly acquired wealth, Zennström founded a philanthropic fund with his
wife Catherine and splashed out on a “nice sailing boat”. But he was also
determined to help build the European tech sector and so launched Atomico to
fund some of the region’s most promising start-ups. Current investments include
Klarna, the digital payments company, Lilium, an electric flying car start-up, and
Corti, an AI-powered healthcare business.
Just back from the Estonian capital of Tallinn, where he celebrated the 20th
anniversary of Skype’s launch, Zennström talks animatedly about the vitality of
Europe’s start-up sector, even if the market is experiencing one of its sharpest
downturns in decades. What most excites him is the number of second- and thirdtime founders who have emerged. They have often learnt from the failures of
earlier ventures and are now more experienced in building stronger businesses.
In Silicon Valley, he says, they talk about the “PayPal mafia”, the founders and
30/09/23, 9:55 am
Tech entrepreneur Niklas Zennström: ‘Let’s break the Silicon Valley...
6 of 7
https://www.ft.com/content/104bc361-050a-43be-bc67-e8cf72d79734
In Silicon Valley, he says, they talk about the “PayPal mafia”, the founders and
early employees of the payments company, including Elon Musk, Reid Hoffman
and Peter Thiel, who went on to found or run other successful companies, such as
Tesla, LinkedIn and Palantir. Zennström says a similarly dynamic network effect is
developing in Europe, even if he does not like the word “mafia”. Former employees
of Skype have founded 910 companies including 15 unicorns, or start-ups valued at
more than $1bn. In total, he says, the European tech ecosystem is worth about
$3tn (roughly the same as Apple’s market valuation on a good trading day).
Our empty plates have been whisked away and new delicacies arrive. The black cod
in yuzu miso, both delicate and delicious, justifies its reputation as one of Roka’s
signature dishes. Zennström warns me that the sauce accompanying the lamb
cutlets is very hot. He is not wrong.
As a nano-entrepreneur myself and co-founder of Sifted, an FT-backed but
standalone media company covering European start-ups, I am keen to hear his
views on how long the current market downturn will last and whether the era of
higher interest rates will wreck the VC game, as some commentators have
suggested.
Unsurprisingly, he argues that the downturn is only a temporary correction and
that the opportunities for entrepreneurship, and VC investment, are greater today
than ever before. The breakout of generative AI represents the next big platform
shift in technology, which agile start-ups can exploit.
The risk-taking mentality of VC investors has a logic of its own. I bring up the
research of Tom Nicholas, a Harvard Business School academic, who points out
the near-identical pattern of investment returns between the leading whaling
company in north-east America in the 19th century and Sequoia Capital, one of the
West Coast’s most successful VC companies today. Back in the days of Moby-Dick,
ships would set sail on the seas for an average of 3.6 years in the hope of
harpooning a whale. Many of them never landed one but those that did paid for the
expedition several times over. In a similar way, the one or two hits that a VC
company scores in a portfolio of 30 otherwise dud investments can often “return
the fund”, as they say.
As we tuck into plates of seasonal fruits and mochi ice cream, Zennström accepts
that VC investors must be comfortable with long voyages and frequent losses and
acknowledges that Skype was a rare investment whale back in the day. But he
argues that Europe has many similar businesses today. Mixing mammalian
metaphors, he observes that Europe has produced 350 unicorns in 29 different
countries. “Now we have a school of whales,” he smiles.
30/09/23, 9:55 am
Tech entrepreneur Niklas Zennström: ‘Let’s break the Silicon Valley...
7 of 7
https://www.ft.com/content/104bc361-050a-43be-bc67-e8cf72d79734
countries. “Now we have a school of whales,” he smiles.
In full promotion mode, he says that Europe boasts more software engineers than
the US, has four of the world’s top 10 universities and is the best place to launch a
start-up focused on tackling big societal challenges, such as climate change. Last
year, Europe attracted 30 per cent of all global funding for early-stage ventures
compared with 36 per cent in the US. But the investment flows in Europe are
heavily concentrated into what Zennström calls purpose-driven companies. Even
the most storied US VC companies, such as Sequoia and Andreessen Horowitz, are
paying attention and have opened offices in London. Silicon Valley is coming to
Europe, rather than the other way round.
As is the case with most VC investors with less than astronomical performance to
shout about, Zennström is coy about discussing Atomico’s investment returns. I
probe: would his investors have been better off just sticking their money in the
tech-heavy Nasdaq stock market? It depends on which fund over what period, he
counters adroitly. When will Europe produce its first company valued at more than
$1tn to match the Apples, Microsofts and Googles of this world? “I don’t know,” he
replies, before quickly adding: “I would rather have 10 $100bn companies.”
Although it needs to mobilise more growth capital from the big institutional
investment funds, he thinks Europe is well on track to reaching that milestone.
Given his love of supporting insurgent underdogs and rattling incumbent
monopolies, I conclude that his career has echoed the rallying cry of Steve Jobs
when running Apple: “It’s better to be a pirate than join the navy.”
“Exactly,” he replies.
John Thornhill is the FT’s innovation editor
Find out about our latest stories first — follow @ftweekend on X
Copyright The Financial Times Limited 2023. All rights reserved.
30/09/23, 9:55 am