In 2001, the company’s lawyers arranged a meeting with the RIAA and MPAA — a large group of lawyers flew in from the East Coast to meet Friday in the attorney’s office in Beverly Hills. On that Wednesday, they discovered an internal memo leaked from a group they were supposed to meet, calling them “Public Enemy No. 1 operating overseas.” “We must follow our example,” he recalled with a smile, the memo said.
“Instead of going to the meeting, we drove around while the lawyers were doing their thing. Later in the evening, when we went to the lawyer’s office, we and two lawyers on their team changed to avoid being served. After that, we Working around the clock from one shady motel to another, paying in cash until we bought tickets at the airport an hour before departure because we were sure they were tracking our credit cards.”
Zennström and Friis sold Kazaa in late 2001 for EUR 600,000 in loan notes (about $600,000 at today’s exchange rates). Then, in 2003, they used Kazaa’s P2P backend to create Skype, an application that allowed users to make phone calls through a direct connection. But Skype’s early development seemed to reveal something unexpected—European VCs weren’t interested in innovation.
“We were rejected by everyone,” he said simply. “It’s a big ask that we want to disrupt the global phone network with this peer-to-peer technology. A lot of them are burned by the internet crash. The model they prefer is to take what works well in the U.S. and do it locally Market.” He stopped and smiled. “And of course we’re also involved in a massive multi-billion dollar lawsuit…”
Still, Skype would soon be one of the first European startups to challenge the supremacy of the American internet giant in the early 2000s. Zennström faced a key decision when, in 2004, a major Sandhill Road VC offered to fund the company, but only if it moved to the United States. “At that time, we had built a world-class team in Tallinn, London and Stockholm, and I didn’t want to leave my team,” he explained. “We knew then that we were committed to making Skype a globally successful technology company headquartered outside of Europe.” He rejected the offer.
A year later, Skype became a unicorn eight years before venture capitalist Aileen Lee coined the term after it was sold to eBay for $2.6 billion. It was the world’s largest tech acquisition since the dot-com bust, dwarfing eBay’s $1.5 billion acquisition of PayPal in 2002.
All of this led to Zennström’s next move – disrupting venture capital with Atomico, launched in 2006. European VCs are taking no chances. The founders came to him for advice. Venture capital funds invited him to join their boards to make themselves look better. “At the same time, the only place in the world that has a functioning tech ecosystem is Silicon Valley — I like to fight and break monopolies, so we started working with Atomico to break the American VC tech monopoly,” he said.