Mr Niklas Zennström: Being an entrepreneur involves selling all the time. You have to sell your idea to your co-founders and employees. Even in difficult times, you have to be the one who believes in it. |
IT professionals and students interested in emerging technologies and the future of infocomm eschewed the royal wedding on 29 April 2011 and headed instead for Infocomm LIVE! at the Hon Sui Sen Auditorium, National University of Singapore, to meet a member of the IT aristocracy. Infocomm LIVE! is a speaker series by the Infocomm Development Authority of Singapore to engage entrepreneurs, industry professionals, researchers
and students.
As an entrepreneur, Mr Niklas Zennström co-founded Kazaa and Skype, which offered an application to make voice calls over the Internet. Skype attracted over 309 million users within five years, and the company was bought by eBay in 2005 for US$3.1 billion. Mr Zennström is currently Chief Executive Officer and of technology investment company Atomico, which he also co-founded.
Tell us about your path to success.
When you’re an entrepreneur it’s not like you have a plan and can execute it flawlessly. The road is not going to be a straight highway; there are a lot of turns. We (Mr Zennström and Mr Janus Friis) started Kazaa in 2000 – a great opportunity to create a network that allows people to share files all around the world. We didn’t know what people would use it for, and we struggled to get financing. I left work in the same week as the dotcom crash, and it was very hard to raise money. We used our own savings and Janus moved in with my wife and me, and we converted the living room into an office.
The Infocomm LIVE! session attracted a capacity crowd. |
Pre-dating us was Napster. We were inspired by Napster as proof that peer-to-peer (P2P) as a concept would work. Then Napster got shut down by a court, and a lot of users came to Kazaa. The technology worked great, and people loved to use it for music and video. We got the music and movie industry after us. We realised the legal costs would make us bleed, so we sold Kazaa for next to nothing.
In 2002, we started Joltid. We didn’t even consider VC funding. In Europe, no one wanted to touch the Internet. I was in Sweden, Janus was in Copenhagen and we had some investors in Estonia, so we spent some time on international phone calls. We wanted to set up a VOIP service to save money because we were bootstrapping.
Everyone had private IP addresses, but we needed to open up firewalls et cetera. It was very complicated, but we realised we were one of the best in the world at setting up P2P, and we had the technology to solve these
VOIP problems.
We first launched Skype in 2003, and more and more people started to use it every day. After a month, we had one million downloads. We realised we had early market acceptance. The next validation was when people took up the paid service.
What were the hard times like? What got you through them?
Determination. Entrepreneurs will encounter hard times. No one believes in you and they say, “Shouldn’t you just give up?” It was good to have a co-founder – you can go through the difficult times together. Probably the hardest was when we couldn’t afford to pay the people who worked for us. You have to tell people, “Everything is fine”, but it isn’t. My wife was super-supportive, and she had a good job, so she could pay the rent and put food on the table.
What advice do you have for budding entrepreneurs?
Being an entrepreneur involves selling all the time. You have to sell your idea to your co-founders and employees. Even in difficult times, you have to be the one who believes in it.
You have to spend time getting the right people around you. The most successful companies have more than one founder, so you can support each other. You also want the right employees, especially in the early days, and the right investors, so everyone has shared objectives.
Finish your university education. When you go to university, try to do economics and things that are entrepreneurial. Specifically, if you’re an engineer, learn how to sell things and convince people. University is a great opportunity to team up with people from other disciplines. Spend time abroad. I spent a year at the University of Michigan, and it inspired me.
Would you recommend bootstrapping as long as possible, or taking on investors?
It varies from case to case. When you’re starting off, it’s probably good to do it in your spare time and get on without spending any money. Stick in very little money, like US$50,000 to US$100,000, to get started. Then you have less to lose. In Singapore, where it’s easier to get seed funding, I’d recommend you get seed finance, but do not accept too much money from the beginning.
How do you manage conflicting interests?
It’s important to have alignment of interests between founders. Have a heart-to-heart talk on the commitment expected in terms of time and energy, and ambition. Otherwise one person could be super-committed, while another partner wants to maintain his lifestyle and go home at 5pm. Have this discussion upfront, and a
good handshake.
Besides friction between founders, there is friction with investors. Have a discussion upfront, on whether you want to take a big risk and make it huge, or minimise the risk. If you feel that you and your investor have different interests, you should not take the money.
What has been your greatest disappointment?
I’m pretty successful, so it’s hard to say I really regret this or that. You make a ton of mistakes all the time and you miss ideas. When I saw Twitter, I thought, “This is so simple, it’s ridiculous. Why didn’t I think of this?” If anything, I regret not starting my career as an entrepreneur earlier.