Silicon Valley is yesterday' says Skype's co-founder

STANDING before me is one of the internet’s greatest heroes. Around the world today close to 600 million people have Niklas Zennström and his business partner Janus Friis to thank for being able to stay in touch with loved ones in ways that were unthinkable a decade ago.

Today people can make free video or voice calls in real-time via broadband or their smartphones, not to mention low-cost fixed and mobile telephone calls, through Skype.

Before Skype, Zennström and Friis had run a peer-to-peer file- sharing company called Kazaa. After selling it, they started Skype in Sweden in 2003 and very quickly realised that if they were to succeed they needed to go international first and not try to be a success at home. They sold Skype to eBay in 2005 for $2.6bn. In 2009, Zennström was part of the consortium that bought Skype from eBay and he currently sits on the board of the internet telephone company.

“When we launched Skype in 2003, voice over IP (VOIP) had already been invented; companies that had tried had failed. When we started no one was interested in us. If you only invest in trends then you shouldn’t be a venture capital investor. It’s not like spotting talent. If someone sat in front of me telling me their technology was the best thing since sliced bread and I believed that person, then it would have the potential to be the next big thing. It’s all about people who are moving against the trend.”

He has a point. Apple spotted the perfect intersection between broadband, MP3 downloads and hardware and created the iPod. Tablet computing was already eight years old before Steve Jobs brought out the iPad and restarted the genre. Timing, it seems, is everything.

According to Zennström, who now sits on the other side of the table as a venture capitalist, there has never been a better time for internet investments, with exciting companies like Groupon, Zynga, Yelp and Twitter shaping the landscape.

Decade ago when the dotcom downturn began

Compared to a decade ago when the dotcom downturn began, he says: “The difference is it’s more and more about infrastructure, the more broadband connections people have, and now we have an explosion in mobile broadband. Next year 50pc of all phones in the US will be smartphones; what we’re seeing is companies growing faster and faster.

“If you look at the curve now, other companies like Zynga and Groupon are growing even faster than Facebook. What you see now is companies who are starting later tend to grow faster and that’s just a function of more and more people on the internet and who have broadband.

“But the underlying growth of internet services did not slow down, so more and more people were using internet services despite the downturn. If you look at the recession we’re in, it really has little impact on models or the time we spend online. If anything, we spend more time online because people with less money use online services that are more cost efficient,” Zennström says.

One of the points that he labours to make is how the world no longer pivots on Silicon Valley and that any company anywhere, whether in Dublin, Cork, São Paulo or Taipei, with the right product and broadband access, can create a great service or product.

“The other bit of advice I have is don’t go to Silicon Valley. Silicon Valley is yesterday. What you need to think about is the world as a market. Silicon Valley is a small place, the US market is not the biggest market anymore – Google makes more revenues in Europe than in the US.

“I would encourage anyone starting a technology or internet company today to think about emerging markets in Latin America. Brazil is growing fast, so too is China and Japan. They are big markets. It’s no longer just about Silicon Valley,” Zennström affirms.