Niklas Zennström

• Born: February 16, 1966; Järfälla, Sweden
• Died: -

• Cofounder of Skype, Kazaa, and Atomico
• Born: February 16, 1966; Järfälla, Sweden
• Died: -
• Primary Field: Internet
• Specialty: Applications
• Primary Company/Organization: Skype, Atomico

Introduction

Niklas Zennström has been termed one of the leading technology “disrupters.” He has leveraged licensing, corporate start-up logistics, ownership, and litigation to disrupt, delay, and disguise information in many technology businesses. With his vision to allow consumers and businesses to interact freely over the Internet, Zennström exploited peer-to-peer (P2P) networks with his Danish collaborator and business partner Janus Friis. Early on, Zennström used these file-sharing code systems so consumers could download files with Kazaa and later stream music with Rdio. Subsequently, Zennström and Friis were responsible for the development of the Internet video service Skype, which bypassed conventional telecommunications companies to facilitate global Internet communication. A billionaire entrepreneur and visionary, Zennström serves as a role model for many technology start-ups and, along with Friis, invests in the ideas of others through his venture capital company Atomico.

Early Life

Born in Järfälla, Sweden, on February 16, 1966, to parents who were teachers, Niklas Mårten Zennström knew at an early age that he wanted to own his own company. He says this desire was more about making it big and earning money than about entrepreneurship. Summer holidays spent in the family's house south of Stockholm in Sodermanland overlooking the Baltic Sea fueled his passions. Here young Zennström enjoyed sailing, swimming, and fishing. Although the family's summer house still stands, the surroundings have changed dramatically. Algae now thrive in the waters and make swimming unappealing, and fish are scarce. These probably account for Zennström's concerns for the environment.

Earning degrees in business as well as engineering physics and computer science from Sweden's Uppsala University (with a final year at the University of Michigan in the United States), Zennström's first jobs exposed him to low-cost Internet technologies and shaped his philosophy of free access for users. His career began in the 1990s at Swedish Tele2's Copenhagen office. There Zennström met Janus Friis, a Dane who had dropped out of high school but was gifted in software scripting. Tele2, a pioneering telephony company, was a fast-growing telecommunications provider in Nordic and Baltic countries and an alternative provider elsewhere. At Tele2, the duo launched Get2Net.com, a satellite-based broadband connection providing high-speed Internet, telephone, and television services through a dish and modem. They also tackled Tele2's European portal of Everyday.com to provide e-mail packages at no charge.

Impressed with peer-to-peer (P2P) technology's capacity to move data through the Internet efficiently and cheaply, the collaborators left Tele2 for Amsterdam in 1999 to work on their own ideas. Heading up FastTrack, a powerful file-sharing utility not requiring a centralized server, Zennström refined its indexing protocol with Friis for a network backbone. They patented an indexing software version through Joltid, a company they formed in 2001. Called Global Index, their distributed computing system was popularized as Kazaa, a website for music sharing founded in 2001.

Life's Work

Ten years older than Friis, Zennström was the visionary technologist, while Friis was the hacker extraordinaire. Their P2P endeavors with Kazaa benefited from the shutdown of Napster servers by the Recording Industry Association of America (RIAA) in mid-2001, while U.S. courts determined copyright infringement merits. Millions of Napster users switched to Kazaa, which was free and easy to use. However, in October 2001, the two software rogues were sued, and they disappeared.

About this time, Zennström also founded Altnet, Inc., in Australia to promote commercial content integrating payment on a secure P2P network. Their real dealings surfaced in a January 2002 announcement that Kazaa had been sold to Sharman Networks. Formed just before Kazaa's sale, Sharman listed an office in Sidney but had been established on Vanuatu, a South Pacific island-nation known as a tax haven. Essentially, Sharman's investor and board member information was hidden from scrutiny and subpoenas. Unlike Napster, Kazaa distributed to millions of individual users who traded and shared billions of music, video, and movie files. The longer it took for a court decision, the harder it would be to track software downloads, particularly since Kazaa had become the world's most downloaded software by 2003.

In January 2003, the two music disrupters were again in the spotlight when the courts ruled against them. The decision meant that RIAA could identify and sue any file-sharing individual for infringement. Legal wrangling lasted until July 2006, when Australian courts declared that Kazaa's file-sharing service encouraged infringement of MP3 and movie downloads. Codefendants Zennström and Friis contributed more than $100 million to settle the case, although by then Sharman had converted Kazaa to a subscription service.

Right after the 2001 Kazaa sale, Zennström and Friis concentrated on modifying their music P2P technology for phone applications. Capital was scarce, but Timothy Cook Draper of Draper Fisher Jurvetson rescued their efforts. Draper helped launch this new Voice over Internet Protocol (VoIP) business, Skype (organized in Luxembourg in 2003), with an infusion of $8.5 million in 2004. A more sophisticated VoIP, Skype used another variant of the Global Index as its backbone.

By 2005, Skype had become the fastest-growing start-up in history, even faster than the online auction service eBay. That is when eBay's chief executive officer (CEO) Meg Whitman came calling. Whitman thought a Skype acquisition would close more eBay online transactions, especially of big-ticket items such as cars. In September 2005, eBay purchased Skype for $3.1 billion. The newly minted billionaire Zennström stayed on as Skype's CEO until the third quarter of 2007, when he became nonexecutive chairman of Skype's board to devote more time to other pursuits.

When Skype's initial public offering was announced in early 2009, Zennström sued eBay in British courts for copyright infringement. Apparently eBay had not acquired Skype's root certificates (its intellectual property) when it bought Skype. Its underlying source code was also encrypted remotely. This meant that Skype's platform could be disabled by Zennström and Friis, who licensed Skype their software from Joltid. When eBay inked a $1.9 billion deal in September for a 65 percent stake, Joltid sued eBay and the new investors, claiming Skype had breached its licensing agreement. Zennström also threatened to pull Joltid's backbone technology and render Skype useless for millions of registered users. Litigation frightened some investors away; then eBay countersued.

Not until November 2009 were the Skype lawsuits settled. Zennström and Friis transferred software ownership to Skype and received a 10 percent stake in the new Skype and two seats on its board. They also purchased another 4 percent stake for $83 million. This was a good deal for Zennström and Friis, especially when Draper solicited another suitor, and Skype was sold to Microsoft in May 2011 for $8.58 billion in cash.

Even after eBay's initial purchase of Skype, Zennström continued to extend his own interests. He and Friis formed Joost N.V. in 2006 to push on-demand Internet television further. Their Venice Project was beta-tested at one point as a secure, rights-protected site supported by advertising. Joost, however, was sold in 2009 to the United Kingdom's Adconion Media Group. Also in 2006, Zennström cofounded an investment firm to fund disruptive technologies with Friis, who is no longer involved. Headquartered in London, Atomico scouted entrepreneurs with the potential to transform technology on a global scale. It particularly looked beyond the developed nations to emerging economies to invest in startups seeking to scale up their operations. The more than fifty remarkable start-ups have included Angry Birds developer Rovio, Technorati, Fab, Jawbone, and Quid; some of these ventures have included Zennström on their boards. Diversifying its holdings, Atomico bought a 15 percent stake in the P2P mortgage lender LendInvest.

In 2008, the Zennström-Friis team went back to its roots by providing on-demand music from Rdio.com; by 2012, however, the two partners were no longer doing business together for reasons that remain unclear. An ad-free web subscription service, Rdio was beta-tested in 2010 to share licensed music across multiple platforms, including computers, in-home devices, and mobile applications. Based in San Francisco, California, the company competes with the likes of Apple's iTunes, Pandora, and Spotify. In 2013, Rdio attempted to break into the streaming-video rental market with a short-lived platform called Vdio but failed to compete effectively against iTunes and Google Play.

He has backed a number of ventures with varying degrees of success. For example, Swedish financial technology company Klarna was valued at $46 billion in 2021; Zennström was the first European venture capitalist to fund the company. He also backed the caller ID service Truecaller and Lilium, an air taxi startup.

Perhaps Zennström's greatest achievement is the work funded through his foundation. Started in 2007 with his wife, Catherine, Zennström Philanthropies supports the projects of nonprofit organizations consistent with its mission to advocate and intervene for human rights, encourage social entrepreneurship, and mitigate climate change and its effects.

Personal Life

Zennström has granted few media interviews but has been recognized with numerous awards, including the OII Lifetime Achievement Award in July 2011 from the Oxford Internet Institute for his founding roles and transformative technologies and the KTH Great Prize in 2009 from Sweden's oldest technical university. In 2006, he was included in Time magazine's 100 Most Influential People List, and he was named Business Leader of the Year by European Voice, Entrepreneur of the Year by the European Business Leaders Awards, and Innovator in Computing and Communications by the Economist Innovation Awards. In 2013, Zennström was also honored with the King’s Medal from the Swedish Royal Court and a gold medal from the Royal Swedish Academy of Engineering Sciences. He was inducted into the Swedish Startup Hall of Fame in 2014.

Zennström met his French wife, Catherine Loing, when they both worked at Tele2. They settled in London and spent time working with their UK-based Zennström Philanthropies. He is active in combating global warming and travels to see firsthand the devastating effects of global warming on places such as his childhood Baltic Sea region and the polar locations of dwindling icebergs.

An avid sailor, Zennström also competes in major races on his yacht Ràn 2. His team won back-to-back races in the Rolex Fastnet competition out of Sidney in 2009 and 2011, a victory only a few have achieved. He has also taken home trophies in four sailing world championships.

Bibliography

Giblin, Rebecca. Code Wars: 10 Years of P2P Software Litigation. Northampton: Elgar, 2011. Print.

Miller, Michael. Discovering P2P: Everything You Need to Know about P2P, to Understand It, to Use It, and to Benefit from It. Alameda: Sybex, 2001. Print.

"Niklas Zennström." Forbes, 2024, www.forbes.com/profile/niklas-zennstrom/. Accessed 15 Oct. 2024.

Strowel, Alain. Peer-to-Peer File Sharing and Secondary Liability in Copyright Law. Northampton: Elgar, 2009. Print.

Tänavsuu, Toivo. "'How Can They Be So Good?': The Strange Story of Skype." Ars Technica, 2 Sept. 2013, arstechnica.com/information-technology/2018/09/skypes-secrets/. Accessed 15 Oct. 2024.

Zennström, Niklas. "Watch Out Silicon Valley, Here Comes Europe." Financial Times, 19 June 2015, www.ft.com/content/9ef3b4e2-0e2c-11e5-8ce9-00144feabdc0. Accessed 15 Oct. 2024.