Europe niklas zennstrom TC Technology

The Zennström manifesto – TechCrunch

The Zennström manifesto – TechCrunch
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At virtually 86 levels Fahrenheit, London is enduring a mini warmth wave by conventional British summer time requirements. Information stories on the weekend had relayed findings from the Met Workplace’s newest “State of the U.K. Climate report” confirming that the nation is formally warming. Maybe the primary two industrial revolutions have lastly taken their toll on the planet, simply because the World Financial Discussion board argues that we’re ushering in a fourth industrial revolution based mostly on rising know-how reminiscent of synthetic intelligence, robotics, the Web of Issues, biotechnology and quantum computing.

Understanding full nicely that the workplace constructing housing European enterprise capital agency Atomico fortunately pumps out air con on a day like at present, I’ve arrived 30 minutes early for an interview scheduled with founding associate Niklas Zennström. Previous to turning into a enterprise capitalist, Zennström co-founded Skype, the web telephony firm, which he famously managed to promote twice — first to eBay in 2005 for $2.6 billion, then to Microsoft in 2011 for $eight.5 billion. A recognized environmentalist, together with his spouse Catherine, he’s additionally the founding father of Zennström Philanthropies, a nonprofit that helps organisations combatting local weather change and selling human rights and social entrepreneurship.

Situated in Mayfair, certainly one of London’s costliest districts, Atomico sits inside strolling distance of the London workplaces of Accel Companions and Index Ventures. If Balderton Capital, the opposite of the “big four” early-stage VCs within the U.Okay., hadn’t moved to the trendier Kings Cross space in North London, Mayfair can be the closest factor the nation has to Silicon Valley’s Sand Hill Street, famend for its excessive focus of enterprise capital.

I’m greeted by Atomico’s hard-working and all the time jovial head of communications, who appears barely on edge, which I take as a complement and has the converse impact of serving to me chill out. After taking the raise to the third flooring, we discover sanctuary in an empty and funky assembly room, and I comment that it looks like I’ve been reporting on Atomico for almost so long as I’ve been a journalist. A fast rely that morning revealed that I’ve coated simply lower than half of the businesses within the present portfolio, in addition to interviewed quite a few members of the now 30-plus funding workforce. But I’d by no means met or spoken to Zennström.

The Atomico founder doesn’t give as many interviews as he used to, preferring to share media duties with the broader staff, although there stays a sense inside the organisation that the VC agency is usually misunderstood. Regardless of being in its 12th yr and on fund 4, Atomico continues to be thought-about to be the upstart in comparison with Accel, Index and Balderton, and amongst entrepreneurs and the press there are sometimes a variety of different misconceptions:

  • Atomico is a late-stage investor. Mistaken. The majority of investments from fund 4 are at Collection A, though the agency does make investments at Collection B, too, and sometimes follows on.
  • Atomico is usually Zennström’s personal cash. Improper. LPs within the fund do embrace Atomico companions, however principally span the standard gamut of household workplaces and institutional buyers comparable to pension funds, funds of funds and the EU taxpayer backed European Funding Fund.
  • Atomico solely invests in shopper know-how. Mistaken. The agency is essentially sector agnostic and locations bets throughout B2C, B2B, software program, hardware, deep tech and extra.

What is probably higher — and precisely — understood is that Atomico is likely one of the few European VCs to have developed a penchant for making “moonshot” investments: placing cash into numerous genuinely groundbreaking corporations and exploratory know-how that isn’t anticipated to generate income for a few years to return and can both change the world or fail spectacularly.

The best-known might be Lilium, the Munich-based startup creating an all-electric vertical take-off and touchdown (VTOL) jet. It plans to make use of the plane to energy a “flying taxi” service that wouldn’t be out-of-place in a Sci-Fi film. One other is Memphis Meats, the San Francisco-based firm rising meat in a lab by harvesting it from cells as an alternative of animals. Then there’s Graphcore, the Bristol, U.Okay.-based startup that’s designing chips particularly for synthetic intelligence, and which has its sights set on Nvidia. Lilium and Graphcore have raised greater than $100 million every, whereas all three are but to launch a product.

A couple of weeks previous to the interview I referred to as numerous mutual contacts Zennström and I’ve to get a way of what he’s like as an individual. Formidable was a phrase that got here again repeatedly. One entrepreneur who has taken funding from Zennström tried to persuade me that there isn’t a enterprise capitalist equal to him in Europe based mostly on sheer ambition ranges, which they stated he all the time tries to instill within the startups he backs. I used to be additionally advised that he’s famend for being a particularly robust negotiator (A associate at Atomico is rumoured to have requested one of many agency’s portfolio corporations to have a pair of brass balls made as a gift for Zennström in homage to a deal he just lately acquired over the road.) Paradoxically, others stated he can typically come throughout as shy or a bit awkward, particularly when speaking publicly.

Atomico’s Niklas Zennström at TechCrunch Disrupt London 2016

I’m advised Zennström isn’t in need of entertaining tales, each from his time constructing Skype and earlier than that by means of his affiliation with the peer-to-peer file sharing software Kazaa, whose know-how was licensed by Joltid, one other firm he co-founded. The success of Skype, which for hundreds of thousands of individuals made worldwide calling successfully free, noticed him turn into a serious adversary to the incumbent telecommunications business. Within the early 2000s, following within the footsteps of Napster’s Shawn Fanning and Sean Parker, Zennström may nicely have been thought-about the leisure business’s enemy No. 1 because of the approach Kazaa was used for music and movie piracy, which led to a number of lawsuits.

As enjoyable as I’m positive these anecdotes are, tales from a bygone period must wait for an additional day. With the interview restricted to only an hour and no purple strains agreed upon, I had different issues on my thoughts. Tech, it appears to anybody who tracks the business for a vocation, is having a “moment,” and never all the time for the appropriate causes.

From the Fb Cambridge Analytica scandal and social media’s reluctance to stem the move of hate speech and misinformation, to dangerous behaviour, together with sexual harassment and assault, bullying and racism, if ever the tech business was in want of discovering its ethical compass, not solely to treatment the issues of the previous, however extra in order we head into the longer term, it’s now.

With $1.5 billion of capital beneath administration, and its fourth fund totaling $765 million, maybe greater than most European VC companies, Atomico is well-positioned to assist form what that future seems to be like and play a big position in figuring out how the know-how business evolves over the subsequent 10 years and past.

 

Z

ennström enters the room in an upbeat and relaxed temper, and we change a couple of pleasantries — no social awkwardness detected. He thanks me for making the trouble to go to Atomico (I’ve a popularity for conducting nearly all of interviews remotely, partially due to the additional time and power touring consumes as a wheelchair consumer). Not eager to waste any time, I change on my iPhone’s recording app and hearth my opening shot: “Why did Atomico need to exist when you first founded this VC firm, and probably more to the point, why does it still need to exist today?”

Individuals informed me there isn’t any ambition degree in Europe. Niklas Zennström

Zennström laughs, having seen the second half of the query coming a mile off, after which launches right into a precursor to the Atomico pitch. He says that when he was constructing Skype (and earlier than that Kazaa and Joltid), he all the time had individuals inform him you can’t construct tech corporations in Europe, and that if you wish to construct a tech firm, you could be in Silicon Valley.

“People told me there is no ambition level in Europe, there’s no development, no talent, nothing,” says Zennström. “Certainly what was true, what I learned firsthand, [was that out of] the VC firms back then in Europe, most of them were very risk-averse. They’d rather bet on a copy of something they’d seen in the U.S., deployed in a small market. And there was also much more of a mentality back then about making a quick buck and exiting early instead of building companies for the long-term.”

He says that when he pitched Skype to European VCs many stated they didn’t dare make investments as they hadn’t seen something prefer it earlier than they usually didn’t perceive why he and co-founder Janus Friis would need to tackle the entire telecoms business. As an alternative they requested if he might create telecoms enterprise software program, which, the VCs argued, would really feel quite a bit safer. In distinction, many VCs in Silicon Valley thought Skype was superb and appreciated the sheer degree of ambition, main them to ask when the London, U.Okay. and Tallinn, Estonia-based firm was planning to relocate. Zennström’s reply: “Well, actually, we’re not moving here.”

“The Skype exit, I think, was a big milestone for Europe. We showed and proved you could build a [European] company that had a big value,” he says. “The thesis that we developed was that if we might do it then a variety of others can do it as a result of we’re not that particular; there’s lots of people who’re lots smarter than we’re. So we had the thesis that Europe will produce a variety of nice corporations sooner or later and that the prevailing VCs have been danger averse.

“As an entrepreneur — and of course being rejected so many times — it was clear to me [that] my next industry to disrupt needs to be European venture capital.”

This led to the realisation that the rationale why many European VCs have been so risk-averse and “asked weird questions” was as a result of that they had by no means run corporations.

“You need to build a VC firm with people who have also built businesses, because you can build a better rapport with founders if you have done it yourself,” says Zennström. “And of course if you’ve been a successful founder, you probably have a competitive advantage to get access to founders because they’d rather take money and advice from someone who has done it themselves.”

Even at bigger enterprise capital funds, he says that founders tended to solely cope with one associate and maybe one affiliate, who might or is probably not that nice. To mitigate this danger, he determined he wanted to construct a group at Atomico that would assist with core points of scaling, reminiscent of getting into new markets, recruitment, advertising and technique, lengthy earlier than it was trendy to take action in Europe. The result’s Atomico’s “Growth Acceleration Team,” staffed by former operators at main tech corporations, from Skype and Google to Uber, Spotify and Fb.

Provides Zennström: “The mission was to prove and to help to build the tech ecosystem in Europe. And that was important because, at the end of the day, this is innovation, and if you don’t have innovation in the future technologies, you’re gonna be a stagnant region. As a European citizen and someone who wants to live in Europe, I thought it was important.”

The Atomico workforce

To half two of my query — why Atomico must exist at present — Zennström says that though we’re seeing an inflection level of accelerated progress in Europe, as evidenced by Spotify and Adyen going public, we’re nonetheless behind the U.S., and it isn’t mission completed simply but. Extra profoundly, he says there’s now a second facet to Atomico’s mission: backing founders who’re constructing know-how “that can actually have a positive impact on society.”

“What we’ve seen over the last few years is more and more founders who are building companies to address world problems, whether that is sustainability problems, trying to fix education, trying to fix healthcare, using AI to massively improve the detection of diseases, or treating mental illness, fixing transportation, fixing the food chain that is broken. If we can support those entrepreneurs who are going after these big opportunities, bigger problems, and if some of those companies can be successful, that can be a positive impact on some pretty urgent challenges we have in this world.”

We is perhaps destroying our planet due to tech. Niklas Zennström

Zennström says that a few of these pressing issues have their genesis in our mother and father’ era, who didn’t perceive that sure issues would grow to be an issue as a result of it was assumed that the world had infinite assets. “But we know very well now that was not the case,” he says.

It’s a theme that the Atomico founder returns to all through the interview: the concept the non-digital know-how of the final century has had a variety of constructive advantages, comparable to automobiles, airplanes and combustion engines, which have been instrumental in driving financial progress and productiveness, “but has had a tremendous impact on our society in terms of the environment.”

“We might be destroying our planet because of tech,” he says, earlier than reiterating his perception that digital know-how and innovation can repair a few of these issues. The examples he cites are electrical transportation and know-how that may assist us turn into much less reliant on animal farming — an oblique reference to 2 of the VC agency’s moonshots.

“If we are leaders and we are people with the ability to have an impact, then it’s not only an obligation, it’s obviously the right thing to do… But we also think that those companies are also the ones that can become some of the biggest companies in the next 10, 15, 20 years, because these problems are really, really big.”

At this level I’m reminded of one thing Zennström stated onstage at TechCrunch Disrupt London in 2016: that politicians are not the changemakers. However what precisely did he imply?

“Well..,” he says, breaking out in laughter and rowing again briefly in reference to Brexit. “Some politicians made change on this nation, sadly, though it was a referendum and finally it was the individuals who voted, however I feel some politicians primarily tousled.

“However what I’m saying with that is, as we’re dwelling in a world which could be very dynamic, and whether or not we now have a greater world or a worse world than earlier than could be debated, there’s an enormous paradigm shift that’s occurring in some ways…

“Not all of them however most politicians are tactical they usually appear to be extra targeted on optimising for the sake of profitable the election relatively than doing the best long-term factor for the constituency, that’s why they’re not likely leaders. An actual chief can also be somebody who goes out and says, ‘these are things we need to do, because we need to pave the way to a better future.’

“In that way, they’re not as great leaders as some of the politicians we had from time to time in history.”

Zennström believes that that is the place entrepreneurs can and are taking over a number of the slack by way of tech’s potential to drive change, coupled with a millennial mindset that’s seeing shoppers “actually thinking about purpose and mission and trying to do the right things.”

I push again a bit and recommend there’s additionally a local weather the place too many startups overstate their missions when on the finish of the day they’re constructing for-profit companies that may ultimately come beneath strain to prioritise returning worth to shareholders. Current historical past is filled with examples of tech corporations which have seemingly misplaced their method in pursuit of progress and I’m wondering if that is one thing the Atomico founder spends a lot time fascinated by.

“Yeah, big time… We think about this a lot,” he says, after which goes on to supply what can solely be interpreted as a analysis of Fb’s current woes, despite the fact that neither of us has talked about the social community by identify.

In comparison with when Zennström was constructing Skype — a time when there weren’t as many suggestions loops out there — on-line corporations at the moment are extremely data-driven, he says. And though this “has been amazing,” there are additionally downsides.

“For those who’re an organization based mostly on ads, all of your engineers, your rank engineers who’re engaged on the rating and the way content material must be displayed, they’re making an attempt to optimise for engagement, proper? It’s like, what’s our North Star, we attempt to get individuals to interact, to click on extra and are available again extra. Then they’ve principally black field algorithms, numerous knowledge factors, and out of that comes the content material and promoting that’s displayed so that folks come again. And that turns into the mannequin.

“And then it’s like, ‘well, we are just trying to optimise our business, we’re not doing anything wrong.’ That’s kind of how most engineers in some of these bigger companies are thinking. They may not necessarily think at all that they’re losing their way: ‘We’re doing really well because our algorithms are awesome.’ But then when they take a step back and look at the consequences, it’s like, ‘wow, that didn’t go so well, did it?’ ”

As corporations develop into huge, additionally they turn into “big machines,” particularly in the event that they’ve gone public and the place the expectation from the inventory market is to repeatedly drive progress. “If you don’t drive growth, guess what, your share price is plummeting and people lose money relative to what they had the day before. So they all want to fuel that growth, without having really thought about some of these consequences.”

Zennström on stage with former U.S president Barack Obama at Nordic Enterprise Discussion board

That is the place Zennström, aged 52, sees a task for business veterans like himself, and Atomico extra broadly. He says the VC agency encourages younger founders to grapple with these sorts of points early, in addition to serving to them construct in firm mechanisms “to make sure we have the right backbone so we don’t lose our way.”

“Those are conversations we are having with founders,” he says. “What is the culture you are building, how do you think about the ethics of your business, so that when you become successful, you’re gonna be a company you can be proud of.”

When entrepreneurs and VCs in Silicon Valley speak about “changing the world” via know-how, there’s all the time implicit assumption that it’s for the higher. Does the Atomico founder view tech as agnostic or is tech inherently good?

“I think most people who are in tech believe that ultimately tech is positive,” replies Zennström, though he says that it isn’t a brand new debate.

“Let’s take tech from the beginning, the industrial revolution and the first pieces of technology. It’s a philosophical question: before we had the plough, the hammer, were we happier? If you read Socrates, maybe we were happier when we were hunter-gatherers, I dunno,” he says, laughing. “Now we live in a society because of technology.”

Zennström recollects how customers of Kazaa typically shared “really bad content,” which he says was horrible to see however that tech and the web is just a mirrored image of humanity and turbocharges connections.

“In fact it’s a constructive factor that folks can join with one another. Connectivity is best than isolation, I feel, as a place to begin. However when individuals join, it can be misused.

“We cannot just say, ‘it’s not our responsibility’ and everyone else who is involved in tech. We need to have conversations about this and say, ‘what is acceptable and what is unacceptable.’ And those conversations did not happen…”

However are they occurring sufficient now?

“Not enough, but they’re happening… We certainly have a lot of those discussions, both internally but also with other people we know in the tech industry. I’m sure also within the big tech companies they’re happening but it’s harder for them to move because they’re so big. But I think they’re not happening enough, we need to have more of those conversations.”

A various determination group makes higher selections. Niklas Zennström

Zennström says that the problem for anybody operating a big tech firm is that legal professionals will typically dictate what can and can’t be stated, which stifles debate and prevents an open dialogue. CEOs are suggested to toe the social gathering line “and then that party line becomes truth.”

“It’s easier if you’re not running a big tech company to have discussions about what is right or wrong,” he says.

If huge tech is vulnerable to adopting a PR “line” as inner fact, I’m wondering what position Zennström sees the tech press having in reinstating much-needed checks and balances, and if he have been to attain the press, how good or dangerous are we doing?

Cautious to not take the bait, he says the press has a “very important” position to play in highlighting points dealing with the know-how business and tech’s broader impression on society, even when he believes the discourse may benefit from going deeper.

On the similar time, we each agree that in some sections of the press, the dialogue has gone from an excessively easy narrative of “technology is amazing” to “technology is awful,” and Zennström says in some methods we’re already within the midst of a public “techlash” that’s solely going to get extra intense.

“I think there is risk for that to become much bigger, because of the strong impact and growth of tech and the development of algorithms and AI and [the] adaptation of that,” he says.

“In many cases when you’re applying AI and machine learning to something, you have biases and then you get a biased outcome. And of course it’s a very interesting thing for the press to write about… so I’m sure you’ll have more and more of these stories. Then you add the risk of more people losing jobs because of tech. Of course there will be a bigger backlash. That’s why it’s so important to have even more discussions.”

Requested what stage AI is in its general improvement — since loads of the know-how is overhyped and under-delivers — Zennström says we’re nonetheless initially, however that AI/machine studying is getting used day by day to affect what information and what content material we’re uncovered to. “It’s deployed at a massive scale already. And it has impact. It’s not in the future, it’s here,” he says.

“The amount of engineers, computer scientists, mathematicians spending time on machine learning and AI today is just massive compared to about five years ago. There’s so much focus on innovation in AI… it’s probably going faster than many people expected.”

As a journalist who has steadfastly caught to masking European tech (even when it was detrimental to my profession), once I take a look at AI corporations within the U.Okay. and the quantity which have already exited, I can’t assist really feel like they’re promoting out extremely early. Zennström doesn’t solely disagree.

“I think that maybe some have,” he says, though there are a number of different AI corporations within the U.Okay. and Europe which are wanting promising and which have definitely not bought out. “Just like when people told me [that] maybe we sold Skype too early… you also have to think a little bit in the context of the times. If you are early in the cycle and you don’t really see a future in how you can get funding, then maybe it is okay to sell.”

On the similar time, he thinks that with increasingly more funding coming into AI corporations, buyers within the U.Okay. are realising that the nation is constructing “really good AI companies” and are encouraging startups to remain unbiased for longer.

With our allotted time collectively coming to an finish, I rapidly flip the subject to variety, one in every of tech’s liveliest and at occasions divisive subjects. I needed to know what variety truly means to Zennström, and — enjoying slightly satan’s advocate — whether it is one thing early-stage startups ought to even care about.

He says the best way Atomico thinks about variety — and one thing that’s truly said within the VC agency’s inner rules of how the organisation ought to function — is that “a diverse decision group makes better decisions,” which he says can also be borne out by the out there analysis.

“If there’s a bunch of people who are coming from an exactly identical background then each person is not going to add as much,” he says. “For us, as a result of that’s the core factor we do, we make funding selections, we expect it’s essential for us as buyers. So variety in that broader sense is individuals with totally different backgrounds.

“And naturally everybody talks about gender variety, that’s one dimension. There’s so many different diversities, there’s religion, there’s cultures, there’s age, there’s disabilities, there’s sexual orientation, there’s for those who’re introvert, extrovert, should you’re a enterprise individual, in the event you’re an engineer, for those who’re somebody coming from an unprivileged geography. It’s like, there’s so many various dimensions on this.

“So we think it’s important… we think that we as an investment firm need to be much better, to be diverse, but we need to think about it in the broadest context and we’re striving to do that.”

Atomico virtually definitely does higher than most VC companies in Europe or elsewhere when it comes to gender variety: Counting all the 51-person staff, 53 % are male and 47 % are feminine — though it’s much less clear how properly it does by different measures.

For startups, particularly shopper corporations, Zennström argues that additionally they ought to have a various staff as a result of that may possible higher mirror their shopper base. “That’s just being a better business,” he says.

“When we are investing in a company, we are talking to them about this. These are conversations we are having, it’s like, ‘how do you think about diversity?’ If they say ‘I couldn’t care less, I just want to build a good business,’ we say ‘if you want to build a great business, you probably want to think about diversity and be active about it.’”

I feel that when you’ve a problem, you first want perception that you’ve an issue. Niklas Zennström

It’s noticeable that the case Zennström makes for a extra numerous workforce, both in enterprise capital or at know-how corporations normally, is essentially a enterprise one, which prompts me to air a view I’ve held for some time as I’ve watched variety transfer additional up the tech business agenda: In Europe we’ve got blindly imported Silicon Valley’s model of variety and in consequence there doesn’t appears to be almost sufficient emphasis on how variety pertains to European and British progressive notions of social mobility and constructing a extra equal society.

“I feel like if tech treats diversity as the way you described it, it misses a trick,” I inform Zennström. Tech is a superb enabler and subsequently also needs to be a car for social mobility. If we’re creating this courageous new world, with a lot of cash being generated or worth being captured based mostly on new applied sciences, and never using a workforce of all the skills, by which I actually imply class as a lot as gender or ethnicity, then one thing goes badly fallacious.

Zennström says that in fact tech has a task to play in selling social mobility, though at first I’m unsure he solely will get it, even when he undoubtedly thinks about these sorts of points greater than most VCs.

He says there are already initiatives making an attempt to deal with this drawback, reminiscent of Zinc.vc, the London-based firm builder that desires to unravel “huge societal issues,” and which counts Atomico as a backer. Zinc’s newest cohort is being requested to give attention to individuals dwelling in locations which were hit hardest by automation and globalisation during the last 20 or 30 years as conventional industries have declined.

“What’s interesting about these things is that what drives an entrepreneur is some kind of hunger: if you’re very privileged you might not be that hungry,” says Zennström. “But if you’re underprivileged you’re probably going to be hungrier to create change. So I think there’s also an opportunity to find entrepreneurs among groups of people who might be less privileged in society.”

“And in a word, so far,” I ask, “the U.K., Europe, Silicon Valley, are terrible at doing that, aren’t they?”

“Yeah,” he replies. “I think that when you have an issue, you first need insight that you have a problem… It’s very early but I think what is good is that there’s an awareness and there’s a lot of initiatives and discussions about these things, which did not happen 18 months ago.”

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Tejas Sachdeva

Tejas Sachdeva

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