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Mashable. We're here at Documented@Davos presented by Scribd and Mashable. We're trying to find out what technology leaders think about the future of tech and what's going on here at Davos. So I'm delighted to be joined by Niklas Zennstrom, very, very long and prestigious buyer. You're the founder of Atomico. It's a venture fund. Also co-‐ founder of Skype, co-‐founder of Kazaa, co-‐founder of Joost as well. What else am I missing? Rdio. A great many internet companies, digital companies that have really changed the world. So I'd love to start on Atomico. What you're working on right now, what kind of investments are interesting to you? NIKLAS ZENNSTROM: So, first of all, I think that it's never been as interesting time to be in this industry and to find companies to invest in because we're living in a world where for every day or every year, there are more and better opportunities. And these are things that are driven by a few bigger trends. There, obviously, continues to be more and more people coming on the internet, using the internet. But if you think back just a few years ago, we did not have the mobile internet. With iPhone, and Android, and the tablets, the whole paradigm is shifting. So you have all new set of companies coming up with new innovative products. So the speed of innovation is happening faster and faster. And also, today it's much easier for an entrepreneur to build a company because you can utilize the cloud, all the stack of existing technologies, so it becomes more capital efficient. So for us, what we're trying to do, we're trying to find companies who take advantage of these big trends, who try to be global companies and take advantage of some of these technology trends, and try to be big companies. PETE CASHMORE: Is there a common thread to the startups you invest in? NIKLAS ZENNSTROM: Yeah, I think there are. The biggest common thread would be the founders themselves. Because at the end of the game, this is about the people. It's always about founders who are passionate about what they're doing and have an idea to change the world, and want to make something big. So that I think is most important thing. And then, the other thing for us is that our focus would be-‐-‐ your graphical focus. Sometimes we joke and we say, we are rest of the world, i.e. we're not Silicon Valley. And that is because me, I'm coming from Sweden, and we're based in London. But what we see now is that there's so many more opportunities happening every day outside of Silicon Valley.
So while Silicon Valley is and probably going to be for a considerable time, the most important geographical area for tech companies, but every day there's more and more opportunities elsewhere. We're trying to find companies in other locations. We're trying to help these companies to expand internationally. Because companies today, once you got it working, once you figure out the product, it's important to have international expansion pretty quickly. PETE CASHMORE: Well you're famously an investor in Rovio, which launched Angry Birds. Is there another Angry Birds sitting in Europe that we don't know about that we're all going to be playing on our iPads and iPhones in the next few years? NIKLAS ZENNSTROM: Rovio is an exciting company. They had over 600 million downloads and I think they had a few million downloads just over Christmas Day. It's one of the few kind of app companies that have really become a global brand. And now what they need to do is to take this and to build this much more into a platform. But it's interesting. There are several other companies that we'd see around Europe which are pretty good game companies. So it just happened to be that the most common activity on a smartphone is playing games. PETE CASHMORE: It's games. I look at the top 10, it's game, game, game, games. NIKLAS ZENNSTROM: The challenge for these companies is down to, can they be a sustainable business? Because if you're a network effect business, then you have a better chance to become a sustainable business. PETE CASHMORE: Is gaming going to become-‐-‐ because you do look at the App Store and everything's a game. Is that going to become part of other apps? Is that the way to get other content or this whole gamification trend? Or is it just a fad? NIKLAS ZENNSTROM: I don't think it's a fad. The reason why games are so popular is that, you think about you're sitting waiting for your friend, for a meeting or in a bus, in the train. And either you do your email, you check your tweets, or whatever. But it's also been nice to just play games for a few minutes. So people feel good about it. And before you had to go and sit in front of your computer or your game console to play games. Now you can do it whenever you have some minutes to kill. So I think that's why games are important. But what's also interesting to look at now is also companies which are also part of the transaction streams, which are a part of monetization. Because sometimes one of the big challenge I see with app companies is that one of the great opportunities is that you can just put up an app in the Apple App Store and you can charge $1 for it. And it's great. If you're developers, you can make pretty good income on that. But then to be a sustainable business, you need to transform that to have a recurring
revenue stream on your subscriber base. And that, I think, is a challenge for a lot of these app companies. PETE CASHMORE: What is that? In-‐app purchases? What's the model? NIKLAS ZENNSTROM: In-‐app purchases, for example. Or just being part of a transaction stream. So we're looking at companies now more and more which are-‐-‐ inherently in their business model is also that there's some kind of transactions in them. PETE CASHMORE: Understood. Well, we've only got a few minutes, so I want to speak really quickly, and maybe get some of your input based on your experience of launching all these other companies. I mean, first off, I guess Skype. Everyone loves it, uses it, one of the most popular apps. What do you think the future is for Skype under Microsoft? Are you optimistic, pessimistic? Think they're going to be a good parent to it? NIKLAS ZENNSTROM: I'm a very happy Skype user these days, and I'm using Skype here. I'm using it everywhere. And I walk in a conference and I hear the Skype ring tone. So I think that Skype has become part of the fabric of what we're doing on the internet because it fulfills such a basic need for people to have communications with each other. But as any other company that, if you have a network effect, as long as you focus on your product and your customers and innovation, continuously improving the core of the business, I think a company like Skype is in pretty good shape. But I cannot really-‐-‐ I don't know what Microsoft will do. I hope they will continue to do what's good with Skype. And I think it's a good home for them. PETE CASHMORE: Great. Well, you were also obviously, co-‐founder of Kazaa. And I don't know if you've been following it too closely, but there's been a great deal of, I'd say, controversy specifically in the US and some of our coverage in the past couple weeks about some bills. There was one called SOPA, one called PIPA. And basically, there's these attempts to crackdown on piracy through these laws. But a lot of the technology leaders feel like they're overly invasive. That they're going to be a threat to-‐-‐ for instance, Google's come out against it. Facebook has come out against it. And also, last week Megaupload was taken down, which is one of the popular file sharing sites. What's your take on tackling these issues? Is there a genuine issue? And is the technology industry doing enough to defend itself? NIKLAS ZENNSTROM: So to me, it feels a little bit like a lot of this legislation is lacking-‐-‐ I'm sorry. Not lacking. It's lagging reality. I felt a little bit like, we fought a big battle with the record companies and the movie studios with Kazaa. But we [? genuinely ?] want to create a business model. We thought you can have a subscription model. You can have advertisement. You can have pay per play and it can be revenue shares and whatever. And at that time, there was a lot of push from that industry, content industry to have a lot of legislation and protection.
But what we see today now is that there's a lot of really, really good legit services. Whether they are subscription services or pay per view or pay per play service. So today people can access legit content, whether it's music or videos online. And you will always have people who say, well, I'm going to be smart. And I'm just going to kind of download it from somewhere. That's always going to be there. But in content, you always have had a set of people which don't pay for music. People listen to the radio. People don't pay for the radio, you just listen to it. People watch free to air television. So you always had that. And on the internet, you're going to have it as well. But I think what's important is to look at also all these innovative models where you have content being mashed up and being recreated for something and become something new. And, in general, I think it's something that adds value and doesn't destroy any value. So I think that some of these new legislations are a little bit too late. PETE CASHMORE: So am I right in reading that you actually would much rather focus on, how do we monetize the audience that is willing to pay? How do we focus on creating new business models versus spending all our time caught up in legislation? NIKLAS ZENNSTROM: I know that as an entrepreneur, having started companies which were in this space, and also as an investor, one thing I know is that if you want to build something that's sustainable, whether you're an entrepreneur starting something or an investor, you need to build something that can be sustainable. So I would be focused on trying to find companies which are working with entertainment industry. But you have great services-‐-‐ PETE CASHMORE: The media companies and the entertainment industry are backing these bills. They're the greatest supporters. Would your message be then that they should really focus on doing deals with those that are pursuing the legitimate models, that are pursuing ways for people to pay for things rather than just-‐-‐ certainly tying themselves us with all this legislation? NIKLAS ZENNSTROM: It's like if you're playing a sport, either you play defense or you play offense. And usually the ones that win the most are ones who are playing offense. And playing offense mean that you're trying to move forward and move with the flow. So I think that-‐-‐ PETE CASHMORE: Do you think ultimately the music or the record companies and those supporting this are going to miss the ball if they spend a lot of time focused on this stuff? By which I mean that we saw it with the previous iteration of which you were involved where Apple came along, invented all the great ways to monetize all this stuff. And ultimately, the record companies that didn't get in maybe lost out. Are they going to miss the ball again?
NIKLAS ZENNSTROM: I think that any company who is focusing on what their customers want to have and working with the technology is going to be successful. And I think that the focus needs to be on that end of the spectrum. Having said that, I think it's important for anyone to protect IP rights and respect copyright. But I don't think you're going to win that by passing a lot of bills. I think you win that by making sure there are great, legit services. Because the population of the internet is basically everyone. And these people are not pirates. This is normal people who want to enjoy content. And if you provide services which are attractive and charge for them, whether they're direct payments bundled with your, maybe, mobile phone bill, or by advertisement, people won't, in general, have a problem with it. So I think that should be the focus. But that doesn't give people the right to go out and violate intellectual property laws. And you have property laws in place already. So I don't think you need to put a lot of additional legislation in place. PETE CASHMORE: Got it. We're getting told we're about time. But I want to cram in one question if you will be really quick. And I know you're involved in the start of online TV with Joost. There's a lot of new TV startups bringing up-‐-‐ and I know Google is getting into TV with Google TV. It hasn't quite seen much pick up. Do you think any of that stuff is going to take off? What's the future of online TV and what did you learn at Joost? NIKLAS ZENNSTROM: We decided to start Joost in 2006, and our conviction was that this whole linear television that you have to sit down and watch TV and see whatever's there based on a broadcasting schedule, that's something that's going to be gone. Because today, people have so much choices what to do-‐-‐ watch TV, go on the web, and play games on their mobile phones. So television needs to be there for when the people want to watch it. So that for sure is going to happen. And it just takes a little bit longer time. But I mean, at least look at myself. When I watch TV, I don't-‐-‐ well, sometimes I watch TV on the news and I just turn on BBC, or CNET, or whatever it is. But if I want to watch a program, I either go to a video service, maybe iTunes, or something else, and I watch something on my terms. When I want to do it. So that's for sure-‐-‐ that's happening. PETE CASHMORE: So it's the future, but it's still in transition. NIKLAS ZENNSTROM: It's still in transition. And also I think what's interesting is that, actually a lot of the existing TV companies have been quite good in transitioning to the online world. PETE CASHMORE: So they're getting it? NIKLAS ZENNSTROM: They're for sure getting it.
PETE CASHMORE: Fantastic. OK, so we're about time. But Niklas Zennstrom, thanks for talking to us here at Documented@Davos. Thanks everyone for joining us. We have more interviews from Mashable and Scribd. Hashtag is #DavosDocs. Thanks so much, Nik. NIKLAS ZENNSTROM: Thank you.
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