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Skype – Profile

August 20, 2004

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HQ: Luxembourg, with offices in London and Tallinn, Estonia
Founded: 2003
Management: Founded by Niklas Zennström and Janus Friis, originators of controversial file-swapping outfit KaZaA.
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Skype co-founder Janus Friis?
Or Flock of Seagulls bassist?

Investors: Total of $19M from Tim Draper, Draper Fisher Jurvetson ePlanet, Index Ventures, Bessemer Venture Partners, and Mangrove Capital Partners.
Business Model: At first blush, the Skype site depicts a kind of Internet utopia – download our peer-to-peer VoIP product for free, never pay for a phone call again, stay in touch with your loved ones, and find the cure for cancer. It’s a group hug (the company even says so on its site). But with over 19.5M downloads of Skype’s software app, there’s reason to believe that the company’s investors will be hugging each other soon. Skype could begin to bake sponsorship/advertising deals into its software in the way that AOL IM and Yahoo have, but more likely it will focus on paying markets, like those it is addressing with the new SkypeOut service. Whereas the current Skype software allows people to make Internet phone calls from one computing device to another, SkypeOut allows calls to a landline phone or a mobile. For this luxury, users are asked to pay a modest by-the-minute fee. The free product will clearly serve as a worthy marketing tool for other premium services.
Competitors: Voiceglo, Vonage, various RBOCs, Packet8, Lingo, Dialpad
Dirt: One of our operatives at a high-flying Seattle start-up recently approached Skype about a marketing partnership and received an auto-generated brush-off that had the all the genuine feeling of a college rejection letter. Skype might want to hire some more suits to take these approaches more seriously. Also, any discussion of Skype leads to the question of regulatory issues – and with good reason. Somewhere, there’s a roomful of paranoid RBOC executives who in their incompetent, lethargic manner may still find a way to crush innovators like Skype.

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