Not long after Mark Zuckerberg paid visits to some of China’s biggest tech companies, another tech tycoon, Skype and Kazaa co-founder Niklas Zennström, is making the rounds as well. But unlike the young Facebook chief, Mr. Zennström is no stranger to the complexities of China’s market.
The 44-year-old Swede, who along with co-founder Janus Friis currently owns a 14% stake in Skype and sits on the company’s board, is in Beijing this week meeting with executives from Baidu, Alibaba Group, Lenovo, China Mobile and others. His visit happens to come in the wake of a media frenzy over Chinese government talk of a crackdown on voice-over-Internet-protocol, or VoIP, phone services—which some outlets interpreted as being aimed at Skype, even though there’s no evidence that Skype is the target and the company says it continues to operate as normal.
In an interview with The Wall Street Journal, Mr. Zennström didn’t wade into the speculation over Skype’s fate in China. But he argued that VoIP services like Skype shouldn’t be seen as a threat to the legacy telecommunications industry. People “are not making fewer phone calls. As a matter of fact there are more phone calls made every year,” he said. “Communication is increasing.”
In addition, he pointed out, calls made from Skype to regular telephones are handled by traditional telecom operators, who are paid for the connections and therefore earn revenue from Skype. (This is true in China, too).
According to Mr. Zennström, Chinese users were some of the earliest adopters of Skype, founded in 2003. In the company’s early days, China had more Skype users than any other nation, he said. “It was happening organically,” he said, in part because lots of Chinese users had family members abroad.
But while his meetings in China also include a stop at the offices of Tom Online, the company that operates Skype in China, Mr. Zennström said the purpose of his visit this time isn’t related to Skype. Rather, he said, he’s in China to learn about the current state of the local market and explore possible partnerships between Chinese firms and startups funded by his London-based venture capital firm, Atomico, where he is CEO. Atomico launched its second fund last year, a $165 million fund focusing primarily on early stage tech companies in Europe.
Mr. Zennström said Chinese tech giants may be able to help Atomico’s portfolio companies expand into the China market. He mentioned Jolicloud, which makes an operating system it hopes to get installed on Chinese netbooks.
But the serial entrepreneur, who also helped found Joost and Joltid, isn’t so interested in looking for investments opportunities here. China is encouraging for foreign investors because it is “a huge market” with “great entrepreneurial spirit,” he said, but discouraging because there is “a lot of capital here already” and local players are so good at tailoring products to Chinese users that it would be “difficult for a foreign investor to add value,” except to help Chinese companies expand internationally.
It was this logic, Mr. Zennström said, that led him to give Tom Online, a unit of Tom Group Ltd., the reins to Skype’s China operations in 2004 via a joint venture in which Tom Online owns a 51% stake and Skype owns a 49% stake.
Despite his disinterest in investing in China, however, Mr. Zennström said China isn’t out of the running for producing the next generation of global technology leaders. “It could happen,” he said. “Silicon Valley has been very important for technology for a long, long time,” but people around the world have better access to information now and “the next Google or Facebook will come from somewhere other than Silicon Valley.”
Still, Chinese firms don’t seem to be at the point yet. Mr. Zennström said that because the local market is so large, many companies are content not to look beyond China’s borders. Whereas the market in his home country, Sweden, is so small that it forces companies to think globally, Chinese companies have plenty of competition to worry about, just in China. He said local companies have proven to be good at picking up on new technologies abroad and making small on them, but the market is isolated and intellectual property protection is weak, with companies preferring to copy technology rather than to acquire it. “The Chinese market is very, very unique,” he said.