Europe’s Plan to Beat Silicon Valley at Its Own Game

The first company to break out in Europe was Skype. Europe is set to beat Silicon Valley at its own game because of the combination of profit and purpose according to the co-founder of the company.

You can't help but think that the Zen in his name is there for a reason. The founder of Atomico met with WIRED at the company's new headquarters in Fitzrovia. They are the first company in the UK to achieve net-zero certification and their boardroom is climate controlled. It is a space that is designed to soothe and inspire.

In 2003 Zennstrm and his wife, Catherine, left their London apartment and six people showed up on their doorstep. Lawyers from the music industry were pursuing him for lawsuits against his peer-to-Peer file sharing startup. He said that he tried to run but was not in the same shape as he is now.

Like when his parents sheltered US soldiers fleeing the Vietnam draft during his childhood or when he had a back door built into his office to escape unwanted visitors, he shares similar adventures with a smile on his face.

One topic that irks him the most is people who underestimate the European startup scene.

The extract from the book was published in the Financial Times. Europe has been slow to develop technology. Silicon Valley can spark a winning streak. Europe was on the verge of a technology take-off when a San Francisco-based venture capitalist made an especially contrarian wager in 2019.

He sighs and says that they think we are weird and primitive. The US had 35 percent of the global share while Europe had 33 percent. There was a time when European companies copied US companies, but that is no longer the case. There's real innovation all over the place.

He has the data to support his arguments. Europe recorded a record $100 billion in capital invested and 98 new unicorns (privately held startups with a valuation over $1 billion), according to Atomico. Europe had 115 VC-backed unicorns at the end of the year. The number grew to 202 within a year. According to PitchBook, there are 607 active unicorns in the US.

Zennstrm is responsible for a significant portion of the growth. That is the reason he founded Atomico. He wants to rally the continent to fund and support people who can lead the new era of tech and make the world a better place.

He says that Europe is leading in environmental, social and governance and climate strategy. Young talent want to make money but also have a purpose. Europe has a competitive advantage due to the fact that the ecosystems is young and fundable. The US has a lot of entrenched players and capital that makes it hard for them to change. The amount of capital invested in European tech went to purpose-driven companies in comparison to North America. Europeans are uniquely positioned to lead this technological revolution.

It is tempting to see Zennstrm as a result of his Swedish genes. The country has the highest tech investment per capita in Europe and is home to Zenn Strm.

Sweden punches above its weight, but social mobility is important. People who have talent, drive, and ambition are the ones who start companies. The environment can help or hurt them. Everyone went to the same schools, the state schools, so we all knew each other, even though we didn't have a lot of money. There wasn't a private school. The private schools are still accessible despite the fact that they can only charge a certain amount. University education is free so people who are talented can attend. You can do it if you areambitious and hungry.

His grandfather was an industrialist, his father was an art teacher, and his mom was a textiles professor. Political demonstrations were one of the first memories Zennstrm had. His parents wanted him and his sister to do well, but he found his friends' parents too well dressed. He feels like he was different. I wanted to beat the system and show them I was better, but on my own terms.

Almost by accident, he did that. Zennstrm fell in love with computers when he was a student. He worked for Tele2 in the Netherlands andDenmark, setting up dial-up internet services. The dotcom boom made millionaires left, right, and center, and he was trapped. He was worried he had missed his chance.

He said that at the end of 1999 he decided to fly with a younger and more daring person. We thought we would focus on people sharing digital media, because we were excited by what was happening with Napster. We tried to raise money in Amsterdam, but it didn't work out. The venture capital environment was not developed.

Europe's weak funding structure would slow his plans. He owes a lot of his career to Friis and Catherine, who supported him with their own money and support. They launched Kazaa in the summer of 2000 so users wouldn't use it to exchange music while they negotiated with record labels. They went to the US and hit trouble quickly.

The company lawyers arranged a meeting with the RIAA and the MPAA in Beverly Hills on a Friday in 2001. They found an internal memo that said they were the Public Enemy No 1 operating offshore. He remembers that the memo said it was important to make an example of us.

We weren't going to the meeting because we were driving around and doing lawyers' work. When we went to our lawyers office later in the evening, we changed clothes to avoid being served. After that, we moved from one shady motel to another, night by night, paying in cash until we got to the airport, as we were sure they were watching our credit cards.

The loan note of 600,000 was sold by Zennstrm and Friis. In 2003 they founded Skype, an app that allowed users to directly connect with each other. It was surprising that European VCs were not interested in innovation.

He said they were turned down by everyone. It was a big ask to disrupt the global telephone network with this peer-to-Peer technology. They were burned by the dotcom crash. They wanted to do it in a local market and take something that worked in the US. He smiled and paused. We were involved in a billion dollar lawsuit.

One of the first European startups to challenge the dominance of American internet giants was Skype. One of the big Sandhill Road VCs offered to fund the company, but only if it moved to the US. He said he didn't want to leave his team because they had built up a world-class team. We knew that we were going to build the company out of Europe. He turned it down.

After being sold to eBay for $2.6 billion, the company became a unicorn. It was the largest tech M&A since the dotcom crash, dwarfing eBay's acquisition ofPayPal in 2002.

The launch of Atomico in 2006 was Zennstrm's next move. Europeans weren't taking risks. He was being asked for advice. He was invited onto their boards to make themselves look better. He says that Silicon Valley was the only place in the world that had a functioning tech community.

They all thought if you are in venture, you need to be in the US, so no one was interested in investing in funds raised by European VCs. Albert Einstein said that those who have the privilege to know have the duty to act and in doing so are the seeds of new knowledge.

Zennstrm was correct once again. Atomico has invested in a number of European unicorns. Robert Vis, founder and CEO of MessageBird, says that atomico works in line with the US way of VCs offering a lot of operational support. There were times when they were in my office three times a week to help with hiring. It had a profound impact on me as a founder. He is a supportive investor who is focused on driving the business forward. Even though he is not on our board, I still consult him on founder-type things.

The initial pitch was where Zennstrm asked experts from companies likeTesla to join the meeting, followed by a weekend away where the two got to know each other. Atomico was the company's second investor in 2016 and reinvested in every round, while Zennstrm remained on the board after the firm achieved unicorn status in 2020.

He wants to make sure the companies are on the same page. He focuses a lot on diversity. He is not loud, but once he speaks, he is always right. The European scene was in awe of his founding of Atomico. Without him, we wouldn't be where we are today.

Friis and Ahti Heinla, both from Zennstrm's former team at Skype, are now running robot firms.

Forbes dubbed Zennstrm's former team theSkype Mafia. According to Forbes, the Skype Mafia was interested in building a thriving European techecosystem, while the PayPal Mafia was interested in making each other.

Zennstrm likes the comparison and says, "I'm from Europe." We can do better than this.

The history of European technology can be divided into three themed decades.

Skype showed what could be done for Europe, and the continent had its first globally successful entrepreneurial role models, paving the way for more in the future. Thousands of jobs were created by the creation of over 150 European unicorn companies.

The decade that followed saw VCs focus on supporting software companies, some of which have made our lives simpler and cheaper. Big Tech and social media are problematic tech that has a less positive impact on the world.

He thinks that technology companies became addicted to wealth creation at the expense of innovation and purpose. He says that more VC money, more technology companies, more well-paid jobs, and more experienced operators have failed to solve the problems that really matter.

This heralds, if Atomico has anything to do with it, Europe's upcoming decade, where technology should be a positive force and play a role in fixing the problems of climate, inequality, food production, health, energy, transportation, and sustainable manufacturing through innovation. Zennstrm says that venture capital was founded on funding breakthrough innovations. We will be facing bigger challenges in the next ten years. Hope is present in Europe. Governments are not moving fast enough. The role of technology in society needs to be regained. We don't have enough money to waste time.

Europe, not the US, is where the leader of the mobilization decade is going to be found, according to his belief. He is looking at a new generation of companies looking at health, microreactors, and hydrogen fusion.

Transport, aviation, food production, and construction materials are some of the sectors that are starting to be transformed by technology. You need more and more talent from different walks of life to take advantage of this.

Atomico's approach to diversity didn't arrive overnight. He admits that they had a blind spot for a long time. My wife pointed out that most of the people pictured with us were white men. We set some goals for our own team and our portfolio to invest in diverse founders.

Although the company didn't offer maternity leave until she had to take it herself, Carolina said she felt a huge shift as that happened. Reshma Sohoni credits Zennstrm with housing her and Seedcamp when they were homeless. The UK has always been more cosmopolitan than the US, even though I was an Indian American woman and started a fund there.

Atomico's investment team and partners are divided into 45 and 55 genders. Atomico has run an angels program for the past four years, recruiting 12 individuals from eight countries and giving them $100,000 each to write early-stage checks. 50 percent of the angels were women and 50 percent were non-white.

Laura Connell joined the company due to the new approach. She says that atomico is putting its money in the correct place. Retention and better people make them more appealing to the best founders. There is more cognitive diversity in companies that have more diversity. Younger people care about diversity and are mission driven.

Zennstrm says that if you want proof of the value of diversity, consider how many startup were founded by first- or second- generation immigrants. It is important that we have a lot of female investors because female investors are more comfortable speaking to female investors. It is difficult to fix the diversity problem when the company is bigger. It is intimidating for the first female engineer. We need to load this early.

Tracking down the outliers is a key part of European tech's future, he argues.

He says that multinational companies are coming from all over Europe. It's important to make sure that the value is coming back to the European economy. Entrepreneurs from the north of England should be encouraged to start businesses. That is how you build companies with purpose, not just profit.

He says we need people who want to solve the problems that matter, people who want to fund things that matter, and people who want to challenge those who are lagging behind. VCs should allocate a portion of their funds to breakthrough innovations that solve world problems at scale and remember that we are funding the creation of jobs your children and grandchildren will do. I've never been as hopeful about technology as I am now, and I've never been as focused on finding and funding it.