BUSINESS BLOGS
BUSINESS BLOGS
category: business
22 Sep 2009

Background

Mike Volpi was the executive at Cisco who ran M&A for John Chambers.  His recommendations made millions for others (whose companies Cisco acquired) and helped make Chambers more and more powerful.  Over time, he was asked by the founders of Skype, Janus Friis and Niklas Zennstrom, to sit on their board.

Then, Skype is acquired by eBay for over $2B in 2005, Friis and Zennstrom retain the underlying P2P platform, called Global Index, through their ownership of Joltid.  In the sale to eBay, investors Index Partners and partner Danny Rimer make a killing.

Joost is Hatched, and Flops

Friis and Zennstrom launch Joost, a video P2P platform, using the same Global Index platform.  Company raises $45M from a blue-chip roster of investors including CBS, Viacom, and many others.

Eventually, they recruit Volpi to become the CEO of the fledging video startup.  Volpi, Friis and Zennstrom realize that the NBC/News Corp.-backed hulu has stolen their thunder and try to right the ship, by dumping the software client distribution model and adopting a browser strategy.  By then, Joost hits considerable headwinds and decides to dump the consumer strategy and focus on white label licensing.

Back to Skype, but How?

Friis and Zennstrom wonder what to do next.  Their focus shifts to their one main hit: Skype, currently in eBay’s hands. Volpi, meanwhile, wonders if he did the right thing by leaving the friendly confines of corporate life for the rough and tumble world of startups.

All equally troubled by the turning of events, they meet to explore their options.  How crazy would it be for them to hatch a plan to reclaim their crown jewel Skype… but how to do without triggering a bidding war with corporate and private equity giants?

The Plan?

Since Joltid retained the source code for Skype, eBay only had access to an executable program.  They probably ask Joltid  for the right to tweak the software, Joltid ignores their request or outright denies it.  Fearing the worst, eBay starts to tinker with the code, Joltid jumps on opportunity to claim that eBay is violating the terms of the license, they sue to prevent eBay from both tweaking the license AND from selling Skype to anyone else (Google, MSFT, etc.).

Fearing that they might lose the case to eBay, how crazy would it be for Friis and Zennstrom to offer Volpi an offer he could not refuse:

Use confidential material information to sell Skype to a third party by convincing them that he had the secret formula to get around the technical challenges posed by relying on the Global Index, but leave enough of a trail so that Joltid could pursue Volpi and the new buyers Volpi shepherded to ultimately force eBay to instead sell Skype at a steep discount to them as part of a settlement? 

This way, Friis and Zennstrom did not have to enter into a bidding war against the much deeper pocketed Google and Microsoft, and private equity players that would underwrite this plan would be once bitten, twice shy about pursuing Skype as well?

You could argue, would Volpi do this?

Honestly, I don’t think so.  I also don’t think - judging from the legal documents that Friis and Zennstrom unleashed on Volpi - that this is a case of three buddies hatching a grand scheme, but it does make for a great movie script, doesn’t it?

More on this:

- Volpi stinks just as much as Friis and Zennstrom.
- Skype Founders Are Destroying Their Reputation and Ability to Recruit and Invest in Talent.
- Joltid jilted eBay, Twice?