23. september 2005.
Allan Martinson AS Microlink Supervisory Board Member
Edited by: John W. Heywood
The takeover of a company that many Estonians have never even heard of, let alone used, might be more important to the Estonian economy than Swedbank’s purchase of Hansabank, Estonia’s largest bank, earlier this year. On 13 September 2005, Ebay Inc. agreed to purchase Voice over Internet Protocol (VoIP) leader Skype Technologies SA for USD$2.6 billion—equal to more than 33 billion Estonian Kroons (EEK). But even though Swedbank’s takeover of Hansabank earlier this year was valued at 70 billion kroons, Skype’s sale will likely mean more for the Estonian economy than the sale of Hansabank.
How might this be possible, you ask?
Following Hansabank’s February 2005 sale, Estonians shareholders cashed in around 5 billion kroons of stock. Today, Skype employees have stock options, and they are similarly poised to cash in. For 5 billion kroons to land in Estonia through the sale of Skype, Estonians would have to hold 15% of the business, and that is unlikely. But even if Estonians owned just 3% of Skype, that would be worth 1 billion kroons— certainly the largest transaction so far in the domestic IT industry. I will not speculate on whether Ebay overpaid or whether it was the best offer for Skype. Skype had a price tag; this is objective and final. But it goes without saying that the founders of Skype made a brilliant deal. The venture capitalists, including Estonian-rooted Steve Jurvetson, who financed the development of Skype, earned their investment back more than tenfold over two years, and this deal will probably be included in future venture capital textbooks. To put the Skype deal in perspective, Jurvetson’s earlier sale of Hotmail to Microsoft was worth ‘only’ about 5 billion kroons (USD$400 million). Skype has brought more fame to Estonia than any other business or person originating from this country. When you enter ’Estonia’ and ’Skype’ in the Google search engine, you get 404,000 matches, while ’Estonia’ combined with the name of the country’s former president Lennart Meri yields 79,000 matches, the country name combined with Hansabank yields 27 000 matches, with the rally driver Markko Märtin – 17 000 matches, with the soccer goalkeeper Mart Poom – 11 000 matches, with the model Carmen Kass – about 1000 matches, and with the hot political topic of ’proportional income tax’ it gives just 648 matches. You would be hard pressed find another company worth 33 billion kroons whose supervisory board regularly meets in Tallinn – except for Hansabank until this spring, probably. No other world-scale venture capitalist besides Jurvetson mentions Estonia as his homeland and Estonia, nanotechnology and biotechnology as his interests in his blog. Skype’s turnover after the first two years of business is nearly a billion kroons and it has cut the sales of ordinary telecoms by at least 30 times this amount. It was not meaningless of the head of the US Federal Communications Commission to say one and a half years ago that after downloading Skype, he understood that the world of telecom would never be the same again. Skype has about 200 employees, with three quarters of them based in Estonia. The company’s market value was about 250 million kroons and its turnover was 5 million kroons per employee in 2005. Compared to other Estonian leading businesses, each employee of Skype seems more valuable than the entire Viisnurk ski factory, and one and a half employees are equivalent to the Kalev candy factory. Everyone in Estonia is probably a little sad that most of the money will end up in the pockets of the Swedish Zennström and the Danish Friis, and that Skype is not 100% owned by Estonians. But we cannot overlook the fact that it was those Scandinavians who hired the Estonian guys first and had them devise Everyday.com, then KaZaa and finally Skype, not the other way round. We might have some of the best IT gurus around the Baltic Sea, but the Vikings had the idea and the necessary contacts. Ahti Heinla, Priit Kasesalu, Jaan Tallinn and Toivo Annus cannot, and should not, be blamed for anything, since being a major part in the success of Skype just 15 years after the collapse of communism is a huge achievement. So why does the sale of Skype matter more to Estonians than the sale of Hansabank? Because we’ve got the taste of it now. We have over a hundred men and women who have witnessed the creation of Skype from the inside and learned a lesson. We have hundreds of young people asking of themselves today – if Skype can, why can’t I? They now have the skills as well as the confidence and motivation. Six years ago, President Lennart Meri urged us at Hansabank’s spring conference to look for the Estonian Nokia. Skype is a huge step in the right direction, and it is proof that we are gradually getting there!